Digital Currency

How Digital Currency Works: Why Countries are shifting to it?

With all the fuss going around related to decentralized systems and cryptocurrencies, we all are forced to sit back and question ourselves What is Digital Currency, and How Digital Currency Work? Well, most Countries are even shifting to it, and there is a good reason behind it. Here in this Guide to Digital Currency we will go in-depth into all these questions. So sit back and enjoy the journey!

What is Digital Currency?

Digital Currency, also sometimes called Crypto Currency or even referred to as Crypto is a virtual currency that isn’t backed up by a central system. Unlike our regular Currency and Payment system, there is a Centralized Bank that deals with everything, and Government backs it up.

So, Digital Currency is something that isn’t Centralized, rather it is completely Decentralized, having no regulating authority or even a central part that controls it. This system is also called a peer-to-peer system that allows anyone to deal with their payment anywhere.

One thing that crosses everyone’s mind from reading this term is that it is completely online and being Decentralized doesn’t mean there is no record for that.

So, Crypto Currency is recorded in the Public Ledger and there are online wallets that store your Digital Money. Just like you read in Whatsapp “End to End Encryption,” a somewhat similar technology is with Crypto Currency.

There is Encryption that verified the payments made, either you are receiving it or sending it. Yes, just like any other tech out there, it is completely based on Coding, and its main use is safety, as well as the security of the user.

If you are looking for more info on Digital Currency or Crypto Currency, You can check out an amazing Research Article from the Reserve Bank of Australia.

What’s Bitcoin have to do with Digital Money?

Bitcoin is the first ever Digital Currency that we got blessed with. In 2009, this Currency was founded and as of today is the best-known one. There are various other Crypto Currencies out there and Bitcoin being the first one is the best of them all.

In simple words, Bitcoin is a Crypto Currency and Crypto Currencies are referred to as Digitial Money. So they are the same things just like the Indian Rupees, Pakistani Rupees, American Dollar, Australian Dollar, and Euro are all Currencies, but have different values.

How Does Digital Currency Work?

Now that you know what this is all about, it is much easier to understand how does Digital Money even work? There is a Blockchain technology that backs up the Crypto. All of your Digital Money including your transactions, account, savings, and everything is on Blockchain, which is a Distributed Public Ledger.

There is a process called Mining (not the one related to Gold) that is done by Computer Power to create Digital Currency Units. The Computer performs on the maximum potential to solve problems related to maths and in return generate Crypto Currency.

Yes, you can also get Digital Money from Brokers who worked hard to get Crypto through Mining and you don’t have to sacrifice your Computer Power. Unlike the Banking System, there are Crypto Wallets that store your Currency, allow you to transfer them, exchange them, check the stats, and so on. It is basically like Online Banking but decentralized!

The main concern about Digital Currency is that it isn’t tangible and also isn’t physical, meaning it’s all on Blockchain which is online. What’s amazing is that there is a special Key that gives you permission to move units of measure or records from user to user and there isn’t any Third Party involved in that system.

Digital Marketing is changing due to Crypto Currency. We got more on this topic here for you to read out.

Crypto Currency Transactions

There are steps to the Crypto Currency Transactions as it is online and you don’t have it physically in your hands. To better understand the Transaction of Digital Currency, we will take the example of Dawer and Masab;

  • Dawer sends the instruction to transfer Digital Currency to Masab. This is a message that anyone within the network can see.
  • There are Miners who mine Crypto and they group that transfer into a Block with other transactions.
  • That same Block is changed to Cryptographic Code.
  • Afterward, the Miners will work to find that same Code that allows them to add Blocks to Blockchain.
  • After using the Computer Power to solve the code, Block is added to Blockchain and then the initial Transactions are made sure.
  • As a result, Masab will receive the Digital Currency sent by Dawer.

Why Countries are shifting to Digital Currency?

After all of the above explanations of Digital Currency and How they work, it is quite easy to understand why the world and even Countries are shifting to it. For the most part, there is no middleman involved here during the whole transaction. There is no cut in fees, there is no bank that makes the rules and it is direct from the person sending the amount to the person receiving the amount.

Unlike Banks, where they control every currency and everything related to it, there are no risks involved here. Even if the commercial bank collapses, there is no loss to the Crypto or Digital Money.

Nowadays we see that when the Government or specific people in the Bank’s higher authority don’t like a person they simply cut off their ties with the Bank, don’t let them send money, stop their payments, stops them from creating an account, and so on. That thing is completely removed in the case of Crypto Currency.

While it might look like Countries are at loss here because of Tax and Power, it is beneficial for them in the term that the World Bank wouldn’t be able to control the Currency. The power of the underdeveloped, developed and developing countries will be the same.

If you feel interested in the concept of Digital Money, you can check out our Article on Digital Currencies Can Help you Earn Well.

Final Verdict

Well, that is all about How Digital Currencies Work and Why countries are shifting to them in the future. You might have seen the rise of BitCoin and other Crypto Currencies, also experiencing their fall, but it is only temporary. The Technology and the Purpose of this Technology are exceptional, it is the people and traders who got greedy for Crypto and messed everything up. Our fingers are crossed and let’s see what the future holds for us!


What are the most famous Digital Currencies?

You might have heard of a Crypto Currency by the name of Bitcoin, there are some other Cryptos like Ethereum, Ripple, and even Litecoin that took the spotlight.

Is Digital Money the same as Real Money?

Just like the name suggests Digital Money is totally Online, meaning it isn’t Physical, backed up by Blockchain Technology. On the other hand, Real Money is the money we are using, backed up by Centralized Banks.

Which country has the highest share of Digital Currency?

There are quite a few countries that support Crypto and Thailand is considered the country with the most shares of Digital Money.

Dawer Iqbal
Passionate Computer Engineer with 5+ years of experience in Professional Content Writing and Gaming Blogging. CTO at, always exploring the latest tech advancements and enjoying gaming in my free time.