Even in digital form, money, like all other resources, has a finite lifespan. At the same time, cryptocurrencies are often considered as a tool to improve the global economic system by bringing more equity into it (Shapiro, 2022). However, their dominance has been threatened by price volatility in recent years due to their fragmented form, which prevents a clear central ownership and stability control (Goodell, 2021). As a cooperative effort to address this issue, major technology firms are creating digital assets backed by ‘real-world’ assets. On the other hand, private companies have noticed the organization and are interested in making a profit from the mixed assets. Because the mixed-currency paradigm is based on both crypto and fiat assets, I believe the government should develop its sovereign cryptocurrencies and eliminate private cryptocurrencies.
Bank of America Bitcoin and other electronic money existence is possible on any digitally issued token. Massive financial institutions create and manage digital money. Money laundering and tax evasion are thereby prevented, although enhanced governmental surveillance is a possible side effect (Peters, 2020). A society where digital money is accepted and spent is less secure. Rather than relying on banks with billions of dollars in assets, the central bank can act as a lender of last resort for individuals and small enterprises through CBDC retail (Shapiro, 2022). In a financial crisis, the central bank will be able to bail out individuals rather than corporations, reducing the incentive for huge corporations to take on additional debt. This, in turn, will reduce the country’s debt burden and promote financial stability.
Sovereign Cryptocurrency aims to improve long-term sustainability and prevent inflationary runaway by algorithmically setting annual inflation rates in the system. Governments worldwide are working with private players to issue mixed and legal tender currencies while developing these Smart contracts to create a more dependable and sustainable economic system (Goodell, 2021). For fairness, each increased offer is distributed to all eligible customers, not to a bank account like traditional currencies (Li & Whinston, 2020). There will be a large amount of network engagement with this model, which is the most crucial in the series.
An independent cryptocurrency is an algorithmically enforced operating systems such as those proposed by the SOV project and Non-Governmental Organizations (DAO) and the protocol employed in a sequence of blocks contain the rules for cryptocurrency issuance (Li & Whinston, 2020). Law enforcement can access funds by allowing the use of cryptocurrency (Goodell, 2021). Another benefit of a third-generation blockchain is that it consumes less energy to reach consensus than previous comparable approaches. There is no need for a certain type of node, such as a miner, in this protocol (Shapiro, 2022). An independent cryptocurrency could potentially contribute to the UN Sustainability Goals by delivering a speedy resolution, reduced delays, open participation, and a green, unstable impact on the mining environment.
It is possible to use a combination of crypto and fiat currencies in this system. It is built on top of a third-generation blockchain. It uses reliable proof of a cost-effective method that provides tools to ensure that the blockchain and transactional governance work for the public good (Peters, 2020). The growth of the Internet of Things (IoT) globally in the coming decade may necessitate the acquisition of economic assets that bridge the digital and physical worlds. IoT capabilities and public activities like tax payments, insurance, and license fees can be used to make a major percentage of the population into autonomous economic players through mixed currency models (Goodell, 2021).
In a cashless society, disadvantaged minorities such as service workers, who are often paid in cash, or at least receive a large portion of their salary from things like cash tips, could be adversely affected, as they lack access to the banking system and/or the technology to participate in a cashless economy. The transition to a cashless society comes with a slew of dangers. As a result, it is imperative that all organizations involved in the economy work together to ensure that no one is left behind and that the vulnerabilities in a cashless system cannot be exploited by those with evil intents.
References
Goodell, J. W. (2021). Diversifying equity with cryptocurrencies during COVID-19. International Review of Financial Analysis, 76, 101781. Web.
Li, X. & Whinston, A. B. (2020). Analyzing cryptocurrencies. Information Systems Frontiers, 22(1), 17-22. Web.
Peters, M. A. (2020). Cryptocurrencies, China’s sovereign digital currency (DCEP) and the US dollar system. Educational Philosophy and theory, 1-7. Web.
Shapiro, E. (2022). Self-Sovereign Personal Cryptocurrencies: Foundations for Grassroots Cryptoeconomy. arXiv preprint arXiv, 2202, 05619. Web.