Central Bank Digital Currencies were proposed well before many of us had wrapped our heads around cryptocurrencies. It's for that reason laymen have yet to form an educated opinion around this technology - it appears as nothing more than [yet] another token. But it would be a mistake to let CBDCs go over your head. There is a cost to the benefits this new fintech facilitates... and it may be the highest price you'll ever pay.
What Are CBDCs?
As put succinctly by Investopedia, they are "a digital form of cash issued by a nation's central bank".
I've talked a lot about digital cash and have gone over the function of blockchain technology in past articles - how it works and how currencies running on blockchains are, inherently, 'trustless'. Perhaps now is a good time to define that term. A trustless transaction is one that requires no third party (like a bank, person, or any other intermediary) to facilitate. It's settled by the network it's running on. CBDCs can run on the same technology but, according to Investopedia, "CBDCs promote financial inclusion and simplify the implementation of monetary and fiscal policy". How could one simplify the implementation of monetary and fiscal policy via trustless technology?
By making their CBDCs programmable.
Aren't All Tokens Programmable?
Yes, is the short answer. No is the long one. CasinoCoin's own protocol cannot be modified without the cooperation of almost all its users - and there will only ever be 65,000,000,000 tokens in existence. That's not just a feature of tokens designed for online casino gameplay, most cryptocurrencies have a finite token count. Near immoveable protocols mean token counts can't be raised unless every holder agrees to that change (which they wouldn't, because it would devalue their tokens).
But CBDCs are pegged to their respective country's currency and, just like their bank notes, private citizens don't get to decide how many are minted. CBDCs don't have to run on blockchains either, so they don't need every user (node) validating transactions. Any decision made about the programming of your CBDCs - where you can spend them or whether or not you can spend them - is firmly in the hands of the issuer. Your government.
Blockchains Keep Digital Money Safe
Money was digitised well before many of you were born, but we've always been able to turn the numbers we see on screens into cold hard cash. We're always able to leave the grid. Aside from expensive security measures, the fact that we can opt out of a remotely accessible financial database offsets many dangers.
But to create an entirely digital financial framework the security and inherent democracy of public blockchain technology is wholly necessary. We, the people (I knew I'd fit this in somewhere) would need even more transparency and input because we cannot simply leave that grid if we don't like how it's running. We'd also need impenetrable security.
By circumventing public blockchain networks, CBDCs end up being the least secure form of currency, perhaps, ever created.
Why Should I be Concerned?
CBDCs aren't just the future of government subsidies, they'll be the future of tax payments, the future of loans, the future of all financial matters. Adoption will be rapid and unavoidable because programmable CBDCs solve wasteful spending. Humans have never liked giving money away, of course we'd jump at the opportunity to dictate how people spend what we give them.
If you were a head of state you'd want CBDCs adopted too. Justin Trudeau could have done with that technology to make his financial attack on both the Freedom Convoy and its supporters more efficient...
So... Now What?
Seek to understand the world as best you can. Fiat, CBDCs & Cryptocurrencies aren't the only ways to barter, and they never will be. Seeds and precious metals (especially) have outlived all known civilisations. When the bough breaks (every civilisation falls), what remains are physical materials - of use to anyone with the skills to put them to work.
In fact, the tone of "doom & gloom" tinting this article may be uncalled for. Money is merely a tool used to create a bubble of convenience, known to you as the society you live in. Though no society can function without a central currency, there can never be a grand, global currency under which all conceivable societies are compelled to live. Such an undertaking would require a level of coercion too extreme to go without opposition.
Nothing is impossible... but that certainly is.