What is Central Bank Digital Currency (CBDC) (Altcoin)
Definition/Example
- CBDC is a type of crypotocurrency that was meant to represent a country currency in a digital way. It also act like a stablecoin but isn’t pegged to a type of commodities.
- CBDC is created and distributed to the people by a central bank of a certain country.
- CBDC can be build on a blockchain that was not owned by a government (that blockchain must be regulated or trusted by that government’s country).
- The development process of a CBDC sometimes is done by the join forces of a local government and company/entity that run a blockchain.
- There are currently more than 10 country in this world that have their own CBDC. Some of them is the Digital Ruble by Russian Central Bank and eNaira by Nigeria Central Bank.
Usage
- Most CBDC usage is quite similar to fiat currency. It can be trade, use for payment for goods and services, store of value and much more. (Just think what you can do with money, that is the sort of thing CBDC can also do)
Pros and Cons
Pros:-
- The usage of blockchain technology enable all transactions can be done a lot more faster and way more efficient.
- Most of the transactions fee that was issued by traditional bank can be reduced or completely eliminate.
- CBDC that was created on a well maintain blockchain can enhance security during a transactions.
Cons:-
- Even though a CBDC is build on a blockchain technology, cybercrime is still its main issues. Hacking, fraud, money laundering and many more is the type of cybercrime that is easier to be committed on a blockchain.
- Your financial activities can also be easily track and control by the government. (You will not have all the freedom to spend your digital money on everything)
- The usage of a CBDC also can create financial instability. If the government suddenly roll out and make the usage of CBDC a must, people will rush to withdraw all of their fund from the bank causing a liquidity issues on the bank and a total collapse on banking system.
Other/Conclusion
- CBDC can either be good or bad for most of us. For the sake of security, efficiency and security on making transactions we might need to sacrifice our freedom of spending our own money.
- Hate it or love it, most of the country in the world might already develop their own CBDC and we cannot do anything about it.
- I like that the government is taking notice on the blockchain technology but watching how CBDC will be use by integrating blockchain technology in it make me consider thinking it twice.
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