Differences between Digital Rupee and Cryptocurrency
The "digital rupee," also known as "Central Bank Digital Currency," is the name given to currency notes that the central bank has issued in digital format (CBDC). Although it is exactly like currency, it is easier, quicker, and less expensive because it is digital. Additionally, it provides every transactional benefit that other digital payment systems do.
According to a statement from the Reserve Bank of India (RBI) on Tuesday, he first pilot for retail use of the digital rupee, or e-rupee, will begin on December 1. The RBI has partnered with four banks from selected locations, including the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. The initial scope of this new pilot will be limited to the closed user group (CUG), which consists of participating customers and merchants.
The RBI's CBDC is intended to add another method of using money. The only difference between it and the banknotes that are currently in circulation is that the digital rupee is anticipated to be used more frequently and facilitate digital transactions.
The legal tender issued in digital form by a central bank is known as RBI's digital currency (CBDC). The central bank's balance sheet will show a liability for the sovereign electronic currency. It is interchangeable one-to-one with fiat currency and is the same as fiat currency.
How it will work?
Two versions of the e-rupee will be distributed: wholesale for use in interbank settlements and retail for general circulation. Commercial banks have the ability to distribute digital currency even though the RBI issues it.
Through a token-based system, e-rupees will be distributed to the general public. The recipient's public key must be known to the person transferring the virtual currency. The recipient's private key (a special password) and the public key are both used to complete the transfer.
Transactions are likely to be partially anonymous; those involving larger sums may be required to be disclosed, whereas those involving smaller sums may be completely anonymous, just like with cash transactions. According to the RBI note, one must also keep it in an e-wallet offered by a bank or other authorized service provider.
Purpose of Digital Rupee
The RBI's decision to advance India in the race for virtual currencies is the primary justification for the introduction of the digital rupee. And, of course, cryptocurrencies are becoming more and more important.
- The digital rupee will become more efficient and transparent thanks to blockchain technology.
- Additionally, blockchain will make ledger upkeep and real-time tracking possible.
- Both wholesale and retail clients will have constant access to the payment system.
- Indian consumers are able to pay directly.
- lower cost per transaction.
- Account settlements in real-time.
- To use a digital rupee, you don't need to open a bank account.
- swift international transactions.
- No volatility risk because the RBI will support it.
- In contrast to paper money, the digital rupee will always be portable.
Bitcoin, Ethereum, and Dogecoin are examples of cryptocurrencies that are not regarded as being equivalent to legal tender. Private cryptocurrencies are actually fraught with danger, and the price volatility makes them a risky choice for investors.
Blockchain, Decentralization, and Cryptography are the three terms you need to be familiar with in order to better understand cryptocurrencies.
- The showrunner of cryptocurrency is the blockchain. It is a digital ledger that keeps track of transactions and distributes access to authorized users.
- In the case of cryptocurrencies, decentralization refers to the absence of any central authority over the asset. By using this mechanism, cryptocurrencies become independent. The RBI also oversees and controls the centralized money that we use.
- In the context of cryptocurrencies, cryptography refers to secret writing, so the recipient can only read messages. It handles the transactions, safeguards operational independence, and strengthens the entire chain.
Private cryptocurrencies, on the other hand, will never be considered legal tender, according to the Indian government. Private cryptocurrencies, which differ from digital currency in that they may have an impact on national security and financial stability, have also drawn strong opposition from the RBI.
How does cryptocurrency work?
All cryptocurrencies are created using an intensive procedure known as mining. The miners use high-end GPU-equipped computers to solve a variety of challenging mathematical puzzles and problems in order to earn cryptocurrencies as a reward. Cryptocurrency mining can take days or even months.
Additionally, people can purchase cryptocurrencies from exchange platforms and currency owners, as well as sell them to other people. In either hot or cold digital wallets, the cryptocurrencies are kept safe. The internet is accessible through a hot wallet. Cold storage, in contrast, keeps your assets offline. Similar to a UPI transaction, cryptocurrency transactions and transfers can be carried out via a smartphone. Users can also exchange their cryptocurrency holdings for cash through P2P transfers or bank accounts.
Additionally, no central authority or government interference can affect cryptocurrencies. However, they have had a very awkward relationship with the Indian government.
Purpose of cryptocurrency
Bitcoin was developed with the intention of facilitating online money transfers. It is a digital currency, a different form of payment that is unrestricted and functions exactly like cash.
We hope now you will be having a better understanding of digital currency and cryptocurrency.