Chapter 5.2
Digital Currency
What is Digital Currency?
- Currency that exists electronically
- Method of paying without physical exchange of notes and coins
- Currency exchange digitally using computers
- Crypto currency or credit card payments or mobile phone payments are different forms of digital currency
Digital Currency vs Crypto Currency
- Cryptocurrency uses cryptography to track transactions
- Digital currency uses a central banking system; whereas cryptocurrency is decentralised
- Cryptocurrency uses block chaining.
- Cryptocurrency transactions are publicly available and therefore all transactions can be tracked.
Cryptocurrency
- Decentralised system, no central authority to manage/process payments
- Blockchain is used to keep track of payments being made (acts as a ledger)
- Blockchain acts as a digital ledger: keeps record of digital signature, time and amount. The data stored cannot be changed.
- Data kept on the blockchain is encrypted, to prevent data from being altered
- Data stored on the blockchain is visible to everyone
Name what values would be stored when a new block is created on the blockchain
- Data (for example, name of sender/recipient)
- Hash value (a unique "fingerprint")
- Previous hash value (pointing back to previous block in the chain)