Recently, I’ve been seeing a lot of people ask what digital currency is, so I’ll share my understanding. In fact, the concept of digital currency has existed for a long time—from electronic money and virtual currencies to today’s cryptocurrencies. Laws in different countries are also constantly being updated, gradually being legalized to keep up with this trend.

Simply put, digital currency is a type of digital asset used as a store of value or a medium of exchange. When investors usually talk about “digital currency,” they actually mean digital cryptocurrencies—there’s no reliance on any physical asset. They are generated by computer programs based on cryptography and P2P technology, and are issued and circulated on the internet. There are now more than 20,000 types of cryptocurrencies in circulation, with a trading volume exceeding $100 billion every 24 hours, and more than 300 million users worldwide.

Digital currencies are roughly divided into two categories. One is centralized—for example, systems like PayPal and Payoneer, as well as government-issued digital currencies such as digital yuan. The other is decentralized—Bitcoin, Ethereum, and Ripple are the key ones that investors focus on. Based on market capitalization, they can also be divided into large-cap coins, mid-cap tokens, and small-cap tokens, with risk increasing from low to high.

When it comes to choosing coins, my advice is that beginners should prioritize mainstream coins with large market caps. Never touch low-market-cap “shanzhai” coins, especially those ranked after the top 100—volatility is too high, and your principal is likely to evaporate. And don’t choose projects without a whitepaper, with an anonymous team, or built around heavily hyped concepts—most of these are “scams” where 9 out of 10 are there to cut retail investors.

Bitcoin is, in my opinion, the most solid entry-level choice for beginners. As the “gold standard” of cryptocurrencies, the concept is simple and easy to understand. It has the largest market cap, the best liquidity, and is supported by nearly all exchanges. It has already been included on the balance sheets of major companies such as Tesla and MicroStrategy. With the PoW consensus mechanism and a decentralized network of nodes, its security is extremely strong. In times of global economic turbulence, Bitcoin can also serve as a safe-haven asset. Recently, the price of Bitcoin has been around $75,960, with a market cap of $1.52 trillion.

Ethereum is my second recommendation. The vast majority of DeFi, NFT, and blockchain gaming projects are built on Ethereum, making it the core infrastructure of blockchain technology. After the shift to PoS, scalability improves and energy consumption decreases, and long-term potential is widely viewed positively. ETH ranks second by market cap, with sufficient trading depth, making it easier for beginners to buy and sell. Currently, it is priced at about $2,080, with a market cap of about $251.4 billion.

Ripple is suitable for small-position allocations. XRP focuses on cross-border payments for financial institutions and can complete low-cost international remittances in 3 to 5 seconds, and it has been adopted by some banks. Transaction fees are extremely low, and the unit price is also low, which makes it popular with beginners. However, you should note that XRP is relatively centralized, with sharp price swings and significant risk. Currently, its price is about $1.33, with a market cap of around $82.3 billion.

Binance Coin is also worth keeping an eye on. BNB is not only an investment asset, but also a pass for a major exchange ecosystem. Paying trading fees with it can get you discounts. The exchange conducts quarterly profit buybacks and burns BNB, reducing circulating supply, which may drive prices higher in the long run. BNB has relatively low volatility and performs more steadily, making it suitable for conservative beginners. Currently, the price is about $653.60, with a market cap of approximately $88.1 billion.

Stablecoins like USDT and USDC are also very useful. They are pegged 1:1 to the US dollar, with zero volatility. Beginners can use them to get familiar with how exchanges work, practice transfers, or temporarily hedge. They can be used as intermediaries when trading other coins, or to earn interest from exchange on-demand funds. The market cap of USDT is about $189.6 billion, and USDC is about $76.4 billion.

There are several common ways to invest in digital currencies. First, through centralized exchanges: register on mainstream platforms, complete identity verification, and then deposit TWD or USD to buy directly. Just be sure to choose exchanges that are compliant and have a good reputation—don’t touch platforms in regulatory gray areas. Second, through decentralized exchanges: they allow wallet-to-wallet trading without requiring registration, but you must assume the risk of smart contracts yourself. Third, CFD contracts (contracts for difference): you don’t need to actually hold cryptocurrencies. By predicting price increases or decreases, you can profit by going long or short, and you can also use leverage. Many platforms use a model of zero commission and only charge the spread, which is friendlier for traders with small amounts and also eliminates the need to manage wallets. Fourth, crypto ETFs or trust products: you can buy them directly through a securities account, which is relatively familiar to traditional investors. Fifth, mining—but now Bitcoin mining is dominated by large mining farms. Ordinary users can consider participating in a mining pool, but you must be extremely cautious about scam risks.

Let’s talk about the advantages of digital currency. First, it has more strictly defined operating rules. Issuance and trading rules are recorded into the system in the form of code, with a fixed total supply. Even the developers cannot change it, fundamentally preventing problems like over-issuance and reckless issuance. Second, it provides stronger security through credit guarantees. By using blockchain consensus mechanisms, every transaction must be confirmed by all participants, ensuring that transactions are completely secure, transparent, and have the lowest transaction costs. Third, it offers more flexible currency trading: bidirectional circulation, with assets transferable freely among users. You can choose whether to peg to fiat currency. Transaction costs are cheaper as well—distributed ledger technology removes time delays and operational costs. Finally, it helps with implementing monetary and fiscal policies. Central bank digital currencies can help the government pay citizens directly, simplifying production and distribution methods.

But what are the disadvantages of digital currency? There is a natural deflationary tendency: the quantity is limited and does not change along with changes in production data, which is not beneficial for economic development. There’s a lack of a reliable unit for measuring value. Prices fluctuate sharply, and there is no stable benchmark for the coin’s value. Any sudden external factor can cause price changes, and the magnitude is usually impossible to estimate. There are hidden security vulnerabilities in storage: it can only be stored in a digital wallet. If you forget the password, the data cannot be recovered—this is a catastrophic blow to users.

In summary, digital currency makes global financial access easier, faster, and more affordable. It introduces new ways for individuals and companies to transfer funds in real time between any two parties anywhere in the world, with relatively low fees. Countries around the world are planning to develop their own digital currencies, which shows that the cryptocurrency market is getting increasing attention and recognition. In the future, digital currencies are expected to continue attracting new users, and the technology will keep innovating.