CBDCs vs Bitcoin: The Future of Money

The money world is evolving at a very rapid pace. In the olden days, individuals had to rely on cash, banks, and government currencies. People are now thinking differently; in the present day, new types of money such as Bitcoin and Central Bank Digital Currencies (CBDCs) are emerging. The question that many individuals including myself would have concerns which will be the future of money. Both Bitcoin and CBDCs are digital yet they differ significantly in their functionality and meaning.

Bitcoin was developed in 2009 subsequent to the world financial crisis. It was constructed to provide individuals with the autonomy of authorities and banks that owned money. Bitcoin is decentralized such that it is not controlled by an individual, company, or any government. Any phone and even the internet will work with Bitcoin, regardless of where the person resides. This renders it effective particularly to individuals in nations such as Nigeria where banking is not always readily available. I find most young Nigerians trading, saving and sending money internationally using Bitcoin.

On the flipside however, CBDCs are digital currencies that are designed and managed by central banks. They are similar to the naira that we have in Nigeria but in the digital form. The Nigerian government has already piloted the eNaira which is a sample of a CBDC. CBDCs are centralized as opposed to Bitcoin. This implies that the government owns them in totality and can be able to track all the transactions. Though this may create stability, it also implies that people have less privacy. CBDCs continue to be tested by many governments in the world due to the desire to modernize money systems.

Trust is one of the major disparities between Bitcoin and CBDCs. Individuals have faith in Bitcoin due to its blockchain technology which is transparent and open. Records of transactions on Bitcoin cannot be readily altered by anyone. In the case with CBDCs the government is trusted. In case the government implements ungood policies or power is abused, the people can lose trust in the CBDC. I understand that quite a number of Nigerians are already concerned with the impact of the eNaira on their financial freedom.

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The other critical concern is inflation. Every year, our naira is depreciating due to inflation in Nigeria. Bitcoin was created to combat inflation since its supply remains to 21 million coins. Any further printing of Bitcoin cannot be done by any government. CBDCs, despite this, remain similar to normal money. Central bank is able to print additional ones at their will, which can boost inflation. This is among the reasons why most individuals contend that Bitcoin is a superior future store of value.

But the risks also have to be considered. Bitcoin is very volatile. It is also priced high and it can drop at any time. This will result in massive losses to an individual who does not take enough care. CBDCs are easier to follow as they are supported by governments. They will never lose their value compared to the money of a country. CBDCs would be simpler to use on a daily basis.

In my opinion, it is not either the future of money to choose one between CBDCs and Bitcoin. The two can coexist though on different purposes. Bitcoin can become the world currency that citizens use to save their funds and transfer money to foreign countries. CBDCs can be locally utilized to make payments on a daily basis such as purchasing food, covering transport, or school fees. The preference of CBDCs will always remain on the governments, as they can dictate its usage whereas the people may still be on the Bitcoin side to enjoy freedom and value in the long term.

I believe that the two will coexist in Nigeria. I also have witnessed the good things that Bitcoin has done to individuals when bank transfer cannot work or when inflation catches deep into savings. Meanwhile, the government is driving the eNaira, and potentially in the future, more people will have no choice but to use it. The most important thing is the degree of freedom, trust and value that these systems provide to the ordinary people such as me.

To sum up, the future of money lies in the digital world. Bitcoin is free, scarce and universally available. CBDCs are associated with government regulation, stability, and convenience. The decision of either one rests on what people desire more, the freedom or stability. In my opinion, in my case, the future of finances is with the Bitcoin, and the future of the government money is with the CBDCs. It remains to be seen which one will be more trusted by people but one thing is certain: the manner in which we perceive and utilize money will never be similar again.