In mid-2017, the concepts of virtual money, electronic money, cryptocurrencies or digital currencies began to be popular in Vietnam, of which, typically, Bitcoin (BTC). The value of these coins has continuously increased sharply and helped many investors get rich quickly, but it is these same coins that have put many people in “misery” when their value dropped severely for a few days. the following month.
Currently, there are still many people who do not fully understand the nature of these cryptocurrencies, do not even know their correct names, are electronic money, virtual money, cryptocurrency or digital currency, and other problems. topics around them. Today’s Post I Love Bitcoin will find out together with you What is virtual currency? What is electronic money? What is cryptocurrency or digital currency? What advantages/disadvantages do they have? Is it advisable to invest in cryptocurrencies in 2020? This guide will be suitable for those who are just getting started in this crypto market.
What is virtual currency?
Virtual money (virtual currency) is an unregulated form of digital money (digital money), issued by the government, but created and managed by developers (developer) and used and accepted between members in a particular virtual community. The European Banking Authority (EBA) defines virtual currency as not a unit of digital currency issued by a central bank or public authority, nor necessarily tied to fiat money, but accepted by a particular group or community as a means of payment and can be transferred, stored, or electronically transacted.
Virtual currencies are also divided into 3 main types:
- Closed virtual currency: Closed virtual currency or fiction currency is the unit of money used in fantasy worlds such as in online games. Closed virtual currency has no connection to the real economy.
- Virtual currency moves one way: Virtual currencies that can be bought with real money, but not convertible in the opposite direction. For example, coupons, accumulated points in the card, Amazon, Facebook account money.
- Decentralized virtual currency: Decentralized virtual currencies are units of money created based on decentralized platforms such as Ethereum and Bitcoin.
What are digital currencies and cryptocurrencies?
Digital currency (digital money) means the same as electronic money (electronic currency), is a unit of currency in digital form, not in physical form such as coins or banknotes. With the same usability as physical money, but with the characteristics of digital, instant transactions and cross-border money transfers.
Cryptocurrency accounts can be stored electronically on a card or other device. Digital currency is centrally manageable, with a central unit controlling all distribution activities. Decentralized management is also possible, the money supply can come from many different sources.
Digital currencies can be divided into 2 types:
- Centralized Digital Currency: Systems like Paypal, Webmoney, Payoneer are centralized digital money management units. Apple Pay, Google Wallet accounts are also centralized digital currencies.
- Decentralized digital currency: Bitcoin, Ethereum, Bitcoin Cash, Ripple and other virtual currencies are also digital currencies.
What is Cryptocurrency?
Cryptocurrency (Cryptocurrency) is a digital asset whose primary function is to act as a medium of value exchange in a peer-to-peer economic system, using cryptography to authenticate and secure transactions as well as control the creation of new coins. Cryptocurrencies are classified in the subgroup of digital currencies and also in the subgroup of virtual currencies.
Bitcoin is the world’s first decentralized cryptocurrency created in 2009 by Satoshi Nakamoto, And then there are many other cryptocurrencies such as Ethereum, Ripple, Litecoin, Stellar, Bitcoin Cash,. . which is collectively known as Altcoins.
Summary of definitions
So by definition, we can see digital currency (Also electronic money) will cover all types virtual money and virtual currency covers all kinds cryptocurrency. It can be understood that: cryptocurrencies can be called virtual money or digital money, but digital money and virtual money are not necessarily cryptocurrencies. And virtual money can be called Digital Money, but not all digital currencies are virtual money.
How does cryptocurrency work?
Cryptocurrency supported by mathematics rather than government or financial institution texts.
While, like all currencies, they still depend on the value for which they are recognized, their scarcity is mathematically based and cannot be regulated by any one institution. or any individual.
They are not tied to the availability of physical goods, such as gold, nor can they be created artificially by governments or financial institutions like the dollar.
Cryptocurrencies use a distributed network to enable a peer-to-peer, peer-to-peer trading system without the need for third parties. To ensure safety, cryptography uses mathematical algorithms and a public ledger.
To ensure every transaction is legit, a complex mathematical equation is used to link each account to the actual amount the account holder wants to spend.
Users, often referred to as miners, spend their computing resources solving equations and often receive a small amount of cryptocurrency as a reward.
Advantages and disadvantages of cryptocurrencies
1. Advantages of Cryptocurrency
- Convenience in transactions: If when depositing money at banks, you may be limited to transferring, withdrawing money … in 1 day, with electronic money, you have the freedom to transact regardless of space and time.
- Bitcoin can’t be faked: Because it does not exist in physical form and each cryptocurrency exists under a unique encrypted bit sequence on the Internet.
- High level of security
- Extremely low transaction costs
- Safety and environmental protection
- There is potential for e-commerce development
2. Disadvantages of Cryptocurrency
- Using is not so easy: For those who are used to using technology, this problem is not too difficult. But for those who have little exposure to technology, creating a Bitcoin wallet and managing it is quite difficult. Maybe it’s even easier to get scammed.
- Bitcoin price often fluctuates up and down that we are very difficult to predict. This is akin to the ups and downs of the stock market.
- A place for criminals to launder money: Perhaps this is the biggest drawback. And for this reason, there are countries that do not yet accept the coin as a legal currency.
Legal status of cryptocurrencies in Vietnam and the world
In Vietnam, Bitcoin and other coins are not banned but also do not support issues related to Bitcoin and the government has repeatedly warned people to be careful when transacting, Bitcoin investment.
Here in 2018, Vietnam also has a law on Bitcoin that you need to know. As follows :
From January 1, 2018, if you use Bitcoin/Altcoin as a currency, you will be breaking the law. That is, it is forbidden to pay for goods with Bitcoin, you cannot use Bitcoin to buy anything in Vietnam, so it is against the law. But if you use it as a commodity, use VND to buy it, no problem.
There are also many countries in the world that have accepted payment in Bitcoin and see it as a currency for transactions, the most notable example being Japan. Here is the latest chart of Bitcoin legitimacy around the world you can see:
- Green: Legal, support
- Yellow: The law does not prohibit it but also does not support it
- Red: The Law of Dissent
- Dark green: Unknown
Is virtual money a scam, multi-level?
I always affirm virtual money nice electronic money No scam, it’s completely transparent and public, you can buy/sell at any time at major and small exchanges, in Vietnam as well as around the world. For example with Bitcoin, it is widely used not only with individuals, but also with large corporate companies in the world such as Microsoft, Newegg, PrivateFly, Overstock.com, Sacramento Kings, TigerDirect, Time Inc,. etc..
Most people say scam virtual currency It’s because they lack understanding, and I also understand why they call virtual money a scam, the reasons that I often see like:
- When someone just learns about cryptocurrencies and wants to buy them, they don’t have much knowledge about virtual currency transactions, they search online and buy from someone, they transfer money to the seller but the person sell not return virtual money to them => virtual money scam
- The crash of Bitconnect and HXT is also the reason why many people call virtual money a multi-level scam, because when investing in these two multi-level coins, investors will have to buy virtual money, namely BTC. , to load up and then use BTC to buy system coins, from there get profit in USD, and when BCC, HXT collapse => Virtual money is also a scam 🙂
End here: Virtual money does not scam anyone, but only because an individual or organization uses it to scam others.
Should I invest in cryptocurrencies or virtual currencies in 2020?
In this section, I will talk about my personal opinion about 2020 and the years to come Should I invest in cryptocurrencies?, this is not an investment advice, you should only refer, and the decision to invest or not is still yours, your money so you have to be responsible for it.
I started participating in this market around March 2017, when the price of Bitcoin was just over 1,000 USD and by the end of 2017 it was up to 20,000 USD at some point, I noticed that the bitcoin price is affected a lot by “acceptance‘, the acceptance here may be of countries…