If you just want to see the CBDCs TLDR list, please skip ahead to that section.

Totally unbiased opinions

The Guardian and Liberal media, in general, do not like the idea of cryptocurrency as a payment method (resources 1, 2 and 3). If you like podcasts have a listen to 'Behind the Bastards: Let's Talk About Cryptocurrency (Spotify).' There are several prevailing FUDdy opinions among this crowd:

• Crypto has no intrinsic value
• Its use would create a 'dystopian future' - with no specific mention of how
• Fundamentally crypto and blockchain technology are scams to separate investors from their money

The first point is hilarious, considering the fact that 1 million US dollars, if 'hodl'd' from 1913 until the present day would be worth less than $20,000 today (down 98%, resource 4). Fiat currencies have debased heavily over time. Pandemic stimulus money printing by the Fed has worked to exacerbate the effects of inflation for current holders of the US dollar. Today the world's richest individuals are billionaires, we will no doubt have trillionaires in due course.

The final point echoes the arguments now used by US bodies attempting to regulate decentralized digital assets - crypto is risky and retail investors need protection from scam coins (and hence from themselves - ourselves). We lemmings are not capable of thinking for ourselves. We are still waiting to see how regulation will play out, but if the recent meeting of US State Regulators with Cardano founder Charles Hoskinson is anything to go by, there are some reasonable voices in the crowd (resource 5).

Unfortunately, our friends over at the Guardian have a tendency to massively oversimplify complex issues. It is unclear why any liberal media journal would support the dystopian technology that CBDCs have the potential to be. Here I will TLDR you the format of CBDCs in creation, while also explaining the powers that this technology will enable central authorities to wield in the context of the current monetary system.

So how does the current banking system work?

Fractionally reserved banking

The name can be taken literally, banks lend out more money than they have in hard cash reserves and pass around this debt to one another. This system of complex IOUs creates an artificially deep pool of liquidity. This has many upsides! To put it simply the world's economies can continue to function and even grow, without having to generate 100% of the cash flow needed to fund essential operations. 

The role of central banks is to:

• Stimulate growth, while
• Controlling and limiting effects of inflation

Their tools - manipulating interest rates and currency debasing/rebasing. There are two opposing states the system tends to find itself in:

• When interest rates are low

Borrowing is cheap - saving becomes less attractive. This incentivizes spending and stimulates economic growth, but increases inflation.

• When interest rates are high

Borrowing becomes expensive - saving becomes more attractive. While this environment dampens the effects of inflation, it does little to stimulate growth.

The intrinsic problem with the system is that it is very easy to print money (money printer goes brrrrr), but taking it out of circulation is significantly more difficult. The result is long-term inflation. Turns out it wasn't so transitory after all.

The Gold Standard

When fiat currency was still on the gold standard - backed by gold - only a limited amount of money could be issued. This system could not have facilitated the explosions of growth that we have seen over the last 50 or so years. Ultimately more gold would need to be found and bought for more fiat to be minted.

Since the collapse of the gold standard in 1971, long-term inflation has set in, and prices of assets have exploded in terms of fiat but stayed the same in terms of gold. Backing currency with an asset that could not be artificially inflated produced more stable behaviour in the long run.

The Rub

Despite such heavy inflationary pressure, its effects were not apparent until recent CPI reports. Inflation statistics have been adjusted many times since the loss of the gold standard to make them seem less severe. The fact that central authorities acknowledge its presence means it's a significantly greater issue than is being let on. This can be seen as mentioned before in the change in the price of goods over time in terms of fiat.

When inflation was high - individuals and institutions took on large amounts of debt - now raising interest rates to combat inflation will ruin those in debt as they will be increasingly unable to pay it back. Government debt is at record levels, especially that of the world's biggest economies (resource 6). Inflation is off the charts due to the massive money supply. Some countries are already defaulting on their debt payments, however, interest rates cannot be raised much more or many more countries and institutions will be unable to continue to make debt payments.

It is very likely that the only solution will be to inflate fiat currencies and use the debasing effect to decrease the value of the debt - but we shall see. Interesting times lay ahead.

CBDCs (TLDR)

CBDCs are a solution to problems presented by this system - they will make it easy for banks to destroy and print money at will. Many readers will be familiar with crypto tokenomics - the supply can be programmed to be infinite and it is relatively easy to install burn mechanisms via forking, sending the money to 'black hole wallets' etc. in order to reduce the total circulating supply.

However, this is not the only power CBDCs will enable central authorities to wield. Firstly there will be two types of CBDCs:

• Wholesale CBDCs - for select individuals and financial institutions
• Retail CBDCs - for average Joe's like you and me

I.e. one financial system for those in power, another for everyone else.

Imagine a decentralized digital ledger, a blockchain if you will, trustless, permissionless, censorship and agenda-free. Now imagine a central bank in control of this ledger, the nodes are still present but they all collude together under a central authority.

Those in control of retail CBDCs will be able to (TLDR, TLDR):

• Freeze holdings
• Limit holdings
• Set expiry dates (no savings)
• Set location limits
• Set time limits
• Set limits on spending
• Decide what CBDCs can be used to buy (goodbye recreational pleasures)
• Tax all CBDC transactions
• Automatically flag/block transactions
• Create custom limits for individuals - with their own wonderful criteria to guide them
• Negative interest rates - gradually delete unspent CBDC holdings over time (again no savings)

Some of these powers may seem pretty scary, even dystopian, especially if you are one of those rare few who do not see eye to eye with all the decisions of your local governing financial body. Jk. However, future implementation of these changes may be necessary to stop the current financial system from imploding...well a solution outside of cryptocurrency.

Compared to Bitcoin

In comparison, crypto tokenomics vary from coin to coin (or token to token). In the case of Bitcoin:

• The maximum supply is limited at 21 million, which is mined and minted slowly over time (halving cycles - known as the emissions schedule).

The basic laws of supply and demand suggest that a decreasing or limited supply coupled with increasing demand should result in value accrual over time.

• The BTC network is one of the most secure networks on the planet.

The increase in BTC value has resulted in the devotion of computational resources across the world to process transactions on the Bitcoin blockchain, making it extremely decentralized. The system runs on incentives. Hence the Bitcoin blockchain will continue to become more decentralized as BTC value increases. This will make Bitcoin a safe base layer for other technologies to be built on top of.

• An increase in value over time encourages people to save and not spend BTC. Could this be an issue?

In a Bitcoin-based economy - saving is encouraged due to value accrual, similarly to the low or negative interest rate state of the fiat system. There are fears this could lead to a 'deflationary death spiral' where there is:

• not enough incentive to spend
• causing prices to decrease
• production decreases
• eventually, the economy peters out

There is little evidence of this being an issue, it may even be a conspiracy theory (just look at the system under the gold standard). The economy has been deflationary for most of human history. Innovation makes everything cheaper over time, the status quo only becoming invalidated when central banks printed vast sums of money. BTC could back a more elastic currency, similarly to gold. I personally think Ampleforth could be our currency - (I will write a future TLDR on Ampleforth tokenomics - Publish0x already features some great articles on this project).

Non-custodial... ideally

With crypto you can be the custodian of your coins, if you take your money off of centralized exchanges. You do not have to reveal your identity to make a transaction. Recent EU laws on KYC (resource 7) may make it very dangerous for those holding crypto should the database of identities leak or be hacked - which has been known to happen.

You do not need to reveal your ID to create a crypto wallet and make transactions on the various networks, making all crypto transactions pseudonymous - but not anonymous. Blockchains are publicly viewable, detailed analysis can and has been used to link crypto wallet addresses to individuals, especially if the platform they used requires KYC to sign up. Custodial wallets - i.e. exchange wallets, for which you do not hold the keys - are technically owned by someone else under your name. The custodian allows you to make transactions if you abide by their terms and conditions.

In contrast, self-custody is not possible with CBDCs. The central bank decides your spending capabilities. CBDC function requires monitoring every aspect of your interaction with the system - even if this is just to monitor the total supply of money and not for nefarious reasons.

Icing on the turd

Social credit scores will likely be assigned to each account to assist with the granting and revoking of permissions and the allowances granted to each person, in accordance with how well they have been following the rules. Prepare to get unexpectedly slapped on the wrist.

Under a CBDC (emphasis on the under), individuals will only be able to see their own transactions - only the central bank will be able to see what is going on under the hood. The final contrast for this article - even privacy-oriented cryptos are open-sourced.

CBDC adoption?

CBDC rollout has been slow thus far. If the average investor saw it as a safe haven, the current financial system could see a mass withdrawal (also from government bonds), leading to a collapse. Rates on bonds determine interest rates - mass-selling would cause a massive increase in interest rates causing a 'next level' deflationary death spiral, and even a full-on government default and collapse.

Mass adoption is unlikely:

• Low adoption rates have been seen in surveys - ironically technologies and adoption curves are being plagiarized from popular cryptocurrency blockchains.

The Bank for International Settlements found that only 4-12% of people in developed countries would voluntarily adopt CBDCs.

• Developers will and are more drawn to working on crypto projects, due to their profitability (and the opportunity to create something useful and of value). CBDC creators will get 6-figure salaries at best (boo-hoo) and be enemies of free individuals, coding the metaphorical shackles if you will.
• Central banks are not dominating the narrative - people are starting to see how dystopian these currencies will be.

(Resources 8 and 9 - I relied on Coin Bureau for this one - please watch his youtube videos linked below).

Conclusion

The TV show Mr. Robot gives us an example of why CBDCs could be introduced. In the case of the show, it was a total financial collapse - anonymous hackers managed to delete all the data of the world's biggest central bank/corporation and encrypt the backup files - with the goal of erasing all debt. It just so happened that this particular revolution led to somewhat of a societal collapse (the most elite were pretty much fine) as well as energy crises. Ironically the collapse of the system the hackers sought to save us from ended up leading us into the real (digital) dystopia.

The CBDCs were needed to help loan certain government entities money, which could not be done with the broken dollar. The show takes a deep look at the petty rivalries between elites that unfortunately dictate so much of our lives. (The specific scenes are listed in resources 10, 11 and 12).

It is deeply ironic that the plot of a TV show that ended 3 years ago is being reenacted in the real world with such accuracy. The individuals running our financial institutions are truly unaware of the extent to which their ideas and actions are cliched and predictable. China had already expressed intentions to develop its own digital currency in 2014 - however, this is not thought to be running on a digital ledger so is not a true CBDC.

Likewise, the Guardian mouthpieces are painfully unaware that their naive critiques of cryptocurrencies - which they obviously do not understand - are based on conjecture and horror stories as opposed to facts and data. They can be forgiven for not having properly done their homework. To quote Futurama (season 2, episode 11):

Afterword

Next time you hear any of the inevitable FUD that seems to follow the crypto community around, just remember the points in the TLDR list, as well as the key aspects of the total failure of our current financial system. Ultimately the creator of the coins can give themselves total control over the transactions and the supply.

Let's not kid ourselves, we have seen this play out negatively in the crypto community. But this is all-the-more reason to ensure that the global financial system is designed in a way that can prevent and negate basic human greed, power complexes and Ponzi schemes. Only then will we be 'saved from ourselves' in the way that regulators and the Guardian journalists seem to be concerned.

The CBDC-ridden future may still be somewhat far away, but we would do well to educate and prepare ourselves to survive whatever comes next.

This one was not such a TLDR so apologies, but this is a really important topic, please spread the word about the risks of CBDCs, whose full implications are not so obvious.

In the words of Klaus Schwab - "you will own nothing and you will be happy!"

Resources

1. Nouriel Roubini - Guardian Article - Why Central Bank Digital Currencies Will Destroy Bitcoin

2. Nouriel Roubini - Project Syndicate - Initial Scam Coins

3. Nouriel Roubini - Project Syndicate - The Big Blockchain Lie

4. Iain Murray - Fee Stories (2016) - Mr. Robot Deals Frankly with Bitcoin and the Future of Money

5. Cointelegraph - Hoskinson pitches software-enabled crypto self-regulation to Congress

6. List of countries by government budget - Wiki

7. The Defiant - European Parliament Bill KYC on Non-Custodial Wallets

8. Coin Bureau (Youtube) - CBDCs Are Coming!! - Could Other Cryptos Benefit?!

9. Coin Bureau (Youtube) - CBDCs Vs Cryptocurrencies - Side-By-Side Comparison

10. Reddit discussion and Mr. Robot quotes - Mr. Robot and E-Coin

Mr. Robot episodes:

Mr. Robot is on Netflix in some countries and Amazon Prime in others

11. Mr. Robot, a TV show (season 2, episode 9, 16:10) - offers surprisingly deep insight into the reasons that CBDCs would become necessary.

12. Mr. Robot (season 3, episode 2, 29:20) "The illegitimate monetary imposter Bitcoin, the unofficially adopted obstacle."