The Future of Payments? To CBDC or Not to CBDC. That is the question

Let me state one thing, before we start … a digital currency is not a cryptocurrency — it is the equivalent of fiat currency, but in a digital form. Before reading the rest of this article, you need to understand this concept. It is not a stablecoin or tethered, either. Basically, it all relies on the trust that central banks have built up in their fiat currency over the centuries and translates this to digital wallets (rather than paper-based approaches).

With a stable coin, we have a cryptocurrency where (it is hoped) there are enough reserves to pay everyone back, whereas a Central Bank promises to pay the bearer for the fiat currency (and hopefully has the reserves to pay for this). All that happens with a CBDC is that, rather than transferring paper money (either physically or electronically), we now have it in a digital form, and public key encryption confirms the transaction. In the following, Alice transfers funds to Bob, and signs the transaction with her private key, and then this will be verified with her public key. The Central Bank and Alice’s bank will store her public key. In the end, the Central Bank will approve or not, the transaction: