CBDCs are legal tender currencies that are issued and managed on an infrastructure similar to that already used today by cryptocurrencies such as Bitcoin, Ethereum, Tether, Ripple, Polkadot and others. This infrastructure is commonly called blockchain, but this term is an understatement. In fact, it is a distributed ledger technology, that is, an infrastructure that operates geographically distributed across numerous databases and is operated transparently by a network of users according to clearly agreed principles. The data is stored in chronological order and cryptographic algorithms guarantee the authenticity of the data. [2] The advantages of this technology lie in the distributed and redundant storage of data across thousands of nodes. This makes the system highly resistant to physical interference and cyber attacks, making data loss almost impossible. Furthermore, this infrastructure is characterized by high data integrity, that is, subsequent manipulation of the data is practically impossible.
Furthermore, the complete transparency of the system allows each user to perform ad-hoc audits: an audit of each data entry is possible for each user at any time, as long as the system is based on the so-called public blockchain. Furthermore, this audit trail goes back to the launch of the system. Using programming logic, so-called smart Phone Number List contracts, which are also stored on the blockchain, entire decision-making processes can also be robustly automated. The user - whether a company or the end customer - will no longer have the CBDCs in their wallet, but in their digital wallet, an app that will be installed on a smartphone or PC. Through this app, the user will be able to carry out both transactions and payments at the physical point of sale or on the web. From gold to CDBCs If you look at the history of money, at some point gold or silver was deposited with a trustee and titled on paper. From then on, paper money was used instead of precious metal. In the next step, paper money became book money, which often only appeared on account sheets.
Over time, the central bank's physical ledger became a digital ledger, and digital money also landed in consumers' wallets in the form of debit and credit cards. Companies have always had to chart this evolution also on the commercial side to offer convenient payment options to customers. [3] Mastering each of these evolutionary steps has been a herculean task that has taken decades, for both central banks and businesses. The introduction of a new distributed cryptographic infrastructure for digital money could now be considered a normal progression of this technological development. But this would be a huge underestimate of this project, as CBDCs open up entirely new technological possibilities, especially for central banks. What are the advantages of CDBCs? In general, new infrastructures aim to offer greater efficiency to their users, or guarantee greater security, or both. This will also be the case for CBDCs, as there will be relatively fewer fake reserves, fewer technical glitches, and less fraud. Higher transaction speeds are also possible, but this will depend on the exact design of the technical system.