How Do CBDC stimulate investments in Cryptocurrency?
In a world where everything is moving to digital, it is no exception that our currency will also become digitized. But in this world of digital currencies, there are two options that you can take whether it is decentralized or centralized.
The Central Bank Digital Currency (CBDC) takes center stage when People’s Bank of China begins trial of its digital yuan early this year, a project that took flight in 2014. Although the idea of CBDC begins from the mass adoption of cryptocurrency, what will be the effect on the crypto world and why will it in turn stimulate the crypto market?
What is a CBDC?
Central bank digital currency (CBDC) uses an electronic record or digital token to represent the virtual form of a fiat currency of a particular nation (or region). Like a paper-based currency note that carries a unique serial number which prevents it from imitations.
The Comparisons to Cryptocurrency
A lot of people always mistake the CBDC for its Crypto counterparts but they are both different financial tools that are battling to be your ‘ideal’ settlement option.
One of the main differences you can see in its system, although they are both created through a blockchain-based network, they are supported by different systems. While as we all know cryptocurrency is created through a decentralized network where every node/computer can access the same ledger, a CBDC is created by what is called a permissioned block chain where the centralized nodes are the only permitted ones to access it.
The other main difference is bitcoin and other utility coins are capped in their number of coins that will be distributed. CBDC, on the other hand, is a virtual presentation of our fiat money, and as we know the amount of fiat money circulating is always increasing.
The obvious difference between CBDC and its Crypto counterparts is how it’s generated. While Cryptocurrency is generated through mining and staking, CBDC is created through the government when it decided to increase the money supply.
Why it should stimulate the crypto market?
Firstly, we may not know yet where it can affect as CBDC is still in the trial phase. But what we know is that CBDC aims to make transactions easier and going digital is the future.
The digital future means more investments that would come to cryptocurrency while also maintaining the privacy of your transactions through a decentralized network and also safeguarding your value due to its limited supply which is not present in CBDC.
We in Nagaya technologies believe in the idea of an easier and accessible financial future. That is what led us to create a hybrid cryptocurrency that will keep growing its value over time.
Interested to know more about Nagaya Technologies and our Hybrid Crypto Asset, you can find out more at www.nagaya.io
Or you can talk to us at t.me/nagayaofficial
