Digital currencies work in a very similar way to official national currencies (the money you can save in a regular bank account). Think of your online bank account; the only indication of the amount of money you possess in there is a number on your screen. A crypto wallet with digital currencies is exactly the same thing. The main difference between standard currencies and crypto ones is the advantage of decentralization. Regular banks can enter into liquidity problems and you could lose your money due to mismanagement. In the case of cryptocurrencies, you actually own your digital money and this problem is not something you need to worry about.
Several cryptocurrencies have arisen all over the world with different intentions. The main differences among them are the sources or basis of their value and their practicality for everyday use. Bitcoin is still the dominant currency. Since the amount of these coins is limited, it cannot be debased by inflation. You can also safely store it in a digital wallet such as LedgerWallet or Trezor.
The main characteristic that defines cryptocurrencies is decentralization. Their proponents argue that it gives cryptocurrencies independence from a central authority, typically a central bank. Decentralization and consensus cryptocurrency protocols are solutions that allow for reliable and secure digital currencies. The consensus protocols typically also reward those who verify transactions (an activity known as “mining”).
In conclusion, on the scale between virtuality and decentralization, bitcoin is on the far right and non-cash money in banks instead on the left. But critics of bitcoin and other digital currencies point out that decentralization alone does not mean that a few dominant players will not have the most significant impact on cryptocurrency development and operation.
Payments with digital currencies involve the transfer of cryptocurrency units from one account to another. The difference between crypto payments and bank transfers is actually small. The main difference is the fact that the receiving party does not have to wait regardless of their location in the world. Once a payment goes through, it is final and it is impossible to recover the funds or modify the transaction. Nowadays, you can use digital currencies to pay for many online transactions including the purchase of goods and services. Even some regular brick-and-mortar stores now accept digital currencies to make your purchases.
For more information about cryptocurrencies, click here: https://en.wikipedia.org/wiki/Cryptocurrency