8 Private and Public Virtual Currency

Subject(s):

Electronic money — Currency — Exchange control — Monetary system

This chapter focuses on the two classes of virtual currency: private and public. The main issue here is that the functionality of existing currency is composed of two elements—one is its acceptability as payment, and the other is the facility with which it can actually be transferred. With regards to real (physical) money, the latter is accomplished by a simple transfer of physical possession. However, the inconvenience of holding large amounts of value in the form of physical money has meant that since the earliest times, money has been held with third party custodians. This difficulty is a major reason for the existence of modern banks. It was really only with the creation of a technological solution to this problem that the existence of virtual currency outside the banking system became possible.