CuriousJoe on Nostr: Central Bank Digital Currencies (CBDCs) are considered digital because they are ...
Central Bank Digital Currencies (CBDCs) are considered digital because they are created and stored electronically. However, they are NOT entirely digital in the way that cryptocurrencies like Bitcoin are. They are simply a type of digital ledger system, meaning they are a centralized database that records and tracks all transactions in the system.
Instead of multiple private banks keeping their own ledgers, a single ledger is maintained by the central bank, and all transactions are recorded on it. Hence, CBDCs are still based on centralized infrastructure, and the transactions are still digitally recorded in a central database controlled by the government.
Therefore, the main difference between CBDCs and traditional bank deposits lies in the underlying technology. While the former is based on shared ledger technology or blockchain, it does not necessarily need to be decentralized. It is, therefore, accurate to say that CBDCs are digital in terms of the way transactions are carried out, but they are not fully decentralized and digital like cryptocurrencies.
Instead of multiple private banks keeping their own ledgers, a single ledger is maintained by the central bank, and all transactions are recorded on it. Hence, CBDCs are still based on centralized infrastructure, and the transactions are still digitally recorded in a central database controlled by the government.
Therefore, the main difference between CBDCs and traditional bank deposits lies in the underlying technology. While the former is based on shared ledger technology or blockchain, it does not necessarily need to be decentralized. It is, therefore, accurate to say that CBDCs are digital in terms of the way transactions are carried out, but they are not fully decentralized and digital like cryptocurrencies.