In budget 2022-23 Indian finance ministry has proposed a digital rupee using blockchain technology. This is a very big positive move in preventing corruption and a step towards making the rupee a global currency. Since the digital rupee is based on blockchain technology I would refer to it as crypto rupee for simplicity. Here term crypto means mathematical hash or a block of record in the digital ledger on the internet, these blocks of hash-chained together form an encrypted ledger called the blockchain.
So let us understand how the crypto rupee is different from conventional currency stored in a digital wallet or bank account today. The number/balance that we see in our digital wallet is just recorded in the bank database. That means when we send and receive money in the conventional bank it just update records in the database and replicates them into the various systems. The disadvantage of conventional currency is, it is possible to update these records if someone gains access to these databases. Also, conventional bank records don’t have any intrinsic value. Records are valid only when underlaying physical money is transferred. Therefore conventional banking is time-consuming, needs more maintenance, and security infrastructure is very expensive due to obvious reasons.
When we want to travel abroad we have to exchange our home currency with foreign currency as a home currency doesn’t have any intrinsic value in a foreign land. And when we want to transfer money from one country to another, an actual physical money transfer would take days to get transferred. Where physical money is bound to physical damages. All these issues can be addressed with the introduction of the crypto rupee.
Advantages of the crypto rupee:
- Crypto rupee can be tracked, which means every transaction will create a new block of hash that can not be modified. Each hash in the blockchain contains information about the sender, receiver, and value of the transaction. This feature would reduce corruption if all government offices start accepting digital rupees for all transactions.
- The digital rupee makes international travel easy as we can easily swap the rupee with foreign currency.
- Less infrastructure is needed to mine the digital rupee.
- The digital rupee can not be faked or damaged.
- Finally, international trades can be done in rupee and not in any foreign currency.
Some more keynotes, in the crypto world digital rupee would be considered as a stable coin which means the digital rupee replicates the value of the actual physical rupee. When a digital rupee is issued, the actual physical rupee will be removed from the circulation, otherwise, this will lead to corruption.
The introduction of the digital rupee is making India future-proof and also helps India tackle corruption. I hope every government office and official should only transact with a digital rupee for obvious reasons. I am excited about the digital rupee and the positive changes it brings to society.
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