The Federal Reserve Bank of New York has been aiming and working towards implementing its own type of cryptocurrency as we know it, to replace the fiat/paper dollar. After dawdling for the past few years on the idea, the idea for ‘Fedcoin’ to finally replace the digital dollar has now been revealed.
The “Fedcoin” will also be a sort of decentralized-centralized digital coin because it is based on Blockchain technology.
Now, while with the dollar bill, we could walk into a coffee shop and ‘purchase’ a cup of coffee anonymously, since our identity is not attached to the dollar bill, Fedcoin comfortably betrays this idea as opposed to other cryptocurrencies like Bitcoin.
Decentralization and nullification of the need for trust have always been at the heart of cryptocurrencies like Bitcoin, but with the Fedcoin, you’ve got eyes on your back. To fully understand this, we need to understand how Blockchain technology works.
How Blockchain Technology works
The way Blockchain technology works, transactions are meant to be anonymous, save for the username and Unique ID available to the public.
Projects like Bitcoin are open source, permissionless, borderless, censor less and beyond the control of a private body. They put the existence of banks into question and suggest a world of self financial-governance.
Whenever a transaction is made using Bitcoin, the transaction information is encoded In a complex technology into blocks. This block will contain Information like date, Time of the transaction, amount, information of parties involved in transaction and hash – hash is a unique Id for that particular block. Once a block reaches a certain number of approved transactions, a new block is formed. This block is then added to the chain of blocks already created by other transactions, hence the name Blockchain.
The Blockchain updates itself every 10 min automatically. These transactions are not monitored by a 3rd party or controlled by Bodies. Although, the information encoded in a block can be downloaded and checked, but given the long chain of blocks, it is difficult to identify the block that contains the transaction, and even if found, the username and the person involved in a transaction is still specific to them plus their unique ID.
Why Fedcoin May be a Nightmare Nevertheless
The idea behind Fedcoin could be tagged as pretty much the same at face value but actually, The Blockchain technology behind Fedcoin idea is most likely not going to be used this way. Not even close.
The idea of a central bank controlled digital currency, in this case, “Fedcoin” is moving closer to reality and according to report, ‘Dozen of central banks globally are also doing such works, including China’. Blogger Robert Wenzel warns the risk of a Federal Reserve having it own Digital coin may even run deeper than that;
“A Federal Reserve created digital coin could be one of the most dangerous steps ever taken by a government agency. It would put in the hands of the government the potential to create a digital currency with the ability to track all transactions in an economy—and prohibit transactions for any reason. In terms of future individual freedom, this would be a nightmare.”
People fear that, as money becomes digital, it gives whoever controls it increasingly more power over them. Today digital money can allow banks and governments to track every single transaction. They can get to decide who sends and receives money, and who can’t. They can cross and seize money if crossed. This wouldn’t have been possible if money was simply cash.
The Blockchain technology behind Fedcoin will create platforms that can be accessed and monitored by a third party. This betrays the idea of a digital coin that normally allows for anonymous transactions.