new Delhi . Finance Minister Nirmala Sitharaman in the Union Budget 2022 had proposed to introduce a Central Bank Digital Currency (CBDC) in the coming financial year. Reserve Bank of India will launch CBDC which will be based on Blockchain technology. CBDC or digital currency shall be a legal tender issued in digital form by a central bank.
What is Blockchain?
To understand blockchain, let us compare it with database. Database is a collection of information of any system. For example, suppose a hospital’s database will contain information about patients, staff, medicine, patients’ movement and so on. All this information will remain in the database. Blockchain is also like a database. It collects information under several categories. These groups are called blocks and these blocks are connected to many other blocks, which form a chain of data in a way. That’s why this system is called Blockchain.
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How does Blockchain work?
Simply put, blockchain is a digital ledger and any transaction that takes place on it is visible on every computer connected to the chain. This means that wherever a transaction occurs in the blockchain, its record will be recorded across the network. This is called Distributed Ledger Technology (DLT).
How will blockchain technology help launch the digital rupee?
A blockchain-based digital currency helps the Reserve Bank to protect the privacy of the holder of the digital currency. According to market experts, it has advanced security features as compared to normal payment systems. User privacy is maintained.
“The fundamental problem of blockchain technology is to control it. The central bank will not have complete control over the currency as the blockchain is decentralized in nature. RBI may explore a centralized system for issuance of its CBDC. But it will also bring questions of privacy and surveillance. Because the user and usage of such currency can be tracked by the authorities.
Tags: crypto, crypto currency, Cryptocurrency, New blockchain technology-based currency Petro
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