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THE
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2 mins Read | 1 Year Ago

Digital Rupee VS Cryptocurrency

DIGITAL RUPEE VS Crytocurrency

CBDC (Central Bank Digital Currency) and Cryptocurrency are two different types of digital currencies that have become increasingly popular in recent times. Both have their own unique features and uses. It is important to understand the differences between them.

CBDC is a type of digital currency that is issued and managed by a central bank. It operates in the same way as physical currency with the central bank being responsible for the management and distribution of the currency. CBDCs are typically backed by the government or central bank that issues them and are meant to be used as a medium of exchange for goods and services.

On the other hand, Cryptocurrency is a type of decentralised digital currency that is not backed by any government or central bank. It operates independently of any central authority and uses encryption techniques to secure transactions and control the creation of new units of the currency. The most popular example of a Cryptocurrency is Bitcoin which was created in 2009.

One of the main differences between CBDC and Cryptocurrency is the level of control of the central bank. Cryptocurrencies are decentralised and operate independently. This means that the central bank has complete control over the supply and value of CBDCs, while Cryptocurrencies are subject to market forces such as demand and supply.

Another key difference between CBDCs and Cryptocurrency is the level of security. CBDCs are typically backed by the government or central bank which means that they are considered to be secure and reliable. Cryptocurrencies on the other hand are subject to security risks such as hacking and theft as they are not backed by any central authority.

Finally, CBDCs are typically designed for use as a medium of exchange for goods and services while Cryptocurrencies are primarily used for investment purposes. This means that CBDCs are designed to be used in day-to-day transactions. Cryptocurrencies are meant to be bought and held as an investment, though in some cases the merchants have started accepting transactions via Cryptocurrencies, the number of transactions is very less.

PARAMETERS

CBDC

CRYPTOCURRENCY

Purpose

To enhance the efficiency of the existing financial system and make it more accessible

Created as an alternative to traditional fiat currencies

Issuance

Issued and backed by the central bank

Decentralised and not backed by any government or central authority

Security

Rely on centralised security systems

Rely on decentralised networks and cryptography to ensure security

Regulations

Government regulated

Unregulated


In conclusion, CBDCs and Cryptocurrencies are two different types of digital currencies that have their own unique features and usage. Understanding the differences between these two types of digital currencies is important for anyone who is interested in using or investing in digital currencies.

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