Bitcoin and CBDC have both gained the attention of the general public as the cryptocurrency industry evolves. However, despite their similar status as ‘digital assets’, there are marked differences in the way they are issued and controlled.
Coin Rivet will explain what a CBDC is and what Bitcoin is before delving into the main differences between the two assets.
What is a CBDC?
A central bank digital currency (CBDC) refers to the virtual or digital asset form of a fiat currency such as USD, EUR or GBP.
They are issued and regulated by a country’s monetary authority or central bank and are currently being explored by a number of countries around the world with the aim of âdigitizingâ the current monetary ecosystem.
What is Bitcoin?
Bitcoin is a decentralized digital asset that can be transferred and sent around the world on a peer-to-peer basis without the need for an intermediary or a central authority.
The asset is distributed, traded and stored using a decentralized ledger system known as a blockchain.
Launched in 2009 by the pseudonym Satoshi Nakamoto, Bitcoin is the first iteration of a cryptocurrency and remains the largest crypto asset by market capitalization today.
what is the difference between both?
The first main difference between the two is that Bitcoin is a cryptocurrency and a CBDC is not.
Cryptocurrencies like Bitcoin are stored on a decentralized blockchain network while a CBDC asset will be issued and stored using a more centralized method.
This means that Bitcoin remains decentralized in nature and cannot be controlled by a single authority. In contrast, a CBDC asset can be regulated and monitored by the issuing authority such as a bank or Federal Reserve.
This raises the issue of anonymity and privacy when using each item.
When you use Bitcoin, you use a wallet address that does not contain any personal or identifying information, which means you can send Bitcoin to others anonymously.
However, CBDCs are expected to replace cash and be distributed centrally, meaning that your details will be âtiedâ to your CBDC asset and subject to potential oversight and regulation by the issuer.
The value of assets and the supply in circulation are also different.
CBDCs should be ‘pegged’ to the value of the underlying asset, just like stablecoins such as Tether (USDT) and USD Coin (USDC), and have supply based on demand and use cases. of the asset.
In contrast, Bitcoin has a fixed supply of just $ 21 million, which is why the value of the asset remains well above the $ 1 valuation of a stablecoin.
Going forward, CBDCs are expected to use blockchain technologies to help distribute and manage their assets.
However, the underlying issues of decentralization and asset anonymity will persist, leading many investors to choose a more private and decentralized asset such as Bitcoin as their ‘store of value’.