Which term describes a digital version of money that functions as a medium of exchange?

The term that describes a digital version of money functioning as a medium of exchange is cryptocurrency. Cryptocurrencies are decentralized and utilize blockchain technology to enable secure transactions without the need for a central authority or intermediary. They are specifically designed for use as a form of currency, allowing users to transact directly with one another peer-to-peer in a digital environment.

The uniqueness of cryptocurrency lies in its encryption techniques, making transactions secure and verifiable. They can be used for various purposes, including purchasing goods and services, investing, and even remittances across borders, which solidifies their role as a medium of exchange in the digital economy.

While fiat currency refers to government-backed money, cryptocurrencies operate on a different paradigm, not relying on any physical backing. Tokenization and digital assets may involve digital representations of value but do not inherently serve as a direct medium of exchange like cryptocurrencies do.