As consumers, we are increasingly becoming dependent on digital platforms for our day-to-day needs. From hailing public transport like cabs to ordering medicines from the internet, convenience is pushing the world towards digital adoption.
The use of money and finance is also witnessing a sea change. Financial technologies or Fintech is changing the way we use our money. You do not have to carry physical cash, a smartphone wallet can do everything you want at a lightning pace, and with complete security.
The move towards digital currencies is also advantageous for governments and central banks. In terms of taxations, digital currencies always carry a footprint, which makes it far difficult to tamper with.
This automatically eliminates issues like forged currency notes, corruption, and money laundering. While all these things cannot be completely eliminated overnight, nevertheless it seems that an end is in sight.
In this article, we will examine some major ways of how digital currencies are changing our lives for the better.
Digital Currencies: What are they and why are they so important?
The advent of the internet and its penetration in every aspect of our daily lives is for all to see. For the last decade, private players, government bodies, and international institutions have been toying with the idea of digital payments.
Debit and Credit Cards, Net Banking, Wallets like Amazon Pay and Google Pay have all made their impact felt in easing the use of finance.
The next big thing, cryptocurrencies have added belief to the idea of money and payments as being fast, efficient, convenient, and secure. In all, there is an effort to move the world in this direction.
Digital Currencies replicate physical fiat currencies. They draw the exact value from a currency’s value and allow the same to be used through digital apps and internet technology.
This allows for faster and better payment processing, and also ensures that there is a track record of everything that we do (data).
Digital Currencies as Central Bank Digital Currencies (CBDCs) and Cryptocurrencies
Countries like China, Japan, Singapore, and others have already started aggressively experimenting with CBDCs.
China is way ahead of the rest of the world and has already implemented the use of its CBDC, Digital Yuan in both governmental payments as well as through private players like Alipay and WeChat Pay.
It is true that there is a lot of speculation and controversy about how CBDCs can be used by nations to counter the hegemony of the dollar. However, for now, it seems that the main intention is to understand the flow of money within an economy and make attempts to make it efficient in nature.
A lot of experimentation, insight, and theories around the now circulation or work in progress CBDCs can be owed to Cryptocurrencies.
Nature, tech, idea, promise, and execution of the CBDCs seems to mimic how cryptocurrencies like Bitcoin work.
According to Bitcoin Trading Strategies, the only difference is that while cryptocurrencies like Bitcoin are truly free in nature, CBDCs are a state’s government design.
Many also point out that many nations around the world are actively working towards CBDCs to counter the growing influence of Bitcoin and other cryptocurrencies.
Which is the Better Digital Currency- Bitcoin or CBDCs?
The answer is clear. It is Bitcoin or any other cryptocurrency.
The major reason for the same is that while CBDCs try to imitate almost all the benefits of Bitcoins and cryptocurrencies, they do not seem to address one issue-
Simpler and more affordable payments by removing intermediaries!
Cryptocurrency payments mean that you do not have any intermediaries like Visa, Mastercard, Western Union, or PayPal. This means that the 1%-5% deduction, which takes place from all your transactions is safe with you.
CBDCs does not do away with this and continue to work with intermediaries, which cash in on your hard-earned earnings.
While the counter-argument is that CBDCs are going to be far more stable and accepted that crypto, which does not have any governmental backing, it is still an argument that lacks substance.