Written By – Saira Younis
Concept of Money is one of the oldest and most widely held notions. As humans, we are wired to form communities and interchange the products and services we generate.
This necessitates the development of a medium of exchange that can serve as both a store of value and a means of payment, allowing us to measure the value of goods and services correctly.
The advent of digital currencies and blockchain-based tokens has generated a significant push toward digital payments in recent years. These have evolved as a group of unique capital assets. Bitcoins serve as the earliest and most well-known example. Some have stated that they’ll be the future of money, claiming that they will replace fiat money. Although this has not occurred, and now it is widespread not to think of Bitcoin and many other offshoots as exchange rates from outside crypto-maximalist societies, the available public records of blockchains provide a unique opportunity to investigate the space of macroeconomically grounded metrics for macroeconomic quantities like the monetary base.
Why pursue digital currency?
A significant effect is a reduction or elimination of fees. Whenever people make cashless payments today, this could appear instantaneous. Still, a lot happens behind the scenes, according to Chris Giancarlo, the former chairman of the Commodity Futures Trading Commission. He explains, “My mobile device informs his mobile device to notify a whole succession of banks, validate who I am, how much money is in my bank, and that there is enough money to go from my bank to his bank.”
There are transaction fees at each stage along the route. They totaled over $110 billion in 2020, and corporations were primarily responsible for it. In principle, you could cut out the intermediaries with a digital currency. You could, for example, transfer money directly from a digital wallet to a cashier if you wanted to buy a sandwich.
Non-government actors would not necessarily be eliminated. Users who wish to utilize the digital yuan in China, for example, can deposit money into their digital wallets at banks. However, simply having digital cash in circulation may put a lot of pressure on credit card companies and payment systems to reduce competition rates when many individuals begin to use the Supply alternative.
Given the popularity and entrenchment of private providers such as WeChat and Alipay in China, the adoption of the e-renminbi has been gradual. Another justification for digital currency is allowing Americans who do not have bank accounts to participate in digital commerce.
According to the Federal Reserve, more than 5% of American families are “unbanked.”
People would be able to participate in our increasingly cashless financial system if they were given a digital wallet.
It will also make it easier for the Government to deliver payments to the poorest citizens of the United States. Putting a digital dollar in existence during the epidemic, for instance, might have enabled the government is sending money straight to e-wallets.
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