Central Bank Digital Currency

Central Bank Digital Currency

September 26, 2020 Decentralized Finance DeFi 0

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Central Bank Digital Currency

Since 2018, Central Bank Digital Currency (CBDC) has become a widely discussed topic among policy makers. The crypto community also shows significant interest towards CBDC since it may have a profound impact on cryptocurrencies in general.

Here are the big ideas to take away from the report:

  • CBDC, in simplest terms, is a digital form of fiat currency established by governments or central banks
  • CBDC can have many variations and possible designs:
    • Wholesale vs Retail
    • Central Bank-managed vs Synthetic
    • Interest-bearing vs non-interest-bearing
    • Deposit limit vs no deposit limit
    • Centralized vs DLT-based
    • Programmable vs Non-programmable
    • Token-based vs Account-based
    • Privacy-preserving vs non-privacy-preserving
  • CBDC may bring opportunities:
    • Supporting a resilient payments landscape
    • Fostering competition, efficiency and innovation in payments
    • Enhanced financial inclusion
    • Enhanced monetary policies
    • Meeting future payments needs in a digital economy
    • As an enabler for better cross-border payments
    • Countering new digital currencies
  • But also risks:
    • Banking-sector disintermediation
    • Run risk
    • Implications for central bank balance sheets and credit allocation
    • Additional burden to the central bank
    • Cyberattack and system outage
    • Digital dollarization
  • More central banks are currently (or will soon be) engaged in CBDC work.




Contributor: Nick Martitsch, Business Development at Compound Labs

  • Total outstanding borrowing on Compound is currently at $978M and trending back towards the $1B mark, as volumes increased 54% in the last 2 weeks; 86% of the total borrowing is concentrated in DAI, followed by 7% in USDC and 4% in ETH. Following a recent governance update on September 21st entitled “Upgrade cUSDC Interest Rate Model”, all stablecoin markets on Compound have the same JumpRateModelV2 interest rate model and therefore have the same interest rates at each utilization rate. (Sources: LoanScanCompound)

  • As a result of the ongoing COMP distribution to protocol users, 38,189 unique Ethereum addresses now hold voting power in the form of the COMP token. Approximately 2,312 COMP are being distributed to users every day, a 20% reduction from the original 2,880 due to the governance proposal entitled “Reduce COMP emissions by 20%” that was executed on August 31st. This decentralization of voting power into the hands of tens of thousands of users is a critical step for the protocol to have a robust, community-owned governance system. (Sources: Nansen.aiCompound)

  • A significant majority of COMP holders hold less than 100,000 COMP, which is the amount of delegated COMP-votes needed to formally propose a protocol upgrade; however, 225 addresses hold at least 100 COMP. With the launch of Compound Autonomous Proposals (CAPs), any user with 100+ COMP may create a proposal template, seek the delegation of 100,000 total COMP-votes, and make the CAP eligible to transition to a formal proposal. Create your own CAP by visiting the vote page of the app, or delegate your support to an active CAP – for example,  Set Pause Guardian to Community Multi-Sig(Source: Etherscan)