Governments around the world – Russia, The United States, Canada, Republic of China, Japan, Venezuela, and others – are taking significant actions to explore and learn more about cryptocurrency (learn crypto on Pheeva.com). With governments keeping a keen eye on digital currencies, there’s a huge question of whether cryptocurrencies such as bitcoins can keep it decentralized. This question had been raised considering that governments would like to keep things centralized which is the exact opposite of true cryptocurrencies.
A Government-Backed Coin
Centralized Digital Currencies
There’s a significant difference between cryptocurrencies and the CDCs (Centralized Digital Currencies). True cryptocurrencies are decentralized meaning there’s no one person, or entity such as the government that controls them. CDCs are the exact opposite which means they are centralized and run by a certain entity such as the government and the central bank.
Through centralization, the government could make exponential changes which can either be good or bad. This is scary because there’s also a question of security and privacy despite a good option to buy goods at a way cheaper price.
Russia has, specifically, came up with intriguing ideas as to why it wants to engage in some kind of government based cryptocurrency to work with international transactions and possibly impose levy on black markets. It has not been clear though if the said digital currency would have a decentralized ledger as it is with true cryptocurrency or if it is possible for it to be mined.
Why governments are showing interest just now?
The concept and technology behind digital transactions isn’t entirely new. Even before the internet have boomed, many companies are working to make digital transactions work without the use of cash or check. With the birth of the internet, the concept wasn’t fully adopted and the technology behind it is also not cheap. Government and financial institutions has not placed so much attention to it because the majority of the public were not into it too.
When Bitcoin was introduced in 2009, the boom had been extensive that the explosion of bitcoins along with other cryptocurrencies pushed governments to have a look at these technologies that could have a huge impact in the future of commerce, the finance industry, and the centralized authorities of the movement and generation of various currencies throughout the world.
Governments are now seeing the potential of the crypto technology but they need time to further understand it. In theory, there are several advantages drawn from true digital currencies. The straightforward and efficient instant electronic transactions that prevents fraud, better book keeping and tracking of transaction are just a few of this advantages. Not to mention that no printing is involved which saves a lot of costs behind its generation. On a side note, governments alongside many companies are overwhelmed by the ongoing trend. In order for them not to be left behind, some governments tend to make up something to catch up with what’s new.
Decentralized Money vs. Centralized Money
The success of Bitcoin proves the feasibility to generate money beyond the borders of traditional financial systems that are based on the government. This fact is pushing government authorities and central banks to inquire difficult questions about their function in future economies.
For some, the issue of true cryptocurrency (decentralized) and centralized digital currency is not the main point because the system is simply a detail. However, the main point is that you can have digital money circulating around which is a huge threat to the central bank rather than to private banks. Regardless if it is done with a blockchain or through any type of database does not make a huge difference.
The goals of Russia for running cryptocurrencies indicate how governing bodies around the globe can start adopting digital currencies no matter if the end is good or bad.
Governments have a tendency to move slowly and thus very little will change in the near future. A series of tests may have to be conducted to find out how the whole system will work. Nonetheless, governments will be forced to adapt the system when cryptocurrencies will start to present a real practical alternative to our current financial system.