3 reasons why Bitcoin is better than CBDCs

Table of Contents

• Decentralisation
• Limited Supply
• High level of security

Bitcoin is a decentralised network that allows anyone to transact with anyone else. CBDCs are issued by a central bank and have controls built into them. Bitcoin offers freedom while CBDCs offer total control.

There is much at stake as world economies look for a way out of the desperate plight that a fiat-backed monetary system has driven them into. Central banks believe that their own digital currencies will put economies back on track. Here are 3 reasons why Bitcoin is eminently preferable.

Decentralisation

decentralised control is a key feature of Bitcoin and other decentralised digital currencies. In a decentralised system, control is distributed among multiple parties rather than being concentrated in a single entity. This means that no single entity has the power to make decisions or exert control over the system.

In the case of Bitcoin, the decentralised control is achieved through the use of a decentralised network of computers, known as nodes, which validate and record transactions on the blockchain. The blockchain is a decentralised, distributed ledger that records all transactions made on the Bitcoin network. Each transaction is recorded on the blockchain in a block, which is then added to the chain of blocks that make up the blockchain.

Because the blockchain is decentralised and distributed, it is not controlled by any single entity. Instead, it is maintained by a network of users who contribute their computing resources to the network. This decentralised structure makes it difficult for any single entity to manipulate the network or the information stored on the blockchain.

In contrast, central bank digital currencies (CBDCs) are issued and controlled by central banks, which are typically government-controlled financial institutions. This means that CBDCs are subject to the policies and decisions of those central banks, and the central banks have the ability to exert control over the issuance and use of CBDCs.

Limited Supply

One of the key features of bitcoin is that it has a limited supply of 21 million coins. This limit is built into the bitcoin blockchain, which is the underlying technology that supports the bitcoin network. This means that no matter how much demand there is for bitcoin, the total number of bitcoins that will ever exist is fixed at 21 million.

The limited supply of bitcoin is intended to help protect the value of the currency. Inflation occurs when the supply of a currency increases faster than the demand for it, which can lead to a decline in its value. By limiting the supply of bitcoin, its creator hoped to reduce the risk of inflation and protect its value.

In contrast, central bank digital currencies (CBDCs) are digital versions of traditional fiat currencies, such as the US dollar or the euro. These currencies are issued and backed by central banks, which have the power to create new units of the currency as needed. 

This means that the supply of CBDCs is not fixed, and the central bank has the ability to increase the supply of the currency if it sees fit. This introduces the risk of inflation if the central bank creates too much of the currency, leading to a decline in its value.

High level of security

Bitcoin uses a combination of advanced cryptographic techniques and a decentralised network to ensure the security of transactions and the integrity of the blockchain.

The blockchain is a decentralised ledger that records all bitcoin transactions. Each transaction is verified by a network of computers, called nodes, that work together to validate the transaction and add it to the blockchain.

These nodes use cryptographic techniques to ensure that the transaction is legitimate and cannot be altered or tampered with once it is added to the blockchain. This makes it extremely difficult for anyone to fraudulently alter the ledger or steal bitcoins.

While CBDCs may also be secure, there is a risk that they could be vulnerable to cyberattacks. This is because CBDCs rely on a centralised system, which means that there is a single point of failure that could be targeted by hackers.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.