JAX-backed stablecoins as an alternative to CBDCs

Governments all over the world have started to pay closer attention to cryptocurrency and blockchain technology. Over 100 countries have engaged in CBDCs in one form or another, whether it’s just a research project or a full operating currency.

What is a CBDC?

A central bank digital currency or CBDC is a digital currency denominated in the national unit of account and issued by a central bank. There are two forms of CBDCs, namely wholesale and retail. The first is used mainly by financial institutions to settle large sums of money, while the latter is provided to the general public to conduct daily transactions. It’s important to note that CBDСs represent not a liability of the financial institution but rather a direct claim on a central bank. Thus, it is settled differently from other types of payment means such as credit card transfers, direct debit, e-money, and card payments.

Limitations of CBDCs

Certainly, retail CBDCs have a wide range of advantages, including increased security, convenience, reduced costs, etc. But all of these benefits come with a number of trade-offs that many people wouldn’t want to deal with. The most obvious one that can be derived from the name is centralization. Central banks always try to control people through money, monitoring each and every transaction. With CBDCs, there is even less room left for privacy, as the central bank has access to all your data and can manage your account as it sees fit.

Another concern is that even though CBDCs run on blockchain.com blockchain.com - [email protected] Centralised ExchangeTrading AppCrypto trading and Information , it is not the same pure-state permissionless network as we know it. Thus, access to the new monetary system would be granted only after compliance with KYC and AML/CFT policies. Not to mention that the central bank would be able to block and reverse any transaction. That takes away censorship resistance and immutability from the network.

JAX and its localized derivatives

Jax.Network houses two native digital coins, namely JXN and JAX. The latter is a stablecoin pegged to the cost of electricity, in other words, energy spent on mining it. Thus, it represents a new measurement for the quantification of economic value based on a deflationary and manipulation-free asset and can become a better alternative to CBDCs.

At the moment, there are two localized stablecoins derived from JAX – JAX Dollar (JAXUD) and JAX Rupee (JAXRE). Both stablecoins retain all the main features of JAX, ensuring stability, low transaction cost, security, and scalability. It makes digital currencies perfect for cross-border remittances, everyday payments, and wealth preservation. On top of that, some of the more curious users can use JAXUD and JAXRE for arbitrage trading with fiat equivalents and yield farming on Jax.Money.

Compared to CBDCs, JAXUD and JAXRE don’t suffer from centralization. It’s true that the Jax.Money platform, where the coins are minted, is governed by a governor, however, he or she can be replaced at any moment via a democratic election. In addition, his/her responsibilities are bound by the smart contract and are mainly focused on yield payments. So, even if someone wanted to freeze or seize your assets, they wouldn’t succeed, especially if you store your stablecoins on a non-custodial wallet such as JAX Wallet. Another good thing is that the app doesn’t store any information about users’ accounts and doesn’t require KYC for using basic features in the wallet.

How to get started

Jax.Money is a platform where you can swap Wrapped JAX (WJAX) to create localized derivatives such as JAXUD and JAXRE. All you need to do is to connect your MetaMask account to the dApp and swap WJAX for JAXUD or JAXRE below the market rate. If you don’t have WJAX, you can buy the coins on DEXs.

Conclusion

CBDCs may seem like a huge booster for the blockchain community at a first glance. However, if you take a closer look at the various experiments that world governments have conducted so far, it becomes clear that it’s not the same blockchain that we adore underneath CBDCs. It would be reasonable to turn to alternative stablecoins that already exist on the market. WJAX, JAXUD, and JAXRE are valid solutions for the current needs of our civilization.

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Author’s bio: 

Maryna Trifonova holds a Master’s degree in Germanic Languages and Translation and has over 4 years of experience working as a copywriter. Since early 2018, Trifonova has been actively studying blockchain and crypto markets and trading digital currencies on a regular basis. This knowledge helps her to create all types of content for Jax.Network, including technical articles, business papers, explainer videos, etc.