Digital Coin – A Podcast With Eswar Prasad
Digital Coin, also known as crypto coins or virtual currencies, are mediums of monetary exchange that exist in digital form and have utility within specific software-based environments. They are often used for speculative investments, but they have also gained acceptance as mediums of payment in a number of online marketplaces and gambling portals.
The first cryptocurrency, Bitcoin, came into existence on January 3, 2009. Its creator, Satoshi Nakamoto, included a headline from The Times newspaper in its initial block, a reference to the economic conditions (involving bank bailouts and a centralized financial system) that were partly the catalyst for its creation.
Bitcoin was followed in quick succession by numerous other cryptocurrencies, each of which relied on the blockchain model to record transactions and maintain their tamper-proof integrity. Most cryptocurrencies are decentralized, but some are centrally controlled (like the Linden dollar of Second Life).
A notable subset of digital currencies is stablecoins, which attempt to mitigate price volatility that can plague the broader cryptocurrency market by pegging their value to fiat currencies or other assets like gold. In some cases, these coins are even pegged one-to-one to the U.S. dollar, though recent issues involving Tether have cast doubt over the credibility of this particular stablecoin ecosystem.
While digital money streamlines current financial infrastructure, it can also be the target of hacking and compromise user privacy. For example, a 2018 SWIFT hack caused severe disruptions across multiple countries. As a result, several governments are exploring the development of central bank digital currencies (CBDCs) to control how these tokens are used and stored.
Despite their wildly fluctuating prices, digital currencies have gained significant traction in the global economy as more people look for alternatives to traditional banking. This has put pressure on policymakers to develop sound governance frameworks and policies for this new form of money.
In this episode, Eswar Prasad discusses the challenges and opportunities that digital money presents to financial institutions and monetary policy. He also covers some of the key questions that still need to be answered regarding this new form of currency.
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