Electronic money

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Electronic money definitions can vary from one source to another, but the underlying principles are always the same: to be considered electronic money, the system has to involve following concepts: computer networking, the use of Internet and digital stored value systems.

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Variants of implementation[edit]

All electronic money can be divided into two categories: centralized and decentralized systems.

Centralized digital money are systems like PayPal, WebMoney, Payoneer, cashU and also any interbank or intrabank wire transfers, bank deposits and so on. They all have two things in common:

  • Whenever these systems are used to transfer money, the funds are sent electronically, but the transmitted sums represent one or another underlying traditional fiat money, so in this case electronic currency doesn't exist on its own but rather helps speeding up operations with traditional currencies.
  • All operations are regulated by a specified third party which has total control over the entire system and thus is able to impose arbitrary rules on its users, change the amount of money in circulation, etc.

The second category consists of decentralized currencies, such as Bitcoin, Litecoin, Dogecoin and others. They are not controlled by a single entity but instead are powered by vast peer-to-peer networks of users who themselves decide if they wish to engage in the process of issuing new monetary units or send any available sum of money to anyone else - a transaction which will be confirmed by randomly picked network members, not by a single bank.

These money systems also don't represent any fiat currency as they are currencies on their own and can, among other things, be exchanged for USD, EUR, and others.

See also[edit]

References[edit]