What is digital currency and how does it differ from traditional currency?

Digital currency is a form of currency that is available only in digital or electronic form, not in physical form like coins or banknotes. Unlike traditional currency, digital currency is typically decentralized and uses cryptography for security, making it a key topic in Cambridge IGCSE Computer Science under 'The internet and its uses'.

How does digital currency work in online transactions?

Digital currency works in online transactions by using blockchain technology, which records all transactions in a secure and transparent manner. This technology ensures that digital currencies can be transferred directly between users without the need for intermediaries like banks, making transactions faster and often cheaper.

What are the advantages of using digital currency?

The advantages of using digital currency include increased security, lower transaction fees, and faster transaction times. Additionally, digital currencies offer greater accessibility, as they can be used by anyone with internet access, which aligns with the Cambridge IGCSE Computer Science focus on 'The internet and its uses'.

What are some common types of digital currencies?

Some common types of digital currencies include Bitcoin, Ethereum, and Litecoin. These currencies are decentralized and use blockchain technology to ensure secure transactions. Understanding these types is crucial for students studying digital currency under the Cambridge IGCSE curriculum.

What are the potential risks associated with digital currency?

Potential risks associated with digital currency include market volatility, security threats such as hacking, and regulatory uncertainties. These risks highlight the importance of understanding digital currency in the context of 'The internet and its uses' in Cambridge IGCSE Computer Science.

Digital Currency | Cambridge IGCSE Computer Science

Summary and Exam Tips for Digital Currency

Digital Currency is a subtopic of The Internet and its uses, which falls under the subject Computer Science in the Cambridge IGCSE curriculum. Digital currencies exist only in electronic form, with no physical coins or notes. People are increasingly adopting digital currencies due to dissatisfaction with traditional money systems, which can be inflated by central banks. Unlike traditional currencies, some digital currencies like Bitcoin have a capped supply, preventing inflation and preserving purchasing power. Digital currencies are often decentralized, allowing direct transactions without banks, and offer potential privacy, although regulations are tightening.

Transactions involve sending coins from one digital wallet to another, requiring accurate entry of wallet addresses. These transactions are validated by network nodes and recorded on a blockchain, a digital ledger that ensures transaction integrity and prevents double spending. Blockchain technology maintains identical copies across multiple users, making fraudulent alterations nearly impossible.

The future of digital currencies varies in transaction speed, with Bitcoin being notably slow. Mistakes in sending coins can lead to permanent loss, emphasizing the need for caution. Unlike traditional banking, blockchain provides a transparent transaction record, though not directly linked to personal identities.

Exam Tips

Understand Key Concepts: Focus on the definitions and characteristics of digital currencies, such as their electronic nature and decentralization.
Blockchain Basics: Grasp how blockchain technology works as a digital ledger and its role in ensuring secure transactions.
Transaction Process: Be familiar with how digital currency transactions are conducted, including the importance of wallet addresses and validation.
Advantages and Challenges: Know the benefits of digital currencies, such as inflation resistance and privacy, as well as challenges like transaction speed and potential for loss.
Real-World Comparisons: Compare digital currencies with traditional systems, noting differences in transaction transparency and error handling.

Digital Currency

Exam Tips and Study Notes for Digital Currency