What is CBDC?
CBDC in English means Central Bank Digital Currency. CBDC mainly works for the issuance of digital currency in any country by the Central Bank of that country, its introduction and promotion.
If we try to understand the concept of CBDC, then it is completely inspired by Bitcoin and other crypto currencies but it does not follow Bitcoin or crypto currency 100%.
What is digital currency?
Digital Currency is a kind of virtual currency which is not in physical form of notes or coins but in virtual form which is used in online transactions through smartphone or computer. It is completely different from any cryptocurrency because it is completely controlled by the government and the Central Bank of that country, which is within the CBDC.
How does digital currency work?
As you all know that Bitcoin or crypto currency is not controlled by the bank or government of any country, but the digital currency issued by CBDC is completely controlled by the Central Bank and Government of that country. And because of this, this currency is considered much safer for transactions.
The digital currency issued by CBDC is not based on blockchain technology like Bitcoin. It exists in its imaginary state under some software programs.
The Central Bank uses most of the databases to use the digital currency and all the information is kept safely saved in these databases and to protect these databases from being hacked, the Central Bank uses security like privacy and cryptography. Uses the system.
digital currency types :
If seen from the legal point of view, there are two types of digital currencies, the first is centralized currency and the second is decentralized digital currency.
Centralized Currency: The digital currency which is controlled by the government of a country or its organization is known as centralized currency. Example: digital rupee
Decentralized Currency: A digital currency which is not controlled by the government of any country or its organization is known as decentralized currency. Like: Bitcoin, Doge Coin, Ethereum etc.
Benefits of digital currency rupee :
Reduces Risk: Payment for any good or service after its use will be made on time and will be able to overcome the delay in payment to a great extent.
Reduces complexity: Payments made through this can be easily transferred directly peer to peer.
Technical Efficiency: Due to the absence of any bank intermediary in the transaction, money transactions can be done in real time.
Financial Inclusion: Through this process, even the smallest business class people and common man in the country will be able to easily transact money at minimum charges and due to this, financial inclusion will be promoted in the country.
Tax Collection: Transparency will increase through digital currency and every small transaction will be accounted for so that people will not be able to evade taxes and it will become easier for the government to collect taxes and tax collection will also increase.
Reduces criminal activities: Tax evasion will stop to a great extent and information about transactions of people involved in criminal activities will be available online and this will reduce criminal activities to a great extent.
Proof of Transaction: You will be able to see the proof of every transaction through the internet in just one click.
Secures the payment system: It is made secure by using software like high level cryptography and due to this the payment system will prove to be secure.