These days we are using currencies while some people don't know about how they came out and here I'm going to explain it.
In ancient ages people had had some jobs like farming and shepherding and whenever a farmer wanted some milk/meat from shepherd he had to give him some farming product instead. Here when a farmer wanted to trade his farming product for mild he didn’t know how much farming product he must give in return.
So, people started using valuable stuff and valuable metals such as gold and they created coins. But, if they wanted to spend a huge amount of coins they had to carry a huge amount of it and this wasn’t good for security.
Here the first generation of the exchanges (Ancient Exchanges) came out, when you wanted to carry 10 million coins with you from Boston to Paris you could give all your coins to an exchange in Boston and he could give you a receipt with signature and …, instead of carrying 10m coins you had to just carry a piece of paper with you and you could give the receipt to another exchange in Paris who and receive your coins on Paris.
Just after few people started to trade receipts instead of giving them to the exchanges and trade coins and here is how the money banknotes came out but they were backed by gold (Here is how people saying currency backed by gold these days). In 1944, after meeting of 43 countries, they set something called Bretton Woods system, in this monetary system every single USD worth rate of $35/ounce. In other words the US government said they are ready to exchange any amount of gold with this rate of exchange.
But between 1968-1973 this monetary system had some problems because the US government could supply this huge amount of gold and in the end on 1973 any currency could be directly exchanged into another currency of another country. In other order since that time fiat currency or non-gold backed currency appeared. Today we know them as money banknotes and they are backed by the economy and political and … power. But people find out there are some problems with the money banknotes. For example, in order to provide budget deficit governments started to print a huge amount of banknotes and printing huge amount of banknotes lowering value of the money.
So, digital currency appeared and got accepted by people (Credit Cards). Today you can transfer millions of dollars to another country using digital currencies, meaning you don’t need a suitcase full of money to transfer your money to another country with old fashioned way. But you may ask what the difference between digital currency and encrypted currency? Digital currency is centralized system and total supply can be changed with decision of banks/governments and can be controlled by them. While, crypto currency is decentralized and total supply is fixed (For example, there are only 21m bitcoins) and can’t be controlled by any government because it’s completely peer to peer.
I tried to make this article real short. So, you won't spent too much time for it.