Digital currency

Digital currency or digital money is an internet based medium of exchange that exhibits properties similar to physical currencies. However, it allows instantaneous transactions and borderless transfer-of-ownership. Like traditional money these currencies may be used to buy physical goods and services but could also be restricted to certain communities such as for example for use inside an on-line game or social network. Digital currencies such as bitcoin are known as decentralized digital currencies, meaning that there is no central point of control over the money supply. Both virtual currencies and cryptocurrencies are types of digital currencies, but the converse is incorrect.

Virtual currency

Virtual currencies are those which are not intended for use in "real life", or for expenditures on real assets. Consequently, most virtual currencies can be found in online gaming and are subject to centralized authority, with the control of the money supply resting in the hands of the virtual world's developers. A virtual currency has been defined in 2012 by the European Central Bank as a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community. The US Department of Treasury in 2013 defined it more tersely as a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.

Cryptocurrency

A cryptocurrency is a medium of exchange that uses cryptography to secure the transactions and to control the creation of new units. Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies. Bitcoin became the first decentralized cryptocurrency in 2009. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as contraction of bitcoin alternative. Cryptocurrencies typically feature decentralized control (as opposed to a centralized electronic money system, such as PayPal) and a public ledger (such as bitcoin's block chain) which records transactions.

Currently, there are more than five houndred criptocurrencies in online markets and few of them (like Bitcoin, Litecoin, Namecoin, Dogecoin and Peercoin) own a capitalization over $10 million.