Danish Central Bank create a centralized electronic currency
This week, Bloomberg featured a piece on Denmark’s aim to create a centralized electronic currency with the primary goals of increasing oversight and cutting down on crime. Most would not dispute a decrease in crime, yet an increase in monitoring and “big brother” often has unintended consequences. Would turning the Danish krone into a centralized private blockchain e-currency remove any of the risks of traditional fiat systems? Perhaps not.
Denmark is not the first country to consider a centralized national digital currency. Canada, Singapore, Sweden and the UK have already looked into centralized online payment systems. Again, I highlight “centralized.” Not all digital currencies are alike, and a private blockchain system is far different than a digital currency with a public blockchain.
A key question that proponents of cryptocurrency have is the issue of accountability. Where is there accountability in a private, centralized blockchain? In a time where individuals are seeking to leverage technology to hold those in authority accountable, the development of private blockchain central bank digital currencies is a mediocre solution at best. There is very little difference between a piece of paper and a note of digital currency from the Central Bank of Denmark as both originate from and feed power to the same source.
Compare That to Altcoins
Let’s face it: A private blockchain state-controlled digital currency is nothing different than an altcoin created by the boy next door. Now some may disagree, but it comes down to whether or not you would like to decentralize financial markets and give more power to the people or are wanting to trust in a central point of control or as some would say, a central point of failure.
While over 700 different altcoins exist today, bitcoin still carries the volume and market share for non fiat currency options. Bitcoin’s infrastructure and current reach usurp those of altcoins. Perhaps one of the key traits of bitcoin involves its founder. Satoshi Nakamoto removed himself from bitcoin development back in 2010, and the project has continued with tremendous success. Bitcoin has remained decentralized without a kingpin making centralized decisions.
The Small Band-aid of a Bankchain
Before blindly endorsing any state-backed digital currency, one should acknowledge whether or not this new payment mechanism will benefit the average citizen or create unintended consequences. Sure, getting rid of paper money might help the environment and be a more expedient way of transacting for citizens. However, merely the digitization of an existing system and currency will not solve the age-old issues of financial inclusion, inflation, capital controls and problems with cross-border payments. The creation of a centralized digital currency with a private blockchain is akin to placing a small band-aid on a large wound in need of greater medical attention.
Let’s look at some of the key solutions the first successful decentralized digital currency bitcoin, provides.
Bitcoin Is a Catalyst for Greater Transparency
Ironically, despite the recent interest of central banks in private blockchain digital currencies, the pain points, lack of transparency and struggles of many central banks continues to spark global interest in the public Bitcoin blockchain. Bitcoin is becoming a solid “Plan B,” for individuals living in countries with devalued currency and corrupt government officials.
In an age where too many individuals are still excluded from the global financial ecosystem, Bitcoin is an equalizerconnecting individuals around the world through a decentralized network. Bitcoin is immutable. No transaction made on the public Bitcoin blockchain can be reversed. The Bitcoin network is based on community consensus. Bitcoin advocates are not trusting in a centralized founder but a decentralized protocol. Most significantly, Bitcoin has the potential to enable average citizens to hold their governments accountable. Why wouldn’t the government of Denmark and all other governments who are proactively looking at digital currency solutions, support the strongest digital currency instead of creating a mediocre at best central bank coin?