Democrats were offered the use of the 'Digital Dollar' project for the money to be distributed to the public in the USA in line with the coronavirus package. So What is Digital Dollar? Who is behind the Digital Dollar? How will this digital asset appear in the future? As Crypto Koin, we wanted to prepare a detailed content for this project!
In our news dated January 20, “The project in question aims to establish a framework to accelerate the development of a virtual, tokenized US currency that may coexist with other federal reserve obligations. This currency can be used to solve transactions in a faster and more cost-effective way. ”The official website of the project explained in a similar way. In the continuation of our content that proceeds in the form of Q&A, you will have a wide knowledge about digital dollars.
What is Digital Dollars?
Digital Dollars, according to the definition of the official site; “It is a digital representation of a dollar denominated debt. Liabilities may include Federal Reserve banknotes created by the Federal Reserve, bank deposits and other financial market obligations. So what we call this digital dollar is actually a new form of the American Central Bank's money press. The most important distinction between this formation, which the official sources call the Central Bank Digital Currency (CBDC), and the tokenized bank currencies; It is the responsibility of the Fed and the commercial bank.
What is the Purpose of CBDC?
The purpose of CBDC in producing this digital dollar is to make the dollar a better and smarter money to serve everyone who is trading with dollars at home and abroad. With this formation, direct money transfer will be possible in the digital world.
What is Token and Tokenization?
We can define tokens as a digital representation of an asset, property, right, or currency with sufficient features to approve and transfer ownership. The job of basing the rights of these assets to a specific token produced for this purpose is tokenization.
Why does CBDC need to be Tokenized?
Tokenization will ensure that the central bank money is portable and can be transferred as easily as sending a text message. Tokenized central bank money; It can be used for retail, wholesale transactions and cross-border payments.
So is the Digital Dollar a New Currency?
No, the digital dollar is a new form of the Federal Reserve's current paper and coins. So a new currency is out of the question here.
What Is The Difference Between Digital Dollars And Physical Cash?
The digital dollar will exhibit cash-like features, offer accuracy in peer-to-peer transactions and payments, and serve as a payment tool in the digital world. The only difference of the digital dollar with cash is that it is not “cash”, this money can be exchanged with cash.
Will CBDC be produced on Blockchain?
This is possible and quite a possibility, according to the official website of the Project. The project will say “…… appropriate technological approaches will be taken into account in order to generate digital dollars in the light of specified functional needs or use cases. This will likely include a blockchain or other distributed ledger technology (DLT) application. ”
Is the Digital Dollar Project Another Form of Libra?
Absolutely not, the digital dollar will be issued by the Federal Reserve and will have an obligation similar to the Federal Reserve's banknotes. Unlike CBDC, which will be the responsibility of the USA, Libra is an intermediary created by the Libra Association. Libra is fixed in national currencies and therefore will fluctuate by dollar.
Why Does Digital Dollar Matter?
A report published in 2017 shows that more than 60 million Americans do not have a bank account. For this reason, it is seen that it is very difficult for the US $ 1000 aid package to be offered to its citizens to reach millions of people. If the Digital Dollar project is used for this package, it will be possible to say that a new era for world finance has begun.
How can Bitcoin's Possible Response to the Digital Dollar Project Be?
Although there are many different opinions in the sector, undoubtedly the one that attracts attention is the opinion of Nathaniel Whittemore. According to cryptocurrency analyst Whittemore, this move can help Bitcoin. According to the analyst, the fact that hundreds of millions of Americans will have their first digital wallet and that the US dollar is very open to fall because the coronavirus has more economic impact than expected plays a key role in this case. Bitcoin can be a port where people seek refuge to escape their melting dollars.
