Chapter 12
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Chapter 12 Electronic currency
An electronic currency is a payment method that occurs in digital form. It does not
involve the exchange of physical currency, such as coins and bank notes. There are
several types of electronic currency.
These include:
• Digital currency
• Virtual currency
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• Cryptocurrency
• Central bank digital base money
• Stored value cards.
These terms can sometimes be used interchangeably, but some information, for
clarity, is given for each.
The terms electronic currency and digital| currency are often used interchangeably.
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Chapter 12 Digital currency
Digital currency is any currency, money, or money-like asset that is primarily managed,
stored or exchanged on digital computer systems, especially over the internet.
Digital currency is money in an electronic form exchanged for goods and services without the
use of physical money such as paper bills or coins.
Technology is growing and evolving. As a result, digital currency is steadily replacing physical
money. Here's what you need to know about the types of digital currencies and the advantages
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and disadvantages of digital currency.
As technology advances, so does digital currency. An early form of digital money was the
electronic exchange of cash between bank accounts or an electronic payment utilizing credit.
This still takes place (mostly by debit or credit card) with bank-to-bank electronic wires, an online
payment system, or the use of a smartphone that carries a user's payment information
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Chapter 12 Virtual currencies
Virtual currencies are a type of digital currency, typically controlled by its creators and used and
accepted among the members of a specific virtual community
Here is where it gets a little confusing: all virtual currencies are digital (they exist online only),
but not all digital currencies are virtual, because they exist outside a specific virtual
environment.
Essentially, virtual currency is a representation of monetary value issued, managed, and
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controlled by private issuers for the transaction of peer-to-peer payments. They are sometimes
represented in terms of tokens and may be unregulated without a legal tender such as coins or
banknotes.
Unlike fiat currency, virtual currency is not issued by a bank. This lack of regulation means
virtual currencies are susceptible to price swings.
Cryptocurrencies such as Bitcoin and Ethereum are considered to be virtual currencies.
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Chapter 12 Cryptocurrency
The first decentralized cryptocurrency (Bitcoin) created by Developer Satoshi Nakamoto in 1990
that used cryptography hash function.
Many people use bitcoin to buy and sell products over the internet. Some support the use of a
decentralized currency, as it allows people, especially businesses, to make payments that do not
involve the usual charges that are applied by banks in a centralized system.
The ‘crypto’ in ‘cryptocurrency ‘refers to the fact that many encryption algorithms and
cryptographic techniques are used to ensure security across the network. This level of security
also makes cryptocurrencies hard to counterfeit.
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Many cryptocurrencies operate as blockchain-based decentralized systems without the need
for a trusted third-party such as a central bank, or credit card company. In this instance, peer-
to-peer transfers are facilitated through the use of private and public keys.
Bitcoin is undoubtedly the most well-known – and most widely used – blockchain-based
cryptocurrency. It’s also the most valuable, currently sitting at $3,821 per coin.
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Chapter 12
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Chapter 12 Advantages of Virtual Currencies
1. Convenient
The major advantage of virtual currencies is convenience. Payments with virtual
currencies are fast and easy due to their network-based nature. The use of virtual
currencies is especially convenient in international transactions.
2. Decentralized
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Additionally, decentralization also avoids intermediaries. It lowers transaction costs
and avoids the security failure of the central administrator.
3. Secure
All transactions are completed using encrypted methods, so data is sent securely
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Chapter 12 Advantages of Virtual Currencies
4. Faster
he use of contactless payments can speed up payment for products and services.
5. Contactless Payments
The user doesn’t necessarily need to remember their PIN number each time, if they
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are using contactless payments methods.
6. Prevention from Debt
The use of payment methods, such as stored value cards, can prevent a person from
getting into debt, as they can only spend the set amount that is stored on the card.
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Chapter 12 Disadvantages of Virtual Currencies
1. Lacks comprehensive regulation
The regulations over virtual currencies are not comprehensive or systematic enough,
hindering their worldwide acceptance. Lacking supervision from a central
administrator, decentralized virtual currencies provide opportunities for illegal
transactions and money laundering.
2. Highly volatile
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Out of the charge of a central bank, the value of a virtual currency is highly volatile.
Therefore, it is a less favorable tool to store value or medium of exchange. For
example, Bitcoin peaked at the end of 2017 at nearly $20,000 per unit. It later
dropped to around $3,000 per unit within one year.
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Chapter 12 Disadvantages of Virtual Currencies
3. Potential security issues
Virtual currencies also raise security concerns. Despite improving encryption
techniques, the loss or leakage of authentication information is still possible and can
cause great losses to virtual currency owners.
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Chapter 12 Digital Currency, Virtual Currency, and Cryptocurrency
Digital currency is a broad concept, referring to all the monetary assets that are in
digital form.There are several different forms of digital currency. The most popular are
payments using credit cards, mobile phones and smart watches. A common reference
for this kind of payment is that it is like having an electronic wallet.
Virtual currency is a subset of digital currency, and cryptocurrency is a subset of
virtual currency. Virtual currency is a type of unregulated digital currency. It is issued
and controlled by a private issuer instead of a central bank. Therefore, it is not subject
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to any monetary policy. A virtual currency can be either centralized or decentralized.
Some virtual currencies contain cryptography, and some do not.
Cryptocurrency refers to a type of virtual currency that implements cryptography
technology to secure and authenticate currency transactions. Cryptocurrencies
depend on blockchain networks. Hence, cryptocurrencies are decentralized virtual
currencies
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Chapter 12 Differences between digital currencies Vs. Cryptocurrency.
Anonymity [unknown to most people]
You cannot transact with digital currencies without identifying yourself. You will need to fill in
your personal information and even upload a photo of yourself and some documents issued by
the government.
This means that when using digital currencies, it is easy to identify individuals or groups involved
in a particular transaction.
Cryptocurrencies, on the other hand, use cryptographic protocols, which are complex code
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systems that encrypt sensitive information transfers. This secures the units of exchange.
Crypto developers build these protocols using advanced computer engineering and mathematics
principles that render them virtually impossible to crack.
They protect the identities of or users, and it could take a lot of time, energy, and resources to
find out the people or group of people making transactions.
This means that the Cryptocurrency network provides anonymity that cannot be found in
virtual currencies.
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Chapter 12 Differences between digital currencies Vs. Cryptocurrency
Structure
Digital currencies are centralized in nature. Even though they are not provided and
controlled by central banks or other institutions, transactions are controlled and
regulated by a particular group of people and computers. Let’s take PayPal, for
example.
All the money you send or receive through this medium is controlled by the company.
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PayPal has the right to accept or reject a particular transaction.
Cryptocurrencies are not controlled by a particular group of people or individuals.
They are marked by decentralized control. Their value and supply are determined by
the activities of their users.
All the regulations| are made by the majority of the community using a particular
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Chapter 12 Differences between digital currencies Vs. Cryptocurrency
Legal aspects
The legal aspects make all the difference between digital currency Vs. Cryptocurrency.
Many countries around the world have defined legal frameworks that govern virtual
currencies.
For instance, digital currencies in countries in the European Union are governed by
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the Directive 2009/110/EC. In the United States, they are regulated by Article 4A of
the Uniform Commercial Code.
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Chapter 12 The Strengths and Weaknesses of Digital Currency
Digital currencies ride along with a plethora of benefits. Among those, we can count
the following
Cheap and Instant Worldwide Payments
Credit card payments can sometimes be steep, especially with international use. Fees
can range between 2-5%. Users often feel the pain when they end up paying
hundreds of bucks to accept payments from clients or customers who are in other
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countries.
By using digital currency, you pay a much lower fee in every transaction. Sometimes,
you don’t incur any fees when making or receiving payments.
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Chapter 12 The Strengths and Weaknesses of Digital Currency
Faster Receipt of Funds than Through Regular Banks
When someone makes a payment through direct bank transfer, it could take days or
even weeks for the transaction to be completed. With digital coins, transactions are
often completed within minutes.
Even though transaction speeds vary depending on the digital currency you are using,
it is still much faster than the transaction times of legacy financial institutions.
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Provides Avenue for Resolving Disputes
One of the biggest differences between digital currency Vs. Cryptocurrency is that
digital currency is centralized. It is controlled by an authority, which is not necessarily
government or central bank controlled.
In case a dispute occurs in a transaction or fraud is detected, the authority can freeze
the transaction until the underlying issues are fixed.
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Chapter 12 The Strengths and Weaknesses of Digital Currency
Convenient
• To use digital currency, you don’t have to follow many steps and fill in tens of documents to open
an account as physical banks do.
• All you need is a device with access to the internet, and you can open a wallet from wherever you
are.
• When it comes to cryptocurrencies, the establishment of a legal framework to regulate them is
still a work in progress.
• Even though some countries such as the US and China have tried to develop regulation, lack of
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enough regulation in most countries around the world is one of the biggest drawbacks of
cryptocurrencies.
• Today, there are thousands of black and grey market transactions that have dominated bitcoin
and other cryptocurrencies. For example, the infamous Silk Road – a dark web marketplace used
bitcoin to facilitate the purchase of illegal drugs and finance other illicit activities.
• Even though this marketplace was shut down in 2014, cryptocurrencies are today popular tools
that fuel money laundering.
• Despite cryptocurrencies being valuable digital assets, you shouldn’t fear investing in, enacting
government regulations will be a great step| towards chanting a brighter ‘crypto’ future.
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Chapter 12 The Strengths and Weaknesses of Digital Currency
Transaction Manipulation
Virtual currencies are centralized in nature, and they have a central authority that
deals with issues that may arise in a transaction.
In case a dispute is raised, or fraud or money-laundering is detected, a transaction
can be frozen or canceled.
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Furthermore, cryptocurrencies are regulated by the community, and it is extremely
difficult to make changes to a blockchain.
This means that it is easier to have transaction manipulation in cryptocurrency
networks than in digital currencies.
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Chapter 12 Weaknesses of Digital Currency
Security Loopholes
Data Security is a major concern when it comes to digital currencies. Unlike
decentralized systems, centralized systems keep a lot of information about their
users.
In the case of a data breach happening, this information might be used for malicious
intent. Also, the data can be lost or transferred to authorities upon a court request.
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Chapter 12
Fraud
The fact that digital currency transactions can be canceled comes with its fair share of
challenges. Sometimes, you can make a genuine transaction, but the sender may
decide to raise a dispute.
The authority in charge of the digital currency medium will put a hold on your money,
and if you are unable to prove that the transaction was genuine, you may lose a
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significant amount of money.
Even though fraud occurs in decentralized systems, it rarely occurs in this manner.
This is because sensitive information about investors is not stored in a
Cryptocurrency blockchain.
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Chapter 12 Central bank digital base money
Central bank digital base money (also known as central bank digital currency (CBDC))
is the digital form of what is known as fiat money. Fiat money is the currency that is
the physical currency used in a country, that is issued by governments and banks. It is
the bank notes.
and coins that you can use in payments every day. Creating digital fiat money in this
way would mean that banks effectively create a digital currency. Each unit of currency
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in CBDC will act as an equivalent of a paper bank note. It will be similar to bank notes,
in that it will have a serial number. There will also be distinguishable characteristics on
the unit that will prevent fake units being created. Banks intend to use it as part of
the controlled supply of currency by the central bank, and it will work alongside
existing currency such as physical bank notes and coins.
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Chapter 12
IT in society Advantages and Disadvantages of CBDC
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Chapter 12 Data mining
Data mining is the process of analyzing massive volumes of data to
discover business intelligence that can help companies solve problems, mitigate
risks, and seize new opportunities.
This branch of data science derives its name from the similarities between the
process of searching through large datasets for valuable information and the process
of mining a mountain for precious metals, stones, and ore. Both processes require
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sifting through tremendous amounts of raw material to find hidden value.
Data mining can answer business questions that were traditionally impossible to
answer because they were too time-consuming to resolve manually. Using powerful
computers and algorithms to execute a range of statistical techniques that analyze
data in different ways, users can identify patterns, trends, and relationships they
might otherwise miss.
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Chapter 12 Data mining
Data mining is used in many areas of business and research, including sales and
marketing, product development, healthcare, and education.
When used correctly,
Data mining can give you an advantage over competitors by making it possible to
learn more about customers
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Develop effective marketing strategies, increase revenue, and decrease costs.at
delivers timely, reliable results, you should follow a structured, repeatable approach.
Ideally, that process will include the following six steps:
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Chapter 12
IT in society Data mining
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Chapter 12
Develop a thorough understanding of the project parameters, including the current
business situation, the primary business objective of the project, and the criteria for
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success.
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Chapter 12
Determine the data that will be needed to solve the problem and gather it from all
available sources.
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Chapter 12
Get the data ready for analysis. This includes ensuring that the data is in the
appropriate format to answer the business question, and fixing any data quality
problems such as missing or duplicate data.
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Chapter 12
Use algorithms to identify patterns within the data and apply those patterns to a
predictive model.
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Chapter 12
Determine whether and how well the results delivered by a given model will help
achieve the business goal. There is often an iterative phase in which the algorithm is
fine-tuned in order to achieve the best result.
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Chapter 12
Run the analysis and make the results of the project available to decision makers.
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Chapter 12 Advantages of data mining
It helps gather reliable information –
Data mining allows companies, organizations, and governments to gather reliable
information. It can be used in marketing research to determine what products
customers might be interested in and then make those products available to them.
Data mining also helps organizations evaluate their own policies and procedures for
effectiveness.
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Chapter 12 Advantages of data mining
Helps businesses make operational adjustments –
Data mining helps businesses make profitable production and operational
adjustments. Data mining can be used to find correlations between products,
consumers, suppliers and other aspects of the business. This can help a company
identify trends that might not have been identified before, or at least help them make
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more accurate predictions. If a company finds out that it is selling less of a product
than expected, they might learn what caused this and adjust their production to
increase productivity.
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Chapter 12 Advantages of data mining
The data mining process also works in reverse – if a company understands who their
customers are now, they will be able to create marketing campaigns specifically
targeting these groups in order to grow sales over time.
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Chapter 12 Advantages of data mining
Helps to make informed decisions –
It is often used for business purposes to improve decision making. As more data is
collected, the accuracy of data mining becomes greater. This technique can provide
insights that would be difficult or impossible to find just from reviewing records or
other sources. For example, it can help to identify various types of customers and
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their purchase behaviour.
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Chapter 12 Advantages of data mining
It helps detect risks and fraud –
Data mining can help identify risks and fraud that may not be detectable through
traditional means of data analysis. It can find patterns in data that are otherwise
difficult to uncover, especially when the data is not organized in a way that makes it
easy to know what type of information to look for. One popular technique is
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association rule mining, which finds any relationships between variables in the
dataset. This can lead to insight about the types of risks that are present and how to
mitigate them in the future.
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Chapter 12 Advantages of data mining
Helps to analyse very large quantities of data quickly –
Data mining can be used to analyse data that was previously too difficult to
understand due to the sheer volume or type of information. Moreover, it is an
important part of the modern world and most companies use it on a regular basis
because it helps them to make more informed decisions about marketing and other
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business activities.
Helps to understand behaviours, trends and discover hidden patterns – Data mining
can be used to find patterns and trends in user behaviour. It does this by looking for
anything that is repeated in the data, such as instances of buying specific items. This
information can then be used to understand trends, discover hidden patterns, and
propose strategies for businesses to try.
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Chapter 12 Application of Data Mining
You can use data mining to solve almost any business problem that involves data,
including:
Increasing revenue
Understanding customer segments and preferences
Acquiring new customers
Improving cross-selling and up-selling
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Retaining customers and increasing loyalty
Increasing ROI from marketing campaigns
Detecting and preventing fraud
Identifying credit risks
Monitoring operational performance
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Chapter 12
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Chapter 12 Data processes
Data cleansing and preparation.
Raw data flows in from any number of sources in a wild mix of formats and quality.
Before it can be used in any meaningful way, that data must be transformed from its
raw state into a format that’s more suitable for analysis and processing.
This includes processes such as identifying and removing errors, calling out missing
data, and flagging outliers.
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Chapter 12 Data processes
Data warehousing.
Unless you are working with only a small subset of data, you will probably need to
collect data from a range of sources combine it into a single data repository before
you can use data to make decisions. This repository is generally known as a data
warehouse. It is the foundational component of most large-scale data mining efforts.
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Chapter 12 Data processes
Data analytics.
Once your data has been cleaned and collected, you can start examining it for past
trends that could be applied to future decision-making. The process of evaluating
historical digital information to provide useful business intelligence is known as data
analytics.
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Chapter 12 Data processes
Predictive analytics.
Where data analytics looks to the past to identify trends, predictive analytics uses
that data to anticipate future outcomes. Predictive analytics relies on data modeling,
machine learning, and artificial intelligence to uncover patterns in big data.
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Chapter 12 Computer science concepts
Next, you should be familiar with some common computer science terms that
describe how various programs and algorithms interact with the data to deliver
meaningful insights.
Artificial intelligence (AI). With modern technology, automated systems can
perform analytical activities that used to be possible only by applying human
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intelligence. These activities can include things like planning, learning, reasoning,
and problem solving. When it comes to data mining, this refers to using a
computer program to identify meaningful trends in the data.
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Chapter 12 Computer science concepts
Machine learning (ML).
The earliest computers needed an explicit program to instruct them through any
process, step by step — but that assumes that the programmer is already aware of
every possible scenario that may arise.
More recently, programmers use statistical probabilities to write machine learning
algorithms that give computers the ability to “learn” and adapt without being
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explicitly programmed.
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Chapter 12 Computer science concepts
Natural language processing (NLP).
Many valuable data sources, such as social media, aren’t easily broken down into
simple fields.
Natural language processing is a feature of AI that gives a computer program the
ability to “read” and understand casual or unstructured data sources.
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Chapter 12 Computer science concepts
Neural networks.
Sometimes a single machine learning algorithm isn’t powerful enough to do the job
alone. A neural network is a collection of algorithms that work together to solve more
complex problems, thinking more like a human brain. Just like a simple machine
learning algorithm, neural networks have the ability to learn and adapt.
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Chapter 12 Data mining techniques
There are many techniques used by data mining technology to make sense of your
business data. Here are a few of the most common:
Association rule learning. Also known as market basket analysis, association rule
learning looks for interesting relationships between variables in a dataset that
might not be immediately apparent, such as determining which products are
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typically purchased together. This can be incredibly valuable for long-term
planning.
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Chapter 12 Data mining techniques
Classification.
This technique sorts items in a dataset into different target categories or classes
based on common features. This allows the algorithm to neatly categorize even
complex data cases.
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Chapter 12 Data mining techniques
Clustering.
To help users understand the natural groupings or structure within the data, you can
apply the process of partitioning a dataset into a set of meaningful sub-classes called
clusters. This process looks at all the objects in the dataset and groups them together
based on similarity to each other, rather than on predetermined features.
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Chapter 12 Data mining techniques
Decision trees.
Another method for categorizing data is the decision tree. This method asks a series
of cascading questions to sort items in the dataset into relevant classes.
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Chapter 12 Data mining techniques
Regression.
This technique is used to predict a range of numeric values, such as sales,
temperatures, or stock prices, based on a particular data set.
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