Cryptocurrency And CBDCs: Exploring The Future Of Money
Are you someone who wants to invest in Cryptocurrency but don’t know where to start?
Do you want to make sure that you pick up the right asset class between the two currencies mentioned above?
Is it true that you have very little to no knowledge about either of those two asset classes mentioned above?
If you answered any of the above questions as ‘yes’ then you have come to the right place. In this article, we are going to explain in detail about both of them so that you can know, which of these two is a better investment opportunity for you.
What is CBDC?
The Central Bank Digital Currency is a type of Digital Currency that is issued by the central bank of a particular country. They are created especially for individuals and small businesses who want to leverage digital transactions. Unlike any other digital currencies, their value is determined by the government and it is equivalent to the country’s fiat currency. The main purpose of this currency is to offer a secure and efficient payment system.
History of CBDC:
During the early 2010s, Bitcoin and other forms of cryptocurrencies were on the rise. A lot of people started investing in them to gain some profits and many of them even took loans from the bank to make their investments. But the problem was that since those types of currencies were not regulated by any government organizations, there was a lot of fraud. As a result, a lot of people started losing their hard-earned money and many fell into a debt trap.
Hence the government decided to intervene and started thinking of an effective solution to this problem. As a result, many banks introduced the concept of the Central Bank Digital Currency.
However, to be very accurate the first major central bank which implemented the idea of CBDC was the People’s Bank of China or PBOC. Although the company started researching the idea in 2014, it was not until 2017 that they finally began to develop these projects. The first project it created was named Digital Currency Electronic Payment (DCEP) in 2020.
Not only that. In 2021 the Bahamas took inspiration from China’s initiative and became the second country to launch its own digital currency named Sand Dollar.
Is CBDC same as cryptocurrency?
There are several contrasts between CBDCs and cryptocurrencies. The CBDCs run on authorized ( private) blockchains, whereas cryptocurrencies work on permissionless( public) blockchains.
3 Best Examples of CBDC:
Since, these initiative has become so popular, so nowadays a lot of countries across the world have introduced their digital currencies. So here are the 3 best examples of them:
The main purpose of this digital currency is to make a digital substitute for physical cash and to ensure that the public has the access to a safe and secure payment system. This currency is based on blockchain technology and could be used for both retail and wholesale systems.
The e-Euro is a digital currency that is implemented by the European Central Bank. This CBDC is developed to prepare a digital version of the Euro. That version is expected to be more efficient and cheaper than any other existing payment system.
This digital currency project is being implemented by the Bank of Russia. This is the new proposed digital currency of the Russian Government. The purpose of this currency is to provide an easier and safer payment method for the Russian people. Also, this project will help to reduce the country’s reliance on foreign payment systems.
Can cryptocurrencies survive CBDC?
Cryptocurrencies can survive the emergence of central bank digital currencies alone if it remains an investment asset. But once its promoters assert on it running a currency, it’ll go out because it can not compete fairly with ruling digital currency or CBDCs.
Pros and Cons of using CBDC:
Now that we know everything about this Digital currency, it’s time to discuss some of its pros and cons so that you can figure out whether it would be the right investment opportunity for you or not.
|There are several places where managing money is a very costly affair. Hence CBDC allows a more effective payment system in those places.||Since more and more people are becoming interested to use this digital currency so many of them might decide to withdraw an excessive amount of money from the bank and purchase those digital currencies. As a result, such actions may lead to a bank run where banks suffer from a shortage of money.|
|Throughout the entire world, there are many remote places in underdeveloped counties where the common people don’t have access to any bank account. As a result, they can’t store or withdraw their money. In those cases, CBDCs come into the hand as it provides easy and cheap access to the financial system along with better security and efficiency.||There is a high possibility of Cybersecurity issues if the government decides to centralize the private technology of CBDCs.|
|Since these currencies are issued by the central government so they won’t suffer from huge volatility, unlike any other digital coins. As a result, there is less amount of risk and more and more people would feel safe investing in it.||There can be several flaws in the new monetary policy launched by the government with the introduction of this currency.|
|CBDCs contribute towards the country’s dream of becoming a cashless society one day. In a cashless society, no citizen would depend on any kind of notes or coins for financial transactions. With the introduction of this currency backed by the central government, the number of ATM cash withdrawals is declining and more and more people are adopting the system of digital transactions.||There is a high chance of increasing credit risk for the central bank since it needs to provide additional liquidity to other banks to manage this digital coin.|
|Since most digital currencies are not issued by the central government so there is a high chance that a transaction made by a person may get hacked by hackers. But in the case of CBDCs, it is not possible at all since this digital currency is issued by the government.||The Central Bank of a country may need to go through the hassle of expanding its already existing balance sheet if there is a large demand for this coin.|
What Is Cryptocurrency?
It is a type of digital currency that is made with the help of blockchain technology and cryptography. Unlike other currencies, it doesn’t depend upon banks for any transactions. Instead, its digital systems allow everyone to send and receive payments from anywhere across the world. But unlike the CBDCs they are not authorized or issued by any government bodies. As a result, they are completely protected against any misuse by the authorities. Hence, cryptocurrency has become a popular trading and investing instrument amongst the public.
Is cryptocurrency real money?
Rather than being physical money carried around and traded in the real world, cryptocurrency payments subsist purely as digital entries to an online database imaging specific transactions. When you transfer cryptocurrency funds, the trades are recorded in a public ledger.
History Of Cryptocurrency:
During the year of 2009, an unknown person named Satoshi Nakamoto invented the first decentralized crypto coin named, ‘Bitcoin’. Bitcoin was famous for enabling digital transactions for the public safely and securely without the help of any financial institutions.
During the initial phases of its launch, this coin gained immense popularity among the public as it was a better alternative to the traditional financial system. But still, many organizations criticized this digital currency too. The reason many people claimed that it was too much volatile compared to the stock market and its lack of government regulation made it a hotspot for criminal activities.
To compete with the growing popularity of this coin, the government of many countries has also decided to launch their digital currencies. But since the token has emerged in various forms like Ethereum, Litecoin, and Ripple so it was difficult to compete with them by the government.
Cryptocurrency, 3 Best Examples :
We all have heard about Bitcoin as it was the first crypto that came into existence for investing and digital transactions. So that’s why let us talk about some other of such popular currencies which are a good substitute for Bitcoin. Here are 3 of them:
It is an open-source and decentralized blockchain network that helps to create decentralized applications and smart contracts. Its native cryptocurrency Ether is widely used for paying transaction fees and computational services.
This online currency came into existence in 2011 when Charlie Lee, a former Google engineer took the initiative to create a peer-to-peer digital currency. Unlike the original Bitcoin, this currency can generate blocks faster and utilizes a more efficient hashing algorithm. As a result, bitcoin transaction happens faster and is much cheaper than Bitcoin.
The main purpose of this crypto is to help users with fast, secure, and low-cost international money transfers. It functions on open-source and decentralized blockchain technology and its native currency is called XRP which is used to enable transactions on the network.
Pros And Cons Of Using Cryptocurrency:
Now that we know everything about this Cryptocurrency, it’s time to discuss some of its pros and cons so that you can figure out whether it would be the right investment opportunity for you or not.
|The public keys and private keys of cryptocurrency make it easier for the public to transfer funds between two parties without the assistance of a bank or a financial institution.||Due to the lack of government regulations, the crypto industry has become a hotspot for criminal activities like money laundering and illegal purchases.|
|The value of most currencies across the world deteriorates because of rising inflation. But the case of this currency is a bit different. Since there are only 21 million of this currency available on this planet so their demand is constantly increasing along with their value. As a result in the long run it will beat inflation.||For most people, cryptocurrency is just a bubble waiting to burst because of its high level of volatility. For example, the value of Bitcoin surged to $65,000 in November 2021 and then unexpectedly crashed down to over $20,000 a year and a half later resulting in a huge loss of money for many investors.|
|The crypto industry works on the concept of, high risk – high reward. Most of these currencies are known for their tendency to go through sudden spikes and drop in value. For example, the price of Ethereum almost doubled from July 2021 to December 2021, thus giving a lot of profits to investors.||There is no refund policy in the crypto industry, which means that if a person sends his money to the wrong wallet address then he/she cannot retrieve it later on.|
|Unlike the Stock market, cryptocurrency allows its investors to get access to their invested money 24/7 without any specific timeline.||Unlike the stock market, you cannot do any technical research on any of these coins before investing your money. As a result, your investment would be highly speculative which could even result in huge losses.|
|Unlike other currencies, this industry allows you to initiate international transactions in a relatively short amount of time.||Cryptocurrency is still not a long-term investment yet as it very recently came into existence i.e. 2009. The first stock exchange in the world was founded in 1801 and it is being successfully operated since that time. So the stock market is a reliable source of investment. But, on the other hand, nobody knows what is going to happen with crypto in the future. Maybe it’s a bubble waiting to burst any minute or even sooner.|
As more and more people are adopting digital transactions, the number of users of these two digital currencies will be on the rise. Also, we hope that by now you have got enough information about both of these currencies. Both Crypto and CBDC come with their pros and cons. So we would advise you to read these articles over and over again to find out the right asset class for you.
Please note that we are not an investment advisor, so please consult one before investing in either of those two asset classes. Alas, if you are interested to know how these two currencies are created through blockchain and if you want to be benefited from a Blockchain Development Company then kindly visit https://www.rosalinditservices.com.
Does crypto have a future?
After a big downtime in 2022, the crypto industry will regroup in 2023, with those still being ready for a major drive heading into 2024. In other words, the following year is a time of remaining survival, with a cast toward a response to huge yield in the years ahead.
Does crypto live in the future?
Crypto Research Report predictions $397k in 2030
According to the noted Crypto Research Report, the price of Bitcoin is on the trail to hit $397,000 by 2030. At this estimate, Bitcoin will arguably be one of the most precious means in the world.