text: what are type of digital currencies?   what you may be referring to are so-called "virtual currencies" that exist in many network based multi-player games like diablo 2.  in diablo 2, a standard (very fun and well designed) hack-and-slash fantasy game, you can gain gold be going around a killing things. since the game is multi-player a high level character can log on with a low level character and give them lots of money.  this has brought up a question of how these digital currencies and virtual economies will work. one main question is "how will inflation work in an economy that is continually producing more money?" if the high level characters are constantly racking up huge amount of gold and giving it away, what makes the game difficult anymore? many theoretical solutions have been proposed, but none has proven to be the magic bullet that solves the problem.  another type of digital currency is the money you're holding in your bank account. most middle class people hold money in bank accounts rather than cash, and very few will go and withdraw all of that money at once. as a result, banks take that money and lend it out elsewhere, rarely holding more than 5-10% of the original amount in actual cash. since this is a practice of most banks, most of the money in the economy is actually virtual, going back and forth between in digital ones and zeros across the internet; very little is kept in cash form.