You may have heard rumblings of central banks wanting to issue their own digital currency.
Why is that?
When money was issued 100 years ago the technology was very bad.
Central banks couldn't issue currency directly to people, they used commercial banks to distribute money to their local areas.
This structure is the same we use today. Only everyone started using computers instead of books.
So while this seems digitized, the structure is ancient.
Blockchains changed the game because they allowed everyone in the world to transact on a single system.
This is different from today where all the money is fragmented within different banking systems, which is the main reason it's so inefficient.
This is why central banks are seeking to create their own digital currency.
They want to create a singular national money system.
A system where money can flow directly to others without the fragmentation.
It's kind of like if everyone in the country used the same bank.
However, governments wouldn't entrust the national monetary system to a single private bank. That's why central banks are involved.
What does this have to do with blockchain? Not much, except for it being a single, unified financial system.
The key difference is central bank currencies are centrally managed, whereas blockchains are not controlled by one group.
Central management makes more sense for national currencies, but an international system has to be more neutral. That's why blockchain is important.
A national singleton vs a global singleton.
You can think of a blockchain like Ethereum as a credibly-neutral network that could one day connect all the different national currencies. An inter-network.
An internet...of money.