Governments around the world have started paying more attention to cryptocurrency and blockchain technology. Over 100 countries have engaged in CBDCs in one form or another, be it just a research project or a full-fledged operating currency.
What is a CBDC?
A central bank digital currency, or CBDC, is a digital currency denominated in the national unit of account and issued by a central bank. There are two forms of CBDCs, wholesale and retail. The former is mainly used by financial institutions to process large sums of money, while the latter is made available to the general public to conduct day-to-day transactions. It is important to note that CBDs are not a liability of the financial institution, but a direct claim on a central bank. It is billed differently than other means of payment such as credit card transfers, direct debit, e-money and card payments.
Limitations of CBDCs
Certainly, retail CBDCs have a multitude of benefits including increased security, convenience, reduced costs, etc. But all of these benefits come with a number of trade-offs that many people are unwilling to contend with. The most obvious one that can be deduced from the name is centralization. Central banks are always trying to control people through money by monitoring every single transaction. With CBDCs, there is even less room for privacy as the central bank has access to all of your data and can manage your account as it sees fit.
Another concern is that although CBDCs run on blockchain, they are not the same permissionless network as we know it. Thus, access to the new currency system would only be granted after complying with KYC and AML/CFT guidelines. Not to mention that the central bank could block and reverse any transaction. This robs the network of censorship resistance and immutability.
JAX and its localized derivatives
Jax.Network hosts two native digital coins namely JXN and JAX. The latter is a stablecoin that is pegged to the cost of electricity, in other words, the energy used to mine it. Thus, it represents a new measure of quantifying economic value based on a deflationary and tamper-free asset and may become a better alternative to CBDCs.
At the moment there are two localized stablecoins derived from JAX – JAX Dollar (JAXUD) and JAX Rupee (JAXRE). Both stablecoins retain all the key features of JAX, ensuring stability, low transaction costs, security and scalability. It makes digital currencies perfect for cross-border transfers, everyday payments, and wealth preservation. Additionally, some of the more curious users can use JAXUD and JAXRE for fiat equivalent arbitrage trading and yield farming on Jax.Money.
Compared to CBDCs, JAXUD and JAXRE do not suffer from centralization. It is true that the Jax.Money platform that mints the coins is governed by a governor, but he or she can always be replaced by a democratic election. Furthermore, his responsibilities are tied to the smart contract and mainly focus on income payments. So even if someone wanted to freeze or confiscate your assets, they would not succeed, especially if you keep your stablecoins in a non-custodial wallet like JAX Wallet. Another good thing is that the app does not store any user account information and does not require KYC to use basic features in the wallet.
how to start
Jax.Money is a platform where you can exchange Wrapped JAX (WJAX) to create localized derivatives like JAXUD and JAXRE. All you have to do is connect your MetaMask account to the dApp and trade WJAX for JAXUD or JAXRE below the market rate. If you don’t have WJAX, you can buy the coins on DEXs.
Conclusion
At first glance, CBDCs may seem like a huge boost to the blockchain community. However, if you take a closer look at the various experiments that the world’s governments have conducted so far, it becomes clear that it is not the same blockchain that we worship among CBDCs. It would make sense to turn to alternative stablecoins that already exist in the market. WJAX, JAXUD and JAXRE are valid solutions for the current needs of our civilization.
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