What Is The Digital Economy?

digital economyIntroduction

A digital economy is a financial system in which monetary transactions are conducted via digital technology. Professor Nicholas Negroponte of the University of Phoenix describes a digital economy as using “bits instead of atoms,” (Nicholas Negroponte). In other words, cash does not exchange hands. In industrialized nations business transactions are frequently conducted online instead of face to face. For instance, millions of workers across the globe have their paychecks direct deposited in a bank account. Once the monies are deposited, the employee will then use his or her bank’s website to pay bills, very rarely using cash or even a paper check to complete transactions. Another common example is a business whose presence is completely online. The business might have a warehouse to store and ship physical goods, but will not have a store front for customers to visit. All purchases are completed online. The main benefit of this to businesses is that they can serve customer all over the globe. The main benefit of a digital economy to customers is that they have the convenience of having the goods delivered to their homes or places of business.


Question: Does conducting business online put the consumer’s personal information at risk?

Answer: There are risks involved with conducting business online. Hackers, identity thieves and viruses are just a few of the more well-known dangers. Most banks and online merchants have secure websites that will protect customer information. As technology improves, the security features for online businesses and banks also become stronger. For more information, please see our posts on [Online Identity and Privacy].

Question: Is digital currency “real?”

Answer: The value of any currency lies in how it is accepted by businesses. The video Are Digital Currencies Real and Sustainable? gives more insight into how digital currencies are viewed by businesses.

Question: Will the need for cash ever be completely eliminated?

Answer: Economists around the world debate whether or not digital currency will replace physical currency. This debate hinges on the fact that many countries are not industrialized and do not have access to the internet. A healthy global economy cannot exist without everyone having access to the tools they need to participate.

Question: Will the entire world use one form of currency eliminating the need for currency exchange?

Answer: Not in the near future. A global digital currency would require everyone in the world to have access to the internet. For detailed information on the global economy, please see the [Global Economy] posts.

Additional Resources:
A Forward Looking Trade
Global Trends 

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