The United States intends to Launching the digital dollar Or the “e-dollar”, which would be the central digital currency of the US dollar, which would be managed by the government.
On Wednesday evening, a US official told the New York Times that the issuance of the digital dollar began before the Ukraine war.
This comes after the White House announced Wednesday that US President Joe Biden will later launch a digital dollar project as part of a large-scale effort to impose controls on the cryptocurrency sector.
Vice President of the Federal Reserve Bank of St. Louis, David Andolvato, said that the digital dollar, “Vedocoin”, will allow financial transactions to be carried out without the need to open a bank account, explaining that the digital dollar will work through the use of a mobile application.
What is a digital dollar?
The digital dollar can be defined as a central digital currency of the US dollar, which the United States is moving to issue, with the expansion of instant electronic payments between individuals and companies without the need for intermediation and the role played by banks.
The digital dollar is characterized by its low level of price volatility, given that its value is equal to one dollar, as well as its effectiveness in storing the information necessary to conduct any trading operation in a digital wallet, where this information about the payment is encoded in the code itself when paying.
The digital dollar is also characterized by universality and accessibility, as it can be used across borders and in local business operations.
Fears
But despite these advantages, there are concerns, most notably the violation of privacy, for the Federal Reserve System to track business operations that take place in digital dollars.
Another concern for the use of the digital dollar is the possibility of undermining local currencies, as it may harm some countries trying to manage their national currency if it replaces local currencies in trading operations.
competitor
The digital dollar, when introduced, may appear to be a competitor to cryptocurrencies, despite the difference in its operating mechanisms compared to, for example, the “Bitcoin” currency.
“There are fundamental differences between (Bitcoin) and the digital dollar or (Vedocoin), as some like to call it,” Bloomberg writer Noah Smith said.
He added, “This does not preclude that the two currencies will provide similar services, which is money transfer at a cheap cost, and here it highlights that the digital dollar may be a competitor to Bitcoin, but it is an enemy for money transfer companies such as MasterCard and others.”
Differences and differences
One of the most prominent differences and differences between the digital dollar and “Bitcoin”, is that the digital dollar does not need to use decentralized processes that enable “Bitcoin” to trade, as “Bitcoin” is designed to work without the need for a trusted intermediary, such as a bank. Two people make a dollar transaction, the bank verifies and records the transaction, and makes sure that money is debited from one account and credited to another.
But when Bitcoin is used, this verification is done instead by a distributed network of computers, called “miners”.
The economics of the system in which “miners” compete to verify a transaction, and those miners are rewarded with bitcoins for doing so, is the process that maintains the reliability of the entire system.
However, this process also requires enormous resources, and the mining process, called “Proof of Work” system, requires solving very difficult computational problems.
trust
What is clear, however, is that there is no need for the Federal Reserve to create its own Proof of Work system for Fedcoin. Proof of Work is an expensive way to build trust in a decentralized world, but it does not need the Fed, which is a truly centralized and trusted entity, To using massive amounts of electricity to restore confidence every time someone wants to spend a digital dollar.
Instead, he could settle the transaction as any bank would, cheaply and easily, and as long as people trusted the Fed not to steal their money, the Fed’s payment system could be cheap without relying on any crypto-technology.