I have been hearing a lot of buzz about the government introducing a “digital dollar”. But isn’t most money already digital? What would be the big difference in this system?
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It’s really *not* different than money kept in banks. A digital dollar is cash in electronic form. This means that people without bank accounts can make electronic transactions.
Right now, Feddie is in the kitchen cookin up batch after batch of funny money. His buddies Jamie and Brian and the crew take the batches of funny money out from the kitchen and put them in solo cups and bring it all out to us in the backyard. Jamie and Brian take big sips out of every cup, and they seem to drink the most out of the cups with the least in them. Basically, we could be better off if we set up a system for us to get our funny money from Feddie himself, using a reusable cup that Jamie and Brian and the crew aren’t taking a cut from.
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It’s, in simple terms, a state run bank that might outcompete private banks in time. Better than nationalization but i’m sure banks are loosing some sleep over this potentially. This also has tax implications as you can imagine – seeing how they now own the data on your financial transactions
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You are correct that most money is now digital. In laymen’s terms, the main point of difference is who has the authority to change the code. This is not really the difference between governmental digital dollars and digital dollars in the bank that still use the government’s currency, but rather the difference between both of those and decentralised blockchain based cryptocurrencies.
In the case of the former 2, both have centralised ‘access points’; for example, a bank can go in its code and say, change your bank account from $50 to $40 if you buy a $10 meal. This may be a valid transaction, and you may be happy with it. However, there is one centralised point of access to change that code, and this enables fraud, theft, or increasing the money supply in the case of central banks (or more) at the whim of one or few central powers.
In the case of decentralised cryptocurrencies, each transaction is verified by a cryptographic system, and then historically imprinted/verified on the blockchain, which every single mining device runs the code for. Basically instead of one central server for a bank for example, the ‘server’ is decentralised across all devices that run to operate the network. As a result, that money is much harder to corrupt as it requires corrupting a majority of devices that operate that network before a block is mined (eternalised). This skips over a lot of course, but I hope it’s digestible.
Therefore, you are correct to say that a governmental digital dollar might not be very different from modern money, as it still has a central power which has access to change its properties like its scarcity (and therefore value), etc. However, it seems that many governments have been hopping on the trend of ‘digital money’, and are likely enjoying the fact that most people aren’t too well versed on this space (I barely know anything IMO, just the bare basics) as it is incredibly complex and has political, economic, and tbh pretty universal implications, and requires some understanding of the philosophy of money.
tldr: digital governmental money isn’t too different from modern money. Many cryptocurrencies (that strive for decentralisation) however are different in the sense that they are much more difficult to infiltrate.
You don’t actually own any money you think you own, you have an account at a bank which has an account with the federal reserve.
A digital dollar would remove the bank, and then your money resides directly with the federal reserve.
The Chinese will do it first, as a surveillance system of the state disguised as a monetary system.
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