Blockchain is everywhere today. Nowadays, established nations are looking to develop the digital currencies. It will allow consumers and businesses to have digital wallets with all the transactions and trading.
Digital currency like bitcoin offer more convenient way for businesses and consumers. Former Federal Reserve executive believes it’s only a matter of time before central banks adopt a form of digital currency that could look like bitcoin, and will offer a more convenient and anonymous way for businesses and consumers to buy and sell goods and store wealth.
According to the latest reports in the Sweden, the total percentage of cash in the transactions fallen drastically less than 1.2% of the nation’s GDP. Though many businesses and back are not accepting this way. But many of them are making their transaction through blockchain technology.
Since the cashless economy is picking up a speed in USA, some individuals suggested a few cryptocurrency payment solutions. According to one bloggers suggestions the basic idea of a cryptocurrency called is Fedcoin. The Crypto would operate on a 1:1 ratio to the U.S. dollar. The only different thing is that it would be issued by the Federal Reserve as a digital currency parner to the USD. Garratt also took part of the Project Jasper team which was experimenting on how to create a blockchain network for large bank-to-bank payments.
Last year, Garratt was working as a digital currency technical advisor at the Bank of International Settlements (BIS) in Switzerland. Their purpose is to promote transaction between central banks around the globe, they have been exploring the role cryptocurrencies could play if nations support them.
The main prospect of a government-backed digital currency that also provides facility may seem is far-fetched, It was noted by Garratt that cash is also essentially a P2P process.Garratt believes that central banks are expected to start using and implementing blockchain technology. At the recent MIT business conference in boston he said these words. He was previously attached as a advisor to the bank of BIS.
The BIS invested crypto mechanisms by state-owned cryptocurrencies could operate. It is recently stated that a central-banked cryptocurrency can be impactable to the global economy.
A government-backed digital currency could deal with banking fees that often target the people whos transactions are very small like, electronic payment transfers via services such as Western Union, while at the same time creating greater efficiencies. For instance, at the time it takes to clear and settle funds could be reduced shortly, with cryptography used to which ensures privacy. Cryptographic keys which control funds could be in a owner’s control; the consumer could be issued a private key associated with their electronic funds and be able to use public keys for payments.
The Riksbank, Sweden’s central bank, is currently using and issuing a digital currency or cryptocurrency similar to bitcoin for mobile payments. They are called the e-Krona, the digital currency that would be used for smaller payments between consumers and customers, businesses or with government agencies. Even it creates safer and more efficient transactions, the government has argued.
In 2015, Ecuador made the world’s first state-sponsored digital currency, Sistema de Dinero Electrónico (electronic money system), which was backed by the central bank. It allowed people to have money in accounts that could be traded on their phones. Ecuador, however, shuttered its electronic money system last year “due to lobbying by the banks,” Garratt said.
“They’re pushing hard, as many countries are using distributed ledgers by using blockchain to implement their own domestic digital token” Brian Behlendorf, executive director of the business blockchain collaborative Hyperledger, said in an earlier interview with Computerworld. He knows that crypto will soon replace the old methods of P2p.
There is one idea originally floated by blogger J.P. Koning is called Fedcoin, a bitcoin-like currency based on blockchain that would offer a 1:1 ratio between a U.S. dollar and a digital token.
While the blockchain is the foundation for cryptocurrency, it would not get involved to digital currencies. Blockchain distributed ledgers are used to myriad of business applications, such as transferring real estate transfers or for digitizing supply chains and tracking international shipments in real time as well.
A government-backed digital currency is not necessarily have to exist on a distributed ledger, as bitcoin does today. It could be centrally monitored by the Federal Reserve and other central banks.
The big question for central banks was to ask themselves is what are they trying to accomplish.
“Is it needy? We want a token that can integrate with this new token economy? Then they may want to use an architecture that’s similar to those [bitcoin] tokens to issue fiat money,” Ali said.
In 2013, Garratt was involved with multi-bank proof of concept called Project Jasper, which explored the use of blockchain as the basis for a new bank-to-bank digital payments system for large money transfers. So, for instance, if a homeowner sold their house, banks could use the electronic distributed ledger to settle the transfer of money.
If the Federal Reserve or other central banks wants to back digital currency, it could take on many forms. For example, it could be operated as a closed system between banks for large money transfers, As they used for daily clearance and settlement of thousands of smaller transactions. Otherwise, it could open central bank accounts available for any consumer’s use, a type of virtual bank account.
The Fed could also use a digital coin, similar to bitcoin, that would represent the stored value of fiat money.Even thy could solve many money factors.
When a government-backed digital currency offers good facilities, it would complete monetary policies because central banks would manage and administrate cash reserves. If you are creating a token, market would also raises questions about it whether it would affect commercial banks.
Banks facilitate a valuable service in our economy. All the large enterprises in our economy typically would work through commercial banks. If one don’t want necessarily take that all away,” Garratt said. “That doesn’t mean that there isn’t a role for central banks to provide a digital form of currency that would in some ways compete with [traditional currency] on equal footing. I don’t think there’s anything antithetical to the idea of a central bank providing this.”
Hence, we are pretty sure that if not for today we would definitely see the US country moving towards cashless economy through blockchain in near future.
Mitul Patel, CEO and Founder of ProtonBits, a Top Rated BlockChain Development Company. He is a tech evangelist with a reputation to provide optimum solutions for business automation and solving real life problems with the power of software solutions. Follow Mitul on twitter, facebook, Linkedin and Google+