CBDC is not a new currency but an electronic version of the existing rupee so then the question arises..
CBDC may be maintained in a conventional Centrally Controlled database or a ditributed ledger technology like blockchain.
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What is blockchain?
- In simple terms blockchain is a technology that enables one builds a network that allows to push or transfer data from point A to B.
- CBDC is said to being build in blockchain
- Blockchain users are identified by addresses (public keys), which cannot be easily linked back to them without out-of-network information. This provides pseudo anonymity, which is amplified when the user generates a new address for each transaction.
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What is Centralized ledger?
- A master ledger controlled and maintained by RBI where children ledgers or commercial banks' ledgers are accounted for.
- Some party is always accountable for all ledgers.
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What is Distributed ledger?
- This kind of ledger is maintained and controlled by something called a smart contract which is a self executing code.
- For example, if RBI decided to share the master ledger over the internet, then people like you and I can access these master ledgers and every transaction ever made will be visible to us.
- Another example where Etherium is a distributed ledger, by visiting Etherscan one can see all the latest transactions happening on Etherium.
!! As no such system (DLT) exists in India, hence CBDC will also be a centralized ledger.