Digital Currency Advantages And Disadvantages

ABSTRACT

We define official digital currency(ODC) as “the system generated sequential numbers issued by state/central bank and replaceable by conventional paper currency(CPC)”. Here “replaceable” we mean that a note of ODC can be exchanged with a note of paper currency of the same value at equal rate as both are issued by the same authority. Similarly a note of PC is exchangeable with that of ODC. ODC is nothing except numbers, so we can call this currency as number currency too. CPC is also nothing except numbers. In Pakistan, we can replace our damaged paper currency note from the State Bank of Pakistan (SBP) if we have preserved its number. The state bank destroys that note and prints a new one bearing the same number and value.

INTRODUCTION

For example a series from AA0000000 to AA9999999 can be generated representing the ODC notes of value Rs. 1000 each. In this way 10 7 digital notes can be issued having the total worth 10^10 Pakistani rupees. Similarly different series of numbers can be generated for digital notes of different values. In ODC we need not to store the images of each currency note. Although, technically it is possible but it is mere wastage of storage space in computers and it will be a great barrier to perform efficient transactions in real life. Issuing numbers representing currency notes is very simple but securing money in this system is not as easy as its creation.

c). Ownership Recorder Recording the ownership is recommended in ODCS. The ownership of Official Digital Currency Notes (ODCNs) is recorded by ODCS for each ODCN or series of ODCNs. That means ODCS knows the owner of ODC notes. In this case the account numbers in different banks represent the owners ID. That means the account holders are owners of money. The ownership ID of each department, financial institution, organization, individual persons may be represented through bank accounts or any other feasible identifier. The commercial banks may facilitate the individual persons who don’t have proper accounts by opening new accounts as required by the ODCS and SB.

d). Counterfeit Currency

Transferring Money among the Financial Institutions The financial institutions are responsible for keeping records of each transaction. What should be recorded along with each transaction? The number (like BU1964521) of each ODCN used in transaction and the new owner (definitely that is account number of another institution) must be recorded. The value of ODCNs against each number and the total amount may be recorded for each transaction.

C. Transferring Money in Day to Day Business Transactions This is the most critical area of our proposed ODCS. When a transaction is committed new ownership of each ODCN used in transaction must be recorded by the ODCS. Our proposed ODCS is not responsible for business rules and requirements of commercial banks. ODCS is only concerned to its modules discussed above. (For simplicity assume that there are only two parties in a transaction (the seller and the purchaser of goods or