January 27, 2023

Why digital currencies of central banks can not replace bitcoin

Why digital currencies of central banks can not replace bitcoin

Grayscale analysts in their latest report focused on the issue of central bank digital currencies (CBDC). Currencies can be triggered by centralby banks, but how will this affect Bitcoin, which is a variant of a decentralized digital asset? According to them, CBDC will act as a tool to modernize the existing payment infrastructure.

In this sense, the operation of the quick translation systemThe US Fed Fed Now, just like the People’s Bank of China's alleged digital yuan, have similar effects, making payments more convenient. At the same time, bitcoin, according to analysts, appears as a tool to update the mechanisms of money circulation in the world.

As the report wrote, “CBDC thinks howa conscious departure from the decentralized protocols that many cryptocurrencies work on. ” Based on such a watershed, analysts make another conclusion. The launch of CBDC in the world “in reality will support the value message that bitcoin and other digital currencies have”, working on a decentralized protocol, while having high transparency due to the functioning of public blockchains.

From this Grayscale thesis, the following follows.conclusion: the central banks of an increasing number of countries, on the one hand, will feel the need to launch a CBDC in order to improve the payment system. On the other hand, regulators will be aware that the advent of CBDC will become a kind of “advertisement” of bitcoin.

Moreover, as the director of research inGrayscale, Philippe Bonello, CBDC will bear the imprint of all those weaknesses that the modern world money system has. CBDC will be a digital image of modern currencies. Work on the blockchain will lead to the question of the sustainability of the functioning of such digital currencies.

Therefore, only in case of compliancedecentralized operation of a distributed registry can guarantee the high cybersecurity parameters of such assets. This has been demonstrated for 11 years by the Bitcoin blockchain, which has remained a stable financial mechanism.

Bonello also noted that the deploymentCBDC will require digital infrastructure. This means that a kind of “invention of the bicycle” will occur, since a number of cryptocurrencies already have the appropriate technical environment.

Finally, Bonello notes that the launchCBDC may create a risk of stronger emission pumping of economies with already digital money. In this case, Bitcoin will look in an even more favorable light, since its total amount is strictly determined - 21 million.

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