CBDC digital currency and Blockchain

What is a CBDC digital currency

Online-only cryptocurrencies have been in circulation for the past few years. But all of them are currencies created by some private organization and managed by a decentralized server. Its value will fluctuate.

A “Digital Currency” has now been released on behalf of the Reserve Bank, the official central bank of the Government of India. It is called Central Bank Digital Currency (CBDC) in English. Digital currencies have the same value as ordinary banknotes and coins. The only difference is that the digital currency stays in your account only in the form of digital tokens. You can use it to buy things and send it to others. Can be used for all online money transactions.

Where can I buy CBDC digital currency

At present, only banks and other non-banking financial institutions are allowed to transact money through digital currency. They can buy digital currency from the central bank and make money transactions.

No CBDC digital currency has yet been approved for public use. But soon digital currency will be available for public use. Those who need digital currency can buy it from banks. A digital wallet will be created for you and your digital money will be credited to it. You can use it to buy goods and make money transactions. You can use digital currency in the same way you do online banking now.

How will CBDC digital currency work

CBDC digital currency is based on blockchain technology. However, its server will be managed by Reserve Bank of India. The digital currency will be credited to the user’s wallet. If you want to send money to someone, you can send it to them. Digital currency can be used to buy goods as soon as possible.

Can CBDC turn digital currency into cash?

One of the critical skeptic questions that arose after the Reserve Bank of India launched its first digital currency, the CBDC digital currency, was “Can CBDC digital currency be converted into cash?” That is. Even if you hold digital currency, you can convert it into cash whenever you need it. It should be noted that the value of both is the same whether it is physical money or digital currency.

What are the benefits of CBDC digital currency

Money transactions can be done easily. Transferring money from smartphones is quick and hassle-free.  Counterfeit notes can prevent the problem

The cost of printing notes will be reduced

There will be no problems like tearing and losing of currency notes in CBDCcurrency.

CBDC

Blockchain

Blockchain technology is currently most widely used in the cryptocurrency known as Bitcoin, but Blockchain technology is also being used in various fields.

What is Blockchain

Blockchain is defined in English as “Blockchain means a transaction ledger maintained at various locations.

For example, all the information about the money transactions we do in banks are stored in the bank’s server (one place). But in blockchain technology, the same information is stored in different places.

 

When a transaction takes place, its details are sent as a “block”. They will encrypt the information in that block and give a unique number called “hash” to each box. Each box has a unique hash. The second block contains the hash of the first block. This is how each box looks like. This is called Blockchain because many blocks are linked together like a chain.

How Blockchain Technology is Used in Bitcoin Technology?

Blockchain technology is used in the leading cryptocurrency Bitcoin. As far as our country is concerned, RBI is the government of India’s organization that creates the money that can be used at present, similarly in many countries, organizations belonging to those countries create money for their country. It can only be done with the help of a third party such as a bank while using it for transfer.

We use a bank to transfer money. An account is opened for us in the bank. The account stores information about how much money we pay and withdraw. If we want to buy any product, we will use bank card to buy it. The bank will give the money from our account to the seller of the product. A bank is no such place when it comes to Bitcoin. Then where is the information stored? How does the money transfer work

Blockchain technology is the answer to these questions. Not all Bitcoin information is stored on a single server. Instead, the entire information is stored in the accounts of everyone who can hold Bitcoin. It means that instead of the bank storing our details, each of us stores everyone else’s information. Every time someone makes a transaction, all the information about it is sent to all the servers that may be connected to the Blockchain network.

You may ask what is the use of this. No organization like a bank can monitor us. Even if someone has hacked the information on one computer, it will be compared with the information on other computers. So it can be understood that Blockchain technology is a method of storing the same information in different places. The use of Blockchain in each technology may be different.

Is Blockchain Technology Secure

Blockchain technology has three security features. Accordingly

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1.hash

For example Bitcoin uses a hash cryptosystem called SHA-256. When a money transaction takes place a block is created containing the details. The information contained in it will be of different sizes. They will then convert them into a different identity using SHA-256 cryptography. Perhaps if hackers change the information in a block, the block’s hash number will also change. If it changes, the block next to that block will not match the existing block number. So it will be detected that something has gone wrong here.

2. proof of work

With the help of supercomputers available today, many blocks can be opened very quickly, the information transferred and then combined accordingly. A second safety feature has been introduced to prevent this from happening. According to this, if you want to make a change in a block, you have to go through the proof of work section. Proof of work is finding the answer to a very difficult puzzle. If you want to do this, you need very powerful computers. Even so it takes at least 10 minutes. This is also difficult because a blockchain can have millions of blocks.

3. distributed network

Let’s assume hackers have passed this too. Next is the third layer of security called distributed network. Accordingly, everyone on the blockchain has a copy of the same information. Maybe even if the hacker changes only the data on one computer, when a new block is created, it’s sent to all servers. Then other computers will detect that particular block as fake and reject it. This means that a new block will only be accepted if 51% of the computers in a network accept it. 51% of computers need to be hacked if hac