International Journal of Trend in Scientific Research and Development (IJTSRD)

Volume 8 Issue 5, Sep-Oct 2024 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470

Digital Currencies: An Introduction

Paul A. Adekunte1, Matthew N. O. Sadiku2, Janet O. Sadiku3
1
International Institute of Professional Security, Lagos, Nigeria
2
Roy G. Perry College of Engineering, Prairie View A&M University, Prairie View, TX, USA
3
Juliana King University, Houston, TX, USA

ABSTRACT How to cite this paper: Paul A.

Digital currency also known as digital money, electronic money or Adekunte | Matthew N. O. Sadiku | Janet
electronic currency (cybercash) is any currency, money, or money- O. Sadiku "Digital Currencies: An
like asset that is primarily managed, stored or exchanged on digital Introduction" Published in International
Journal of Trend in
computer systems, especially over the internet. The various types of
Scientific Research
digital currencies include cryptocurrency, virtual currency and central and Development
bank digital currency. Digital currency is recorded on a “distributed (ijtsrd), ISSN:
database” on the internet, a centralized electronic computer database 2456-6470,
owned by a company or bank, within “digital files” or even on a Volume-8 | Issue-5,
“stored-value card.” Digital currency can be used to buy physical October 2024, IJTSRD69388
goods and services, but may be restricted to certain communities such pp.432-437, URL:
as for use inside an online game. This paper looks into the benefits, www.ijtsrd.com/papers/ijtsrd69388.pdf
pros and cons, challenges and the prospects in the future use of
digital currencies globally. Copyright © 2024 by author (s) and
International Journal of Trend in
KEYWORDS: Digital currency, distributed database, e-gold, bitcoin, Scientific Research and Development
cryptocurrency, virtual currency, ethereum Journal. This is an
Open Access article
distributed under the
terms of the Creative Commons
Attribution License (CC BY 4.0)
(http://creativecommons.org/licenses/by/4.0)

HISTORY OF DIGITAL CURRENCY

Precursory ideas for digital currencies were presented resistant to attempt by government to regulate them
in electronic payment methods such as the “Sabre” [9].
(travel reservation system) [1]. In 1983, a research The origins of digital currencies date back to the
paper by David Chaum titled “Blind Signatures for 1990s Dot-com bubble [10], and Liberty Reserve
Untraceable Payments” introduced the idea of digital founded in 2006. Several digital currency operations
cash [2, 3]. In 1983, he founded DigiCash, an were reputed to be used for Ponzi schemes and
electronic cash company, in Amsterdam so as to money laundering, and were prosecuted by the US
commercialize his ideas in his research. It filed for government for operating without MSB licenses [11].
bankruptcy in 1998 [4, 5]. There is currently a renewed interest in
The first widely used internet money was e-gold, cryptocurrency with the introduction of bitcoin in
which was introduced in 1996, and grew to several 2008 becoming the most widely used and accepted
million users before it was shut down by the US digital currency, as shown in Figures 1 and 2.
Government in 2008. However, e-gold has been Another decentralized blockchain is Ethereum with
referenced to as “digital currency” by both the US smart contract functionality, as shown in Figure 3.
officials and academia [6, 7]. Ether (abbreviation: ETH) is the native
It was in 1997 that Coca-Cola offered buying from cryptocurrency of the platform. Among the
vending machines using mobile payments [8], and cryptocurrencies, ether is second only to bitcoin in
while PayPal launched its USD-denominated service market capitalization. Decentralized digital currencies
in 1998 coupled with that of bitcoin in 2009 – which make them more resistant to government interference,
marked the start of decentralized blockchain-based censorship, and manipulation, as well as making true
digital currencies with no central server, and no control over the digital currency to be spread over a
tangible assets held in reserve; also referred to as broader range of owners or users [12].
cryptocurrencies, blockchain-digital digital proved

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TYPES OF DIGITAL CURRENCY 4. Stable Coins: these are digital currencies that are
The various types of digital currencies include designed to have a constant value in comparison
cryptocurrency, virtual currency and central bank to a traditional currency or other asset.
digital currency. Digital currency is recorded on a Stablecoins are backed by the underlying asset’s
“distributed database” on the internet, a centralized reserves or by algorithms that modify the
electronic computer database owned by a company or stablecoin’s supply based on market demand. The
bank, within “digital files” or even on a “stored-value pros of Stablecoins are: (a) stability and
card” [13, 14]. predictability, (b) faster transaction processing
Due to the rise of technology, traditional money is no and lower fees, and while the cons are: (a)
longer the only available option. There is the need to dependence on the stability of the underlying
have a deep understanding of digital currency as a asset, and (b) potential for regulatory scrutiny and
result of its different forms and how they differ. The lack of transparency.
four types of digital currency are [15]: CHARACTERISTICS OF VIRTUAL
Cryptocurrencies, Central Bank Digital Currencies CURRENCIES (VIRTUAL MONEY)
(CBDCs), Virtual Currencies, and Stablecoins. Some of the characteristics are [12]:
1. Cryptocurrencies: this is a type of digital currency  Virtual currencies are digital representations of
that regulates the generation of new units and value whose transactions occur in online networks
secures transactions using cryptographic methods. or the internet.
A decentralized ledger known as a blockchain is  All virtual currencies are digital currencies, but
used by cryptocurrencies to verify transactions the opposite is not true.
and allow them to operate independently of any
 Virtual currencies are issued by private
centralized authority. Examples of
organizations or groups of developers and are
cryptocurrencies are Bitcoin and Ethereum The
mostly unregulated.
pros of cryptocurrencies are: (a) they have
decentralization and anonymity, and (b) high  Some virtual currencies strive to increase
potential for value appreciation; while the cons transaction speeds by removing intermediaries
are: (a) volatility and risk of price manipulation, from the process.
and (b) lack of regulatory oversight. There are  There are two types of virtual currencies: closed
more than 9,000 cryptocurrencies according to and open, which can be centralized or
CoinMarket [15], as shown in Figures 4 and 5. decentralized.
2. Central Bank Digital Currencies (CBDCs): THE BENEFITS OF DIGITAL CURRENCY
CBDCs are digital versions of fiat currency that Some of the benefits of digital currency are [15]:
central banks issue and maintain. They have 1. Faster payments: payments can be completed
developed to maintain the reliability and security much faster than by ACH or Wire transfers,
of traditional currencies while simultaneously which could take days for financial institutions to
providing many benefits of digital currencies, confirm a transaction.
such as quick and secure transactions. The pros of
CBDCs are: (a) improved efficiency and security 2. Cheaper international transfers: moving funds
of transactions, (b) greater control and monitoring from one country to another by individuals are
by governments, and while the cons are: (a) expensive, especially when it involves currency
possible threat to privacy and financial freedom, conversions. Digital assets could disrupt this
and (b) dependence on central authorities. market by making it faster and cheaper.
3. Virtual Currencies: these are unregulated digital 3. 24/7 access: during weekends and outside normal
currencies that are used in virtual worlds or online working hours, money transfers take longer time
gaming environments to facilitate user to confirm transactions. However, with digital
transactions. They can also be used to buy virtual currency, this barrier would be removed as
goods, such as weapons or clothing for avatars. services would be for 24 hours a day and 7 days a
They are being controlled by developers or a week.
founding organization involved in the process. 4. Support for the unbanked and underbanked: In
The pros of virtual currencies are: (a) easy and America alone, more than 7 million households
convenient transactions, (b) accessibility and do not have a bank account, according to the
inclusion, while the cons are: (a) lack of FDIC in a 2019 survey. Globally, this number
government regulation, and (b) volatility. would be astronomical. If countries can launch

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 International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
CBDCs, unbanked individuals could access their transactions and trades, but may not be used by all
money and pay their bills without extra charges. countries and communities. They can be exchanged
5. More efficient government payments. for regular money or other assets. The most popular
digital currencies are cryptocurrencies like bitcoin,
However, some of the disadvantages of digital and while many national governments are considering
currency are: issuing their own centralized digital currencies.
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 International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
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Figure 1. History of bitcoin

Source:https://www.google.com/search?sca_esv=50094aa3d5842932&sxsrf=ADLYWIKTOoXybrFOzaJ3a
6NOozFVybvqgw:1724327870513&q=images+on+digital+currency+by+wikipedia&tbm=isch&source=ln
ms&fbs=AEQNm0Aa4sjWe7Rqy32pFwRj0UkW9NAzhPVmkAfB2zK1tnQfJ7YXLTPLGowL1aB4gvrdK
mu70zzTP2_sQ159Xok78I2QMeoWwolxGOk_e6RaRltc3S-
Ab9q8946LdQg4VISRnt7VgZDWk3P2jmx6V7FE8qpBPnLhG0oLnqapH-
lRWnxeq9mOd2Y&sa=X&ved=2ahUKEwjlzcrxxYiIAxVkSUEAHflPHIkQ0pQJegQIEhAB&biw=1366&b
ih=580&dpr=1#imgrc=yv6_rCJhQ-MV0M

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Figure 2. Digital currency

Source:https://www.google.com/search?sca_esv=50094aa3d5842932&sxsrf=ADLYWIKTOoXybrFOzaJ3a
6NOozFVybvqgw:1724327870513&q=images+on+digital+currency+by+wikipedia&tbm=isch&source=ln
ms&fbs=AEQNm0Aa4sjWe7Rqy32pFwRj0UkW9NAzhPVmkAfB2zK1tnQfJ7YXLTPLGowL1aB4gvrdK
mu70zzTP2_sQ159Xok78I2QMeoWwolxGOk_e6RaRltc3S-
Ab9q8946LdQg4VISRnt7VgZDWk3P2jmx6V7FE8qpBPnLhG0oLnqapH-
lRWnxeq9mOd2Y&sa=X&ved=2ahUKEwjlzcrxxYiIAxVkSUEAHflPHIAb9q8946LdQg4VISRnt7VgZD
Wk3P2jmx6V7FE8qpBPnLhG0oLnqapH-
lRWnxeq9mOd2Y&sa=X&ved=2ahUKEwjlzcrxxYiIAxVkSUEAHflPHIkQ0pQJegQIEhAB&biw=

Figure 3. Ethereum
Source:https://www.google.com/search?sca_esv=50094aa3d5842932&sxsrf=ADLYWIKTOoXybrFOzaJ3a
6NOozFVybvqgw:1724327870513&q=images+on+digital+currency+by+wikipedia&tbm=isch&source=ln
ms&fbs=AEQNm0Aa4sjWe7Rqy32pFwRj0UkW9NAzhPVmkAfB2zK1tnQfJ7YXLTPLGowL1aB4gvrdK
mu70zzTP2_sQ159Xok78I2QMeoWwolxGOk_e6RaRltc3S-
Ab9q8946LdQg4VISRnt7VgZDWk3P2jmx6V7FE8qpBPnLhG0oLnqapH-
lRWnxeq9mOd2Y&sa=X&ved=2ahUKEwjlzcrxxYiIAxVkSUEAHflPHIkQ0pQJegQIEhAB&biw=1366&b
ih=580&dpr=1#imgrc=wKsIIuXye99XpM

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Figure 4. Cryptocurrency logos.jpg

Source:https://www.google.com/search?sca_esv=50094aa3d5842932&sxsrf=ADLYWIKTOoXybrFOzaJ3a
6NOozFVybvqgw:1724327870513&q=images+on+digital+currency+by+wikipedia&tbm=isch&source=ln
ms&fbs=AEQNm0Aa4sjWe7Rqy32pFwRj0UkW9NAzhPVmkAfB2zK1tnQfJ7YXLTPLGowL1aB4gvrdK
mu70zzTP2_sQ159Xok78I2QMeoWwolxGOk_e6RaRltc3S-
Ab9q8946LdQg4VISRnt7VgZDWk3P2jmx6V7FE8qpBPnLhG0oLnqapH-
lRWnxeq9mOd2Y&sa=X&ved=2ahUKEwjlzcrxxYiIAxVkSUEAHflPHIkQ0pQJegQIEhAB&biw=1366&b
ih=580&dpr=1#imgrc=b2U_1VPqyqjI8M

Figure 5. Cryptocurrency
Source:https://www.google.com/search?sca_esv=50094aa3d5842932&sxsrf=ADLYWIKTOoXybrFOzaJ3a
6NOozFVybvqgw:1724327870513&q=images+on+digital+currency+by+wikipedia&tbm=isch&source=ln
ms&fbs=AEQNm0Aa4sjWe7Rqy32pFwRj0UkW9NAzhPVmkAfB2zK1tnQfJ7YXLTPLGowL1aB4gvrdK
mu70zzTP2_sQ159Xok78I2QMeoWwolxGOk_e6RaRltc3S-
Ab9q8946LdQg4VISRnt7VgZDWk3P2jmx6V7FE8qpBPnLhG0oLnqapH-
lRWnxeq9mOd2Y&sa=X&ved=2ahUKEwjlzcrxxYiIAxVkSUEAHflPHIkQ0pQJegQIEhAB&biw=1366&b
ih=580&dpr=1#imgrc=3K5eFNQ4ocL2QM

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