Along with use by the common public, a virtual currency can have restricted usage, and it may be in circulation only among the members of a specific online community or a virtual group of users who transact online on dedicated networks. Virtual currencies are mostly used for peer-to-peer payments and are finding increasing use for the purchase of goods and services.
Due to the lack of a centralized regulatory authority, virtual currencies are prone to wide swings in their valuations.
Difference between Digital, Virtual, and Crypto Currencies
Digital currency is the overall superset that includes virtual currency, which in turn includes cryptocurrencies. Compared to virtual currency, a digital currency covers a larger group that represents monetary assets in digital form.
Digital currency can be regulated or unregulated. In the former case, it can be denominated to a sovereign currency—that is, a country’s central bank can issue a digital form of its fiat currency notes. On the other hand, a virtual currency often remains unregulated and hence constitutes a type of digital currency.
Cryptocurrencies like bitcoin and ethereum are considered to be a part of the virtual currency group. A cryptocurrency uses cryptography technology that keeps the transactions secure and authentic, and also helps to manage and control the creation of new currency units. Such cryptocurrencies exist and are transacted over dedicated blockchain-based networks that are open to the common public. Anyone can join and start transacting in cryptocurrencies.