206.8 Lesson - CBDCs

Screen: CBDCs

Headline: Central Bank Digital Currencies

Reward: 5

Text: Central bank digital currencies (CBDCs) are digital versions of traditional currency that are issued and backed by a central bank.

CBDCs are not decentralized or permissionless like Bitcoin, and are instead intended to compete with other forms of digital payment methods for market dominance.

One of the main reasons for the development of CBDCs is the surveillance and censorship capabilities they provide the issuer.

Additionally, in an age of negative real interest rates (when the inflation rate is higher than the interest rate), the widespread adoption of CBDCs often goes hand in hand with the phasing out of physical cash, which can lead to the devaluation of the currency in real terms.

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QUIZ

Question: What is the main purpose of central bank digital currencies (CBDCs)?

Answer: To provide surveillance and censorship capabilities to the issuer

Feedback: That's correct! CBDCs are like the Big Brother of digital currencies, designed to provide surveillance and censorship capabilities to the issuer. Creepy, but correct

Correct: true

Answer: To compete with Bitcoin as a store of value

Feedback: Haha, sorry but no. While Bitcoin and CBDCs are both digital currencies, they have very different purposes and characteristics. CBDCs are issued and backed by central banks, while Bitcoin is decentralized and not controlled by any government or financial institution

Correct: false

Answer: To create a decentralized and permissionless digital currency

Feedback: Oh boy, that's a creative answer but unfortunately not quite right. CBDCs are not designed to be decentralized or permissionless like Bitcoin. In fact, they are issued and backed by central banks, and their main purpose is to be the ultimate tool for control in the digital age. Better luck next time!

Correct: false