The advent of cryptocurrency can potentially redefine society as we know it. Even though it’s not without issues, millions have decided to invest their hard-earned fiat money in these virtual currencies with varying degrees of success.
Still, taking them as just a speculative asset is dangerously understating them as a game-changer. And in case this wasn’t enough, CBDCs also came into the fray.
In this article, we’ll explain why crypto’s importance goes way beyond the monetary value and what CBDCs mean for the crypto industry.
Similar Tech, Different Concept
Cryptocurrencies are often misunderstood in the way they work. Let’s say you want a casino bonus. You can simply go to bonus.ca, check the best offers and sign up at a casino website. They have a server which administers bonuses.
The same goes for banks: they have servers where your money is accounted for. Any issues are between you and the bank. Unlike this situation, cryptocurrencies have no central server. They work with something called blockchain instead. It’s like a network where all the participants have the same information.
This means that when you purchase Bitcoin, everybody in the network registers the transaction. A cyberattack is unlikely because the hacker must affect at least 51% of all the participants. We’re talking about a world-war-level cyberattack here.
Central Bank Digital Currencies are the central bank’s answer to cryptocurrencies. They’re also digital, but their value is fixed by the central bank instead of the free market. Even though the technology is similar, there’s a major difference: it’s centralized, whereas cryptocurrencies aren’t.
Let’s now discuss the implications of this.
Do You Want a Government With That?
Besides the investment factor, cryptocurrencies offered a window to a different world in the imagination of many at the time of Bitcoin’s release. This world wouldn’t need central currencies since people would interact with cryptos without official intermediaries.
Most importantly, no single actor would, in theory, determine the value. It would float freely. Also, many cryptocurrencies have a limited supply, unlike cash, which can be created on the fly.
CBDCs are the logical outcome of governments trying to control the crypto space, with both supporters and detractors.
The ones favoring CBDCs consider cryptocurrencies dangerous as anyone can use them without any control. They also claim that these can be manipulated by unseen forces, which is evidenced by the huge swings they experience.
They also claim CBDCs can ensure stability, control growth, and influence inflation, giving more tools to central banks. Since the government backs them, they’d be more stable than current cryptocurrencies.
Additionally, CBDCs would help people worldwide access money, especially in countries with a high grade of unbanked citizens. Detractors claim this is wishy-washy, as most people in those countries don’t even have capable smartphones or free internet access.
But the biggest fear of many involves giving even more government control over one’s assets. Using cash or cryptocurrencies, nobody can prevent you from purchasing anything. With CBDCs, you might be subject to censorship or confiscation if, say, you oppose the views or policies of your government.
No Clear Outcome
Are cryptocurrencies a Trojan Horse meant to impose CBDCs? Are these two concepts true fierce opponents in a battle to shape society? Nobody knows, or, better put, very few people might.
Perhaps the panorama will become clearer with the rise in cryptocurrency regulatory initiatives worldwide. Maligned by many and welcomed by others, they aim to develop an official framework for cryptos.
This only serves to amplify the debate. Federal Chairman Jerome Powell stated there wouldn’t be any need for cryptocurrencies or stablecoins if there were a U.S. Digital Dollar.
Whatever the case, a brave new world is coming. Are you ready for it?
