With the evolution of the universal modes of measurements and communication, the payment system also changed with ages keeping in view the demands of the world. Currently, fiat currency is accepted as a medium of exchange to buy physical assets.
Technology has changed everything and connected the whole world together. We are now living in a globalized country and everything now transferring to the internet. To accommodate such challenges, we also need a currency that will meet all the standards and needs of the current issues.
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For this purpose, Satoshi Nakamoto has created bitcoin in 2009 and aimed to remove the role of the third party while making the bitcoin more secure than the fiat currency. With the emergence of the Bitcoin, several other cryptocurrencies came on the scene and the process is still continued.
The virtual currency took birth but still, it is not properly regulated and can be used for various illicit purposes. The more concentration is needed on the part of legal institutions to accept the cryptocurrency and try to make it more legal.
Merits of Cryptocurrency
Cryptocurrency has some benefits over the fiat currency. These features need to be appreciated instead of criticizing as most of the government discouraging it rather than accepting it. The most striking feature of the blockchain currency is the removal of one central or controlling authority.
The whole system of transactions is decentralized and the transaction is purely peer-to-peer. The decentralization is more appreciating the centralization of the fiat currency.
Due to the public ledger, everything is saved on the blockchain and can be accessible to every validator. This can assure that the assets are not vulnerable to any kind of theft attack. Cross-border payments are easier with the cryptocurrency as it takes less time to transfer and is very secure.
Demerits of Cryptocurrency
Reliability is the most important thing for any currency to be officially used by the masses of people. Cryptocurrency is not a reliable asset due to its volatile nature and its engagement in illegal activities.
As the cryptocurrency is built on the blockchain, if the public ledger deleted or failed due to any kind of malfunction, the cryptocurrency will erase as a result. In case of losing the private key for wallets, the assets will be lost forever.
State Issued Cryptocurrency
Due to the above-mentioned disadvantages or demerits of the cryptocurrency, governments are required to take a step further and try to regulate the digital currency. Moreover, due to the increasing usage of cryptocurrencies in illegal activities and over the dark web, the government is taking very serious measures to control such practices.
Central Bank Digital Currency (CBDC) is entirely different from the State-issued cryptocurrency. CDBCs are already designed by many governments to facilitate the economic structure of the country.
However, various governments are now planning to issue the cryptocurrency according to the rules and policies of the Central Banks.
Last year, the giant social site, Facebook announced to launch its own cryptocurrency called Libra. However, it is still not on air but in its development phase. Following this, the Central Bank of China has also announced to issue its cryptocurrency.
Threat to Decentralization
Besides the recognition of cryptocurrency from governments, the state financial institutions are also a real threat to the decentralization and the privacy of the crypto assets as blockchain is under the control of authority rather than nodes or validators. The users’ data will be easily accessible and there will be no personal privacy.