While digital currencies have fast become one of the latest Fintech trends in Australia, it can be difficult to know whether incorporating them into your financial plan is a sensible choice for you to make. Therefore, it is important to have a full understanding of what digital currencies actually are and to weigh up the pros and cons before you join the digital currency world.
What are digital currencies?
Digital currencies are, in simple terms, a type of currency that is unavailable in physical form. Digital currencies are only available in electronic or digital form, and are therefore only able to be accessed through computers and mobile phones. You may have heard of cryptocurrencies, which are a form of digital currency. However, it’s worth mentioning that not all digital currencies are cryptocurrencies.
Digital currencies are usually used to pay for goods and services, and are more likely to have their value pegged to some form of commodity, whereas cryptocurrencies often do not peg their value.
Pros of digital currencies
If you regularly send money overseas, make a lot of transfers or operate a business, digital currencies are likely to benefit you. Digital currencies can provide added flexibility in managing finances, as the infrastructure of digital currencies is not burdened by the same restrictions as traditional banks.
Digital currencies are often built on blockchain technology, a new form of digital ledger, that makes transacting simple whilst keeping transaction fees low due to it’s low maintenance and high security format. With traditional transactions, you are often limited by the amount of money you are wanting to move. However, with digital currencies, you can complete this transaction regardless of location or amount.
Most digital currencies also provide enhanced privacy, as whilst some digital currencies are associated with banks, most are not, meaning users can move money without it being tracked by banks.
The bottom line
Digital currencies may be advantageous for some people, but will not be for others. Therefore, global currencies can continue alongside these new technologies. If you require more guidance as to whether digital currencies are something you should consider, get in touch with us.