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1. What surprised me the most is the complex system involving digital currencies and the usability of these systems in other environments

2. We are in a time where society is very familiar with digital currency and being able to understand something that seems to have caused such a big impact is a good way of learning more about our technological progress.

3. The most important thing to pass on is telling them to do their research. In terms of digital currency I would start with how digital currencies work and their applications in our society. Giving this information will hopefully result in this person researching more about digital currencies preparing them for whatever they wish to do with that knowledge

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Cryptocurrency uses encryptions to control and secure all transactions. The blockchain is where these transactions are kept and the verification of these transactions create the currency.

Some traits of crypto currency include no physical property, no intrinsic value and its complete decentralization.

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Bitcoin is based on an electronic peer to peer system. When a transaction happens it is broadcasted to the network and all its users. A problem with this system is double spending (when a user spends money on something twice).  This issue is remedied with miners who confirm transactions by solving cryptographic puzzles in exchange for the currency.  These miners ensure the legitimacy of all transactions.

This video shows the viewer how digital currency is obtained and why this monetary system works.

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What is Cryptocurrency? A Simple Explanation

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Digital currency is a form of currency that is only available in a digital or electronic form. It can be used as a method of payment and provide convenience and cost efficiency when making transactions.  There are two types of digital currency, Virtual and Crypto. Virtual is an unregulated form of currency under control of the developer of the currency. Cryptocurrency (a type of virtual currency) uses cryptography to control the management and creation of the currency.

This website provides information on understanding what a digital currency is and compares it to physical currency. We also get an explanation of the different variants of digital currency (Virtual, and Crypto Currencies).

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What Is a Digital Currency?

Digital currency is a form of currency that is available only in digital or electronic form. It is also called digital money, electronic money, electronic currency, or cybercash.

Understanding Digital Currencies

Digital currencies do not have physical attributes and are available only in digital form. Transactions involving digital currencies are made using computers or electronic wallets connected to the internet or designated networks. In contrast, physical currencies, such as banknotes and minted coins, are tangible, meaning they have definite physical attributes and characteristics. Transactions involving such currencies are made possible only when their holders have physical possession of these currencies.

Digital currencies have utility similar to physical currencies. They can be used to purchase goods and pay for services. They can also find restricted use among certain online communities, such as gaming sites, gambling portals, or social networks.

Digital currencies also enable instant transactions that can be seamlessly executed across borders. For instance, it is possible for a person located in the United States to make payments in digital currency to a counterparty residing in Singapore, provided they are both connected to the same network.

Characteristics of Digital Currencies

As mentioned earlier, digital currencies only exist in digital form. They do not have a physical equivalent. Digital currencies can be centralized or decentralized. Fiat currency, which exists in physical form, is a centralized system of production and distribution by a central bank and government agencies. Prominent cryptocurrencies, such as Bitcoin and Ethereum, are examples of decentralized digital currency systems.

Digital currencies can transfer value. Using digital currencies requires a mental shift in the existing framework for currencies, where they are associated with sale and purchase transactions for goods and services.

Digital currencies, however, extend the concept. For example, a gaming network token can extend the life of a player or provide them with extra superpowers. This is not a purchase or sale transaction but, instead, represents a transfer of value.

Types of Digital Currencies

Digital currency is an overarching term that can be used to describe different types of currencies that exist in the electronic realm. Broadly, there are three different types of currencies:

Cryptocurrencies

Cryptocurrencies are digital currencies that use cryptography to secure and verify transactions in a network. Cryptography is also used to manage and control the creation of such currencies. Bitcoin and Ethereum are examples of cryptocurrencies. Depending on the jurisdiction, cryptocurrencies may or may not be regulated.

Virtual Currencies

Virtual currencies are unregulated digital currencies controlled by developers or a founding organization consisting of various stakeholders involved in the process. Virtual currencies can also be algorithmically controlled by a defined network protocol. An example of a virtual currency is a gaming network token whose economics is defined and controlled by developers.

Central Bank Digital Currencies

Central bank digital currencies (CBDCs) are regulated digital currencies issued by the central bank of a country. A CBDC can be a supplement or a replacement to traditional fiat currency. Unlike fiat currency, which exists in both physical and digital form, a CBDC exists purely in digital form. England, Sweden, and Uruguay are a few of the nations that are considering plans to launch a digital version of their native fiat currencies.

The use of CBDCs has been suggested as a means of enhancing the speed and security of centralized payment systems, lowering the costs and dangers of handling cash, and promoting greater financial inclusion for people and companies without access to conventional banking services. They may also make cross-border payments easier and lessen the need for foreign exchange.

The introduction of a U.S. CBDC presents a number of difficulties. For instance, for Congress to authorized the issuance of a CBDC, there must be robust privacy and security infrastructures put in place. The government must also weight the possible impacts on monetary policy and the operational management of the switch from conventional money to a CBDC.

Regulated or unregulated currency that is available only in digital or electronic form.

An unregulated digital currency that is controlled by its developer(s), its founding organization, or its defined network protocol.

A virtual currency that uses cryptography to secure and verify transactions as well as to manage and control the creation of new currency units.

Advantages of Digital Currencies

The advantages of digital currencies are as follows:

Fast Transfer and Transaction Times

Because digital currencies generally exist within the same network and accomplish transfers without intermediaries, the amount of time required for transfers involving digital currencies is extremely fast.

As payments in digital currencies are made directly between the transacting parties without the need for any intermediaries, the transactions are usually instantaneous and low-cost. This fares better compared to traditional payment methods that involve banks or clearinghouses. Digital-currency-based electronic transactions also bring in the necessary record keeping and transparency in dealings.

No Physical Manufacturing Required

Many requirements for physical currencies, such as the establishment of physical manufacturing facilities, are absent for digital currencies. Such currencies are also immune to physical defects or soiling that are present in physical currency.

Monetary and Fiscal Policy Implementation

Under the current currency regime, the Fed works through a series of intermediaries-banks and financial institutions-to circulate money into an economy. CBDCs can help circumvent this mechanism and enable a government agency to disburse payments directly to citizens. They also simplify the production and distribution methods by obviating the need for physical manufacturing and transportation of currency notes from one location to another.

Cheaper Transaction Costs

Digital currencies enable direct interactions within a network. For example, a customer can pay a shopkeeper directly as long as they are situated in the same network. Even costs involving digital currency transactions between different networks are relatively cheaper as compared to those with physical or fiat currencies. By cutting out middlemen that seek economic rent from processing the transaction, digital currencies can make the overall cost of a transaction cheaper.

Decentralized

Digital currencies may be decentralized. This means they are not controlled by any government or financial institution. Digital currencies that are decentralized make them more resistant to government interference, censorship, and manipulation. Decentralization means true control over the digital currency is spread over a broader range of owners or users.

Due to the fact that transactions with digital currencies are not linked to personal data, users are given a high level of privacy and anonymity. They are therefore very helpful for those who want to protect the confidentiality of their financial dealings.

Accessible Around the World

Anyone with an internet connection can utilize digital currencies from anywhere in the globe. These services are therefore particularly helpful for people who do not have access to conventional banking institutions. In addition, many of these banking services only need access to an internet connection; for geographical areas that are not as developed with a strong financial infrastructure, digital currencies may be a stronger option.

Disadvantages of Digital Currencies

The disadvantages of digital currencies are as follows:

Storage and Infrastructure Issues

While they do not require physical wallets, digital currencies have their own set of requirements for storage and processing. For example, an Internet connection is necessary as are smartphones and services related to their provisioning. Online wallets with robust security are also necessary to store digital currencies.

Hacking Potential

Their digital provenance makes digital currencies susceptible to hacking. Hackers can steal digital currencies from online wallets or change the protocol for digital currencies, making them unusable. As the numerous cases of hacks in cryptocurrencies have proved, securing digital systems and currencies is a work-in-progress.

Volatile Value

Digital currencies used for trading can have wild price swings. For example, the decentralized nature of cryptocurrencies has resulted in a profusion of thinly capitalized digital currencies whose prices are prone to sudden changes based on investor whims.

Other digital currencies have followed a similar price trajectory during their initial days. For example, Linden dollars used in the online game Second Life had a similarly volatile price trajectory in its early days.

Limited Acceptance

Digital currencies are still not commonly used as a means of payment by retailers and other enterprises. Because of this, using them for routine transactions may be challenging. Though digital currencies have gained gained in popularity, there are still limited functionalities in everyday transactions in many places.

Irreversibility

On a digital currency network, transactions are irreversible. This means that once a transaction has been completed, it cannot be undone. In circumstances where a mistake or fraud has taken place, this may be a disadvantage.

This is also a tremendous disadvantage for those new to the digital currency space, as there is a substantial learning curve. Because there is no central oversight area for many digital currencies, new users can't simply go to their local branch to receive help for many digital currencies.

Pros and Cons of Digital Currencies

Pros

Faster transaction times.

Do not require physical manufacturing.

Lower transaction costs.

Make it easier to implement monetary and fiscal policy.

Offers greater privacy than other forms of currency.

Cons

Can be difficult to store and use.

Can be hacked.

Can have volatile prices that result in lost value.

May not allow for irrevocability of transactions.

Still has limited acceptability.

Central Bank Digital Currencies Around the World

Some major central banks around the world have begun looking issuing their own digital currencies. Some of the larger, more notable examples include the countries below.

China: Since 2020, the People's Bank of China (PBOC) has been testing the digital yuan, also known as e-CNY, in a number of Chinese localities. Millions of Chinese citizens currently utilize the digital yuan, which is intended to be used for retail transactions.

Sweden: Also since 2020, Sweden's Riksbank has been testing the e-krona digital currency. The e-krona is being created to complement Sweden's diminishing use of currency and to give the general public access to a safe and effective payment system.

EU: A digital euro that may be issued by the European Central Bank (ECB) and used for retail transactions within the Eurozone is being investigated.

England: The Bank of England is looking into the prospect of launching the "Britcoin" cryptocurrency. The UK's payment system would be backed by a digital currency, which could also reduce the nation's dependence on cash.

Canada: The Bank of Canada has been conducting research and consultations on the idea of creating a CBDC.

Future of Digital Currencies

Cryptocurrencies like bitcoin have exploded in value, but they are largely used for speculation or to buy other speculative assets. Although there have been some signs of merchant adoption in countries like El Salvador, the high volatility and complexity of these currencies make them impractical for most daily applications.

Many companies have tried to reduce volatility by introducing stablecoins, whose value is fixed to the price of fiat currency. This is usually done by depositing an equivalent amount of fiat, which can be used to redeem the tokens. However, stablecoin issuers such as Tether have used these deposits on more speculative investments, raising concerns that they are vulnerable to a market crash.

Another possible application is in central bank digital currencies, which could be issued by a country's bank or monetary authority. These would be used and stored in online wallets, similar to cryptocurrencies, but allowing the central bank to issue and freeze tokens at will. Several countries, such as China, have proposed digital versions of their currencies.

Can You Invest in Central Bank Digital Currencies?

CBDCs are unlikely to be useful for speculative investments since they will likely be pegged to the value of an underlying currency. However, it will still be possible to invest in those currencies through the forex markets.

How Do You Buy China's Digital Yuan?

The digital yuan, or e-CNY, is only available to Chinese cities living in 23 major cities. Users can buy digital yuan by downloading an app and connecting it to their bank accounts.

How Do You Make a Digital Currency?

Most digital currencies are created by issuing them on Ethereum or another blockchain capable of running smart contracts. The issuer must first decide how many tokens to issue, and any special rules that limit transactions or ownership. Once these choices are coded into the smart contract, the issuer pays a small amount of cryptocurrency to pay for the computational cost of issuing the tokens.

The Bottom Line

Digital currencies are assets that are only used for electronic transactions. They do not have any physical form, although they can be exchanged for regular money or other assets. Although the most popular digital currencies are cryptocurrencies like bitcoin, many national governments are considering issuing their own centralized digital currencies.

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Digital Currency Types, Characteristics, Pros & Cons, Future Uses

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Digital currency are digital formats of currencies that do not exist in physical form. They can lower transaction processing costs and enable seamless transfer across borders.

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Cryptocurrencies are a secure method of online transactions. This is done by cryptography, a method of protecting information using code. Cryptocurrencies can be thought of as arcade tokens or casino chips.

Cryptocurrency values are considered speculations to investors as cryptocurrency generates no cash flow. In order to make a profit someone else must buy your currency at a higher price than you. This can be correlated to "the greater fool" theory of investment.

Some reasons why cryptocurrency is so popular includes, supporters liking the decentralized processing, removing banks from managing supply and the security of such currency. of course, potential profits are one of the driving factors as well.

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What Is Cryptocurrency? A Guide For Beginners - NerdWallet

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Cryptocurrency is a class of digital assets, including Bitcoin and Ethereum, that runs without the need for a central authority.

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Welcome to my padlet on digital currencies.  This padlet will present the basics of digital currencies with key takeaways including an understanding of digital currencies, the variants of digital currency (Virtual, and Crypto Currencies) and information regarding issues and their potential solutions.

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A bitcoin is a statement on  a global public ledger that records every single transaction every made. This public ledger is called the blockchain. When making a transaction, the currency is not directly transferred from one point to the other, rather a statement is made saying an individual sends digital currency to another individual. During this transfer it is publicly announced that a transfer is taking place so that miners ensure that this information is correct, confirming the authenticity of the transaction.

This video gives an in depth explanation of cryptocurrencies. Using examples and visuals that are easy to understand the view can easily follow along in the video and clear up any confusions they may have about cryptocurrencies. How this video differs is the explanation of using cryptographic hash functions to add information to the block chain and the potential issues and solutions of cryptocurrencies

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How Cryptocurrencies Actually Work: Bitcoin Explained

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Blockchain protocols form the money and make it viable as a currency.  Blockchain protocols provide:

1.   Unique and non-duplicable

2.   Non-reputable and impossible to “double spend”

3.   Scarce and limited in supply

4.   Durable and immutable

5.   Divisible and uniform

(BitIRA, 2019)

Each blockchain network of a currency is a  variant of the protocol above.

Miners are what keep the transactions secure. A miners responsibility includes the confirmation of the legitimacy of all transitions in a block, allowing the block to be added to the chain. This is how digital currency is obtained.

Storage of digital currency comes in the for of a digital wallet. These digital wallets come with public and private keys. Public keys can be considered anonymous addresses used to publicize all transactions. Private key contains the access to a wallet and the management of the digital currency.

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Although there are many separate types of digital currency, the underlying mechanics behind them all are essentially the same. That said, once you wrap your head around the basics, you should have a decent idea of how each digital currency operates.

Here's a step-by-step breakdown of how digital currencies work, plus the technology that makes them possible...

Digital Currency Networks: Blockchain

The biggest (and most difficult to grasp) element of how digital currencies work is their blockchain networks. But before we go any further to discuss how these networks operate, we need to make an important clarification.

There is a distinct difference between Blockchain cryptographic protocol (uppercase 'B') and the respective blockchain (lowercase 'b') networks of each digital currency.

See, the Blockchain protocol was developed and released by the creators of Bitcoin. And although Blockchain is the technology on which all digital currencies are built, it is not tied or affiliated to any particular digital currency.

However, when we talk about the blockchain of a specific currency, we're referring to a singular implementation of the Blockchain protocol. That implementation is what actually creates a digital currency.

In simple terms, the Blockchain protocol allows digital currencies to be created and used as viable forms of money. That's because it provides a framework for creating digital items that are:

1. Unique and non-duplicable

2. Non-repudiable and impossible to "double spend"

3. Scarce and limited in supply

4. Durable and immutable

5. Divisible and uniform

Without the Blockchain protocol, making a digital currency would be impossible. The individual blockchain networks of each digital currency are essentially different incarnations of that protocol.

In other words, all digital currencies are created, stored, and exchanged on their own separate blockchain networks - all of which are built using the foundational Blockchain protocol.

To summarize once more for clarity, the Blockchain software is like a universal blueprint that makes digital currencies possible, but it's not a currency in and of itself. But when that blueprint is used to build a blockchain network, a digital currency is born.

Creating & Exchanging Digital Currency: Mining

So once a digital currency is created, how in the world do people obtain and use it? On top of that, how can we eliminate the chance of fraud and manipulation across the millions of transactions happening between users?

The Blockchain protocol addresses both of these concerns through a process called "mining."

See, a digital currency's blockchain network is a public ledger of all transactions of that currency that have ever occurred. New transactions are grouped into 'blocks.' Each block is confirmed and validated by multiple users throughout the network, before being added at the end of the chain. Every user has their own copy of this public ledger, and it's constantly updated.

Miners have the responsibility of confirming all the transactions inside a new block, so the block can be sealed and recorded on the public blockchain ledger.

To confirm a block, miners compete with one another to make something called a hash, a unique sequence of cryptographic information based on:

1. The transaction data inside the block being confirmed.

2. The result of complex mathematical formulas.

3. The previous hash of the last block on the chain.

Once miners complete a hash, the new block is confirmed and the hash is stored alongside it. As a reward for each new hash/confirmed block, miners receive new units of the network's currency.

To regulate the currency supply and control inflation, the Blockchain software protocol makes it increasingly difficult for miners to generate hashes and confirm new blocks as the network grows in size.

This system guarantees transparency, accountability, and stability for networks and their currencies.

Storing Digital Currency: Wallets

We've discussed what makes digital currencies possible, where they come from, and how they're exchanged. Now let's talk about how they're stored...

When digital currencies are mined on their blockchains or transferred between users, they must be stored until their new owner is ready to use them. That's where digital currency wallets come into play.

Wallets are simply pieces of software capable of housing digital currencies securely for an indefinite period of time.

All digital currency wallets have a public key and at least one private key.

The simplest way to understand the public key is to think of it like an anonymous address. When you send or receive digital currency, that address is recorded on the public ledger for your transaction. Everyone can see it, but it contains none of your personally identifiable information. It simply documents your wallet's location on the blockchain network.

The private key, on the other hand, is seen by nobody but the wallet's owner. It contains the cryptographic information needed to authorize transfers out of the wallet, and it should never be shared. Private keys are often secured through encryption and backed up in hard copy on paper.
However, nothing matches the security of a multi-signature wallet, which utilizes multiple private keys stored in separate locations - and requires the signature of two keys for every transaction.
For most BitIRA customers, Digital IRA investments are held in multi-signature wallets through our proprietary wallet solution. These wallets are held on custom hardware devices that are personal to each customer, and locked in cold storage inside a state-of-the-art depository. We are so confident in the security of our wallet solution that all assets of BitIRA customers are fully insured.

To learn more about how cryptocurrencies work, contact BitIRA and one of our Digital Currency Specialists can explain in more detail. Or, if you're ready to enter the growing digital currency market with a Digital IRA, your Specialist will explain the process step-by-step and remain available to answer any questions.

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Although there are many separate types of digital currency, the underlying mechanics behind them all are essentially the same. That said, once you wrap your head around the basics, you should have a decent idea of how each digital currency operates. Here's a step-by-step breakdown of how digital currencies work, plus the technology that makes...

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This image represents the potential of a 51% attack where a group or single miner acquires 51% of the mining power, effectively controlling the block chain and validating false transactions.

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Digital currencies can be used to purchases various goods. A wallet is required to make transactions.

Digital currencies do not count as legal tender in Canada.
Automated exchangers or bitcoin ATMs allow for the exchange of cash and bitcoins.

Digital currencies are subject to the
Income Tax Act. Anything you buy or sell and even the profits or losses from digital currency must be reported, failing to do so is illegal.

Risks of using digital currency are:
1. Deposits are not insured
2. High risk investment
3. Non reversible transactions

Tips for using digital currency include:
1. Reading all policies carefully
2. Protecting your wallet
3. Ensure confirmations
4. Check for unexpected fees
5. Ensure someone else can access your wealth incase of death or illness.

This website provides the reader information on how digital currency is handled in Canada and some rules that Canada imposes on digital currency. The reader is also given some risks and tips when using digital currency.

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This page is about cryptocurrencies, which are not issued or governed by a government or central bank.

Digital currency is electronic money. It's not available as bills or coins.

Cryptocurrencies are a type of digital currency created using computer algorithms. The most popular cryptocurrency is Bitcoin.

No single organization, such as a central bank, creates digital currencies. Digital currencies are based on a decentralized, peer-to-peer (P2P) network. The "peers" in this network are the people that take part in digital currency transactions, and their computers make up the network.

Using digital currencies

You can use digital currencies to buy goods and services on the Internet and in stores that accept digital currencies. You may also buy and sell digital currency on open exchanges, called digital currency or cryptocurrency exchanges. An open exchange is similar to a stock market.

To use digital currencies, you need to create a digital currency wallet to store and transfer digital currencies. You can store your wallet yourself or have a wallet provider manage your digital currency for you.

You need a "public key" and a "private key" to use your wallet. Keys are made up of a random sequence of numbers and letters.

Public keys are used to identify your wallet.

Private keys are used to unlock your wallet and access your money. Private keys should be kept secret.

All transactions are recorded to a public ledger or "blockchain" that everyone can see.

Digital currencies are not a legal tender

Digital currencies, such as Bitcoin or other cryptocurrencies, are not legal tender in Canada. Only the Canadian dollar is considered official currency in Canada.

The Currency Act defines legal tender.

Legal tender is defined as:

bank notes issued by the Bank of Canada under the Bank of Canada Act

coins issued under the Royal Canadian Mint Act

Digital currencies are not supported by any government or central authority, such as the Bank of Canada.

Financial institutions, such as banks or credit unions, don't manage or oversee digital currency.

Automated exchangers (Bitcoin ATMs)

Automated exchangers are commonly referred to as Bitcoin ATM s. They are vending machines that allow you to insert cash in exchange for bitcoins, and in some cases bitcoins for cash.

Unlike traditional ATMs, they are not connected to your bank, credit union or the Interac network. You may be charged a transaction fee for using a Bitcoin ATM. Shop around as exchange fees vary and you may be able to get lower rates elsewhere.

Generally, when you use a Bitcoin ATM, the machine:

reads the bills you insert

converts the amount into an amount of bitcoins

sends the equivalent of bitcoins to the Bitcoin address you enter

How tax rules apply to digital currency

Tax rules apply to digital currency transactions, including those made with cryptocurrencies. Using digital currency does not exempt consumers from Canadian tax obligations.

This means digital currencies are subject to the Income Tax Act.

Buying goods or services using digital currency

Goods purchased using digital currency must be included in the seller's income for tax purposes. GST/ HST also applies on the fair market value of any goods or services you buy using digital currency.

Buying and selling digital currency like a commodity

When you file your taxes you must report any gains or losses from selling or buying digital currencies.

Digital currencies are considered a commodity and are subject to the barter rules of the Income Tax Act. Not reporting income from such transactions is illegal.
Learn more about the Canada Revenue Agency's reporting requirements for digital currencies.​

Risks of using digital currency

Using digital currency has certain risks.

You may have fewer protections

You may not have access to a complaint-handling procedure like you would with other payment methods, such as debit and credit cards.

Even if you use a wallet provider to help you manage your digital currency, the provider does not have to help you get your funds back if something goes wrong with your transaction.

Your deposit is not insured

It's your responsibility to protect your digital currency wallet.

Federal or provincial deposit insurance plans don't cover digital currency.

For example, the Canada Deposit Insurance Corporation only covers eligible deposits in Canadian dollars at member financial institutions if the institution fails.

If the currency exchange or wallet provider that has your digital currency fails or goes bankrupt, your funds won't be protected.

Your investment may be high risk

Digital currencies can be risky investments because their value can change quickly. The value of a digital currency can increase or decrease over a very short period of time. Such changes in value can be difficult to predict.

When you exchange your digital currency for traditional currency, such as the Canadian dollar, it may be worth less than when you bought it.

You may have a hard time exchanging your digital currency

Digital currencies can be difficult to buy and use. You may not be able to exchange them easily for cash or to purchase goods and services.

Merchants don't have to accept digital currencies as payment. They don't have to exchange digital currencies for traditional currencies, such as the Canadian dollar.

You may be exposed to fraud

Digital currencies may be vulnerable to fraud, theft and hackers.

All transactions are recorded to a public ledger or "blockchain". The blockchain may include information such as transaction amounts, wallet addresses and the public keys of the sender and recipient.

Digital currencies are also sometimes used to support illegal activities.

Transactions are not reversible

Purchases and transactions made with digital currencies are not reversible.

This means:

you can't reverse the charges if you didn't receive the product

you can't get your money back unless the seller agrees

you might not be able to stop a payment

Tips for using digital currency

Here are a few tips to help you protect yourself when using digital currency.

Protect your wallet

Take steps to protect your wallet:

keep your wallet, and any backups, in a safe place

encrypt your wallet using encryption software

encrypt any copies you make or online backups

set a password to help prevent thieves from withdrawing your funds

use a strong password that contains letters, numbers and symbols

Know the merchant's refund, return and dispute policies

Before you make a purchase, find out:

what the exchange rate will be

if refunds are available

if refunds will be processed in digital currency, Canadian dollars or store credit

how to contact someone if there's a problem

Wait for multiple confirmations before completing a transaction

It can take 10 minutes or more for a digital currency transaction to be confirmed. Confirmation happens when users on the network verify the transaction. During that time, a transaction could be reversed and you could lose your funds to a dishonest user.

Understand what the actual costs will be

Find out if there are any mark-ups or other fees. Find out what will happen if the rate changes before the exchange is completed.

Think about the future

Consider what will happen if you fall ill or die and can no longer access your wallet.

If no one knows the locations and passwords of your wallets when you are gone, the funds can't be recovered.

Consider having a backup plan for your peers and family.

Related links

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personal finance; consumer protection; currency; banking; income tax; taxes

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This page is about cryptocurrencies, which are not issued or governed by a government or central bank. Digital currency is electronic money. It's not available as bills or coins. Cryptocurrencies are a type of digital currency created using computer algorithms. The most popular cryptocurrency is Bitcoin.

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Digital signatures are one method of verifying transactions. How they work involves private and public keys. A signature is made up of a function involving the transaction and the private key. The public key is used to verify that the transaction actually came from the user with the right private key. Transactions include a unique ID to prevent copies of the same transaction.

Compared to the other videos, this video focuses on how each solution works to a potential problem with digital currency. There is a lot of emphasis on the example of ledgers to explain block chains and how the entire system functions.

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This video shows the view the benefits of using a proof-of-stake  vs proof-of-work technique. It provides an alternative to proof-of-work techniques. Proof-of-stake requires its users to deposit their own currency into the network as stake when they validate a block, ensuring that the profits from validating fraudulent transactions is lower than the transaction amount.

1. POW encourages mining pools which results in centralization if groups join together to own most of the blockchain allowing for fraudulent activity to occur.

2. Because of the removal of the competition to solve the function first and a lack of mining a there would be a considerable decrease in electrical consumption.

3.  POW setups are a lot more expensive than POS setups because mining equipment is not necessary.

This video shows the potential for the Proof-of-Stake technique which solves some problems regarding the Proof-of-Work technique currently in use.