What is a CBDC? — (Central Bank Digital Currency)

Kolin Lukas, Top 30 u 30 Crypto & Blockchain

So, Bitcoin is great, huh? But why can’t I use it to buy coffee or pay taxes? While Bitcoin is a form of digital money, using it as a day-to-day currency maybe isn’t the most ideal. This use will likely be served by another type of digital asset: central bank digital currencies (CBDC).

Most countries are only exploring the idea of a fully digital currency, while others are already testing out implementations. But what makes CBDCs different from other digital assets? Let’s find out.

Introduction

The technology behind moving money around in traditional finance hasn’t really been keeping up with the pace of change in the rest of the world. While it’s only a little more than sending bits from one place to another, sending money can be costly and take more time than it would be ideal.

Many governments are actively developing a new type of digital currency. The main benefits would be to increase the efficiency of payment systems and lower costs for everyone involved. You could think of CBDCs as digital fiat money built on a new technological layer inspired by advancements brought forth by blockchain.