The emergence of central bank digital currencies (CBDCs) has sparked widespread interest, sparking excitement among central bankers, generating curiosity in the financial media, and fueling lively debates in the bitcoin community. Among cryptocurrency enthusiasts, opinions on CBDCs vary widely, from seeing them as powerful tools for government surveillance and control to seeing them as desperate attempts by traditional fiat systems to stay relevant. In this essay, we will explore the claim that CBDCs are unlikely to achieve widespread adoption, while bitcoin is poised to emerge as the dominant digital currency. Three fundamental factors support this argument: bitcoin‘s open and permissionless nature, its first-mover advantage, and its user-centric monetary policy.
Open and permissionless architecture
bitcoin operates in an open and permissionless framework, allowing anyone to participate in the network and contribute to its development. This openness fosters a vibrant community of developers, miners and users, driving innovation at a rapid pace. In stark contrast, CBDCs are closed systems under government control. Lacking the open source nature that encourages community-driven development, CBDCs resemble government intranets, such as those used by entities such as the US Department of Veterans Affairs or the UK’s NHS, designed for specific user groups and purposes. The restricted and centralized nature of the CBDC intranet hinders its ability to innovate at the speed of an open system like bitcoin.
First move advantage
bitcoin not only pioneered the concept of digital currency, but has also seen substantial real-world adoption and growth. From a financialization perspective, bitcoin has achieved important milestones, including its recent adoption as legal tender in El Salvador. It has a thriving organic economy, deep and highly liquid trading markets and the development of mature derivatives markets around the world. On a technical level, bitcoin maintains tens of thousands of distributed nodes that hold the ledger, backed by a globally dispersed network of miners and mining rigs operating in nearly every jurisdiction on Earth. In stark contrast, most CBDC projects are still in their infancy, with many still in the alpha stage or early phases of research and development.
On September 25 of this year, Christine Lagarde, head of the European Central Bank, indicated that the Digital Euro is still at least two years away from implementation. China, previously considered a pioneer in central bank digital currency technology, was still in the testing phase, focused primarily on establishing rudimentary use cases with close allies. By comparison, bitcoin and the broader open cryptocurrency ecosystem have accumulated over 14 years of productive activity and organic growth. For those who have not followed the evolution of bitcoin closely, CBDCs may initially seem reasonable. However, upon closer examination, it becomes clear that bitcoin‘s first-mover advantage gives it a substantial advantage in terms of network effects, adoption, and technological maturity.
User-centered monetary policy
bitcoin‘s monetary policy is designed exclusively with the user in mind. It imposes a maximum limit of 21 million coins and uses a merit-based minting process: bitcoin mining. This approach is revolutionary because it introduces a fixed supply, a feature that government-driven monetary policies have historically failed to offer. Central banks are unlikely to adopt such a user-centric model, as the power to control the money supply is invaluable both politically and economically. Consequently, bitcoin not only serves as an attractive alternative, similar to gold in the past, but also represents a scientific advancement over previous monetary frameworks.
Conclusion: the rise of bitcoin
In conclusion, it is entirely plausible to anticipate that bitcoin, as the leading open and permissionless value network, will surpass technical experiments led by bureaucracy. The same fundamental principle that propelled the World Wide Web ahead of government intranets – the ability to move quickly, continually innovate, and operate on a global scale – is the driving force behind bitcoin‘s potential to become the global standard for digital value. . bitcoin‘s remarkable agility, innovative spirit, global reach, and significant head start make it a formidable contender. In contrast to the prevailing belief by government authorities in the inevitability of CBDCs, a more logical view may be skepticism regarding the practical viability of CBDCs as a whole.
