Virtual Currency Explained: A Guide for Beginners

Key takeaways

Virtual currency has grown from an interesting concept to a means of making financial transactions around the globe. 

• Popular virtual currencies include Bitcoin, Ethereum, Tether, XRP, and Binance USD.

• Several industries have begun integrating virtual currency into their day-to-day operations, including banking, real estate, travel, and gaming.

• You can choose to hold open or closed virtual currencies, depending on whether you want the ability to easily convert your virtual coins or you plan to use them within a specific environment. 

Whether you are looking for a career involving virtual currency or are interested on a personal level, building foundational knowledge and skills in virtual currency can help you make educated decisions and feel confident when navigating this exciting new field. You can also start building foundational skills with the Accounting Data Analytics Specialization from the University of Illinois. In as little as three months, you can develop Python skills for data preparation, data visualization, data analysis, data interpretation, and machine learning. By the end, you’ll have had the opportunity to apply your skills to build a machine learning model that predicts whether a loan is to be fully paid and constructs an optimized loan portfolio. 

What is a virtual currency?

A virtual currency is an electronic representation of value that does not have a physical form. For example, a US dollar has paper and coin physical representations of its value. Virtual currency, on the other hand, is completely stored, exchanged, and circulated online. Some virtual currencies are encrypted to protect the record of the trades and ownership of the currency. You can also convert many types of virtual currency into physical currency of equivalent value.

Read more: How Does Cryptocurrency Work? A Beginner’s Guide

Types of virtual currencies

Organizations design many different types of virtual currencies for specific functions. Depending on their intended use, virtual currencies fall into one of two categories:

Open virtual currencies

You can buy, sell, or trade open virtual currencies in open marketplaces and exchange them for an equivalent value of another currency. They're also called convertible virtual currencies. For example, Bitcoin is one of the most widely traded cryptocurrencies, a virtual currency. If desired, Bitcoin owners can sell their Bitcoins for an equivalent value of US dollars or another type of currency. 

Closed virtual currencies 

You use closed virtual currencies within a specific private ecosystem. These virtual currencies do not retain their value outside of the closed setting, and you cannot trade them for other currencies. For example, some video game environments have a specific virtual currency. Players can earn this currency within the game and use it to buy in-game items or upgrades. This currency does not have value outside of the game, so you can’t trade it for US dollars or any other type of money.

The difference between virtual currencies, digital currencies, and cryptocurrencies

While they may sound interchangeable, clear differences exist between the types of online currencies that make them more or less suited for different functions. Depending on your interests and the industries you would like to become involved in, focusing your knowledge on the right type of currency for your needs can help you grow into exciting roles and expand your opportunities. 

Digital currencies

Digital currency is a broad term that represents all types of electronic currency. This includes virtual currency and cryptocurrency. The defining characteristic of digital currency is that it has no physical representation. Digital currency is kept in a digital wallet, and you can use this digital wallet for online transactions that accept it as a qualified form of payment. While most digital currencies operate independently from banks or third parties, digital representations of central bank-issued currency (CBDC) also fall under the umbrella of digital currency. This currency has its value attached to the value of the issuing country’s fiat currency. 

Virtual currencies

All virtual currencies are digital currencies, but not all digital currencies are virtual currencies. Virtual currencies are a form of digital currency designed for a specified virtual community and controlled by a private party. As mentioned previously, people create virtual currencies for use in a closed or open environment, which will determine whether you can trade them for alternative currencies. 

Unlike some types of digital currency, virtual currencies are unregulated and do not involve a third party, such as a bank, for transactions. This can increase the speed of transactions and reduce third-party fees.

What is the most valuable virtual currency?

As of 2025, Bitcoin is the most valuable virtual currency by market cap (the total value of all coins in circulation) [1]. Bitcoin has consistently had the largest market cap and is one of the oldest, most widely held cryptocurrencies.

Cryptocurrencies

The most specific type of digital currency is cryptocurrency. Cryptocurrency falls under the digital and virtual currency umbrellas, but it uses cryptography to secure transactions and networks. This type of virtual currency runs on blockchain-based decentralized systems and is independent of third parties. Cryptocurrency is a widely known type of digital currency, and many industries are finding new ways to incorporate blockchain technology into their practices.

Examples of virtual currency: Coins and platforms to know 

When participating in virtual currency conversations, knowing the most common coins and platforms will likely help you better understand what is happening in the space and why. Many industries, such as banking and gaming, are beginning to use virtual currency in their business transactions. Depending on the type of transaction, professionals may prefer different coins or platforms over others. 

If you enter into a career in an industry in the early stages of adopting virtual currency, knowledge of available platforms and uses can help you discuss with business partners why they may want to incorporate one type of virtual currency over another. For personal use, learning about the different coins and platforms can help you understand your options for investing and trading. 

Common virtual currency coins

While different industries utilize different types of virtual currencies, common ones that you may hear referenced are:

• Bitcoin

• Ethereum

• Tether

• XRP

• Binance USD

• USD Coin

• Cardano

• Solana

• Tron

• Shiba Inu

• Avalanche

Common platforms that sell virtual currencies

Choosing a secure and regulated platform can add a layer of protection for virtual currency holders. Some common cryptocurrency exchanges and platforms include:

• Binance.US

• Bitstamp

• KuCoin

• BDFYi

• Coinbase

• Crypto.com

• eToro

• Gemini

• Kraken

• Uphold

Industries using virtual currencies and related technologies

As we move closer to a cashless society, more industries have begun incorporating virtual currency and related technologies into their day-to-day operations. To start a career in the virtual currency space, understanding how you can use virtual currency in different industries and the potential growth opportunities can help you determine how to take your next steps to land the right position for you. While new technologies and applications are developing every day, some top industries adopting virtual currency include:

The banking industry

Many banks have begun adopting blockchain technology, the base technology of cryptocurrency, into their transactions. By using blockchain, banks can implement smart contracts, which are contracts that automatically execute once terms are met without the need for a third party. Blockchain technology also allows for transactions to have added security, lower fees, and clear transaction records.

The real estate industry

The real estate industry is in the early stages of virtual currency adoption, but the outlook is positive. Because of the high volume of paperwork and records involved in home ownership, the potential use of blockchain technology and smart contracts to keep secure records and automate transactions is catching the eye of many people in the industry.

The travel industry

Like the real estate industry, the travel industry shows potential for blockchain technology to provide convenient and secure tracking of all travel transactions. Some travel agencies and service providers are also beginning to accept virtual currency as a recognized form of payment, which is great news for virtual currency holders. 

The education industry

As more people hold virtual currencies, some institutions are beginning to allow students to pay tuition in virtual currency. In addition, some institutions use blockchain technology to secure their networks and keep unalterable records.

The gaming industry

The gaming industry was one of the earliest adopters of virtual currency and continues to show fast-paced growth. Many online games now use blockchain technology and smart contracts to complete in-game transactions. Players for certain games also have the opportunity to earn cryptocurrency or related virtual tokens. For some players, virtual currency-based gaming provides an income stream that you can translate into fiat money. 

The health care industry

Blockchain technology's clear record-keeping and secure network make it a popular choice for health care organizations. It can potentially influence patient data keeping, synthesis of previous medical records, and increased security of private medical information. Plus, more hospitals globally are beginning to accept cryptocurrency payments. As this expands, there may be a need for innovation surrounding effective system development for these payments. 

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