MIT and FED published white paper of digital US dollar
The Massachusetts Institute of Technology and the Federal Reserve Bank of Boston unveiled the open-source Central Bank Digital Currency (CBDC) accompanied by the explanatory report. The CBDC is expected to replace the U.S. dollar in the future.
Why is it so important?
- The development of the state cryptocurrency may lead to the prohibition of other types of cryptocurrencies, just as China has already done.
- CBDC implementation could change the value of other cryptocurrencies.
According to the FED of Boston, the new digital currency has been under development for two years, reaching the conclusion of the first stage. Following discussions with the public, the second stage will start, namely, the search for improvements and alternative solutions.
- Currently, CBDC offers the following features:
- Store a full history of transactions
- Throughput of 1.7 million transactions per second
- No intermediaries and no commissions. However, this option can be changed upon the agreement of politicians.
"There are still many remaining challenges in determining whether or how to adopt a central bank payment system for the United States," said Neha Narula, director of the Digital Currency Initiative at MIT. "What is clear is that open-source software provides an important way to collaborate, experiment, and implement. In addition to supporting collaboration, monetary systems benefit from transparency and verifiability, which open-source offers."
Central bank digital currencies (CBDC)
CBDCs are a product of central banks, using which they try to compete with all cryptocurrencies. They almost completely copy the characteristics of cryptocurrencies, except for a few peculiarities. First, instead of decentralization, they offer centralization, i. e., only one organization can issue coins. The second thing is that there is no possibility to mine or perform DeFi in order to passively obtain new digital coins. Thirdly, CBDC is controlled by the state, and as a consequence, it can control transfers by imposing sanctions against countries, organizations or certain people. Moreover, there is no anonymity.
Among major countries, the People's Bank of China is the most progressive in issuing such a currency. The secret development started back in 2014, but the world only found out about it in 2019. Today, testing of the central bank's digital currency, called DCEP, is in its final stages.