Digital Currency (Copy)
IGCSE / O Level Computer Science Cheat Sheet
Topic: 5.2 Digital Currency
💸 What is Digital Currency?
- Currency that exists only electronically
- No physical form (unlike coins or banknotes)
- Uses cryptography and blockchain technology for security
🪙 Examples of Digital Currency
| Type | Examples |
|---|---|
| Cryptocurrency | Bitcoin, Ethereum, Litecoin |
| Central Bank Digital Currencies (CBDCs) | Digital Yuan, Digital Euro |
| Virtual/Game Currencies | Robux, V-Bucks, FIFA Coins |
🔗 Blockchain Technology
- A digital ledger that records transactions
- Each block contains:
- Transaction data
- Timestamp
- Hash of the previous block
- Blocks are linked chronologically forming a chain
- Stored across a decentralized network
🔐 Key Features of Blockchain
| Feature | Description |
|---|---|
| Immutable | Once data is added, it cannot be changed |
| Transparent | Visible and verifiable by all participants |
| Decentralized | No single control authority |
| Secure | Protected by encryption and consensus mechanisms |
🔁 How a Transaction is Recorded
- Transaction is created by a user
- Broadcasted to the network
- Verified by consensus (e.g. mining/validators)
- Added to a block
- Block is appended to blockchain
⚖️ Advantages of Digital Currency
- Fast transactions (global)
- Lower fees
- Transparent and trackable
- Reduced reliance on banks
⚠️ Disadvantages / Concerns
- Price volatility (cryptocurrencies)
- Security risks (hacking, scams)
- Regulatory issues
- Not universally accepted
📋 Summary
| Concept | Description |
|---|---|
| Digital Currency | Exists electronically, used for transactions |
| Blockchain | Secure, timestamped ledger of transactions |
| Cryptocurrency | Type of digital currency using blockchain |
| Immutable | Data cannot be changed once recorded |
| Decentralized | Distributed across many nodes (no single owner) |