Central Bank Digital Currency (CBDC)
Central bank digital currency, or CBDC for short, is a type of digital currency created by central banks. It has been gaining attention in recent years as some governments have started exploring the use of this technology to facilitate payments and monetary policy operations. Unlike most other cryptocurrencies, such as Bitcoin and Ethereum, which are decentralized networks with no central control over their supply or value, CBDCs are issued directly by a central bank and can be used to store value digitally on behalf of its citizens. Additionally, they offer more security than traditional payment methods since all transactions between users are verified through the blockchain network maintained by the issuing authority.
The concept behind CBDCs originated from research conducted in 2012 at The Massachusetts Institute of Technology Media Lab’s Digital Currency Initiative that explored how new forms of money could exist outside existing financial systems like cash or credit cards. Since then various countries around the world have begun experimenting with launching their own form of Central Bank-backed cryptocurrency including Sweden’s eKrona project and China’s DCEP initiative among others.
While these projects remain largely experimental for now it is possible that one day we may see them become widely adopted currencies backed directly by national banking authorities similar to paper bills today. This would allow individuals to make secure online payments without having to rely on third parties like Visa or Mastercard while simultaneously providing governments with greater oversight into financial transactions made within their jurisdictions unlike what currently exists when dealing with anonymous cryptocurrencies such as Bitcoin..
