Let’s start with a simple understanding of what money is. Money is a contract about the right of exchange, which can be expressed in different forms, such as general equivalent, precious metal money, paper money, electronic money, etc. At present, only a small part of the currency field is displayed in the form of paper money or coins, and most transactions are in the form of checks or electronic money. Among them, fiat money is the money that relies on government decrees to make it legal currency.
So, what are electronic money and virtual money respectively?
Electronic money is actually the electronization of legal currency, including our common bank card, e-bank, e-cash, etc. There are also third-party payments developed in recent years, such as Alipay and Wechat Pay. The original source of these electronic currencies is fiat money issued by the central bank. The reason why electronic money can be widely used at the present stage is that it reduces normal currency transaction costs to a large extent, and this huge advantage also makes it possible for electronic money to replace traditional currency.
The most important difference between virtual currency and electronic currency is the difference between the issuer. Virtual currency is the electronization of non-legal currency, which can be simply understood as the currency circulating in the virtual world and the product of the development of the Internet community. These virtual currencies can often be purchased by completing tasks in the virtual world or by using real fiat currency, and are limited to circulating in a specific virtual environment.
Electronic money has the function of transfer and settlement, which is also the most basic function of electronic money. This kind of transfer settlement activity can completely replace the transfer transaction of cash and reduce the cost of paper money in the process of transaction. In addition, electronic money has the function of deposit. In terms of the use of electronic money, transfer is the most basic function, and the function of deposit and withdrawal can be fully realized. Moreover, the operation steps of deposit and withdrawal through electronic money will be simpler. Besides, electronic money has the function of exchange, which is a necessary function at the present stage, because once people go out to other places, they have to start to exchange money, and electronic money can realize this function. Different e-currencies will support different merchants, have different payment channels and so on. Electronic money also functions as a consumer loan.
Online virtual currencies can be broadly divided into three categories. The first category is the familiar game coin. In the era of single-player games, the protagonist accumulated currency by defeating enemies and winning money in gambling parlors, and used it to buy herbs and equipment that could only be used on his console. Back then, there was no “market” among players. Since the Internet established portals and communities to connect games, virtual currencies have become “financial markets” where players can trade game coins with each other. The second type is the special currency issued by portal sites or instant messaging service providers to purchase services within the site. A third class of virtual currencies on the Internet, such as BTC, LTC, Doge mama cryptocurrency, etc.
Electronic money and virtual money are intangible, the most important difference between the two is the issuer. Electronic money and virtual money are collectively called digital money.