#basics_digital assets

Stablecoins, Central Bank Digital Currencies (CBDCs), and the Digital Euro are key concepts in the discussion about digital assets

and now common terms...(quite)

However, it's often easy to get confused and conflate these three distinct elements. Let's try to clarify...

stablecoins, which are literally "stable coins", they are a type of digital currency that always maintains a stable value anchored (technically pegged) to another underlying asset, which can be represented by:

• - Fiat currency, when they are tied to current currency, such as the dollar or euro, and fluctuate based on its performance;
• - Commodity, thus linked to the performance of raw materials such as gold, oil, silver, or others;
• - Other digital assets, using an on-chain process and smart contracts to guarantee their performance;
• - Mathematical algorithm, using a system known as mint and burn aimed at creating and destroying money in order to constantly maintain a balance (this model is very rarely used).

Stablecoins are born not only as a digitalization of a current currency but also and above all as a model to reduce risk and exposure in the digital assets market, more easily enjoy market fluctuations as well as facilitate transactions between multiple parties globally.

Introducing the concept of smart contracts, i.e., software aimed at automating processes and events upon the occurrence of certain conditions, we can imagine a not-too-distant future where transactions, even between individuals or companies geographically distant, can be resolved with the sole use of stablecoins anchored to a real and pre-agreed value, avoiding transaction costs, exchange costs, and long timelines in currency management. Talking about stablecoins and stable coins allows us, therefore, to move on to the concept of CBDCs or Central Bank Digital Currencies. CBDCs are digital currencies issued by central banks. Their main goal is to modernize the financial system and offer citizens a secure and efficient digital payment method. Some countries, such as China, England, and Sweden, have already started experimenting with their CBDCs, while others are still evaluating whether to adopt them or not.

It is not yet clear how they will fit into the economic systems, however, it is certainly interesting to delve into the impact that these new computer systems will have within the international value transfer market systems. If we think only of clearing and settlement services, it is important to note how these digital currencies could reduce the need for financial intermediaries, allowing P2P transactions that still exploit the general financial rules known so far.

And it is in the context of CBDCs that the Digital Euro finally positions itself, a new form of current currency aimed at all users of the eurozone and ready to replace the digital currency model we already know. It is important to note that the Digital Euro will be issued by the Central Bank and can be distributed directly to citizens through national and para-national banks. The key element to understanding this new form of digital currency is not so much in its being non-physical, but in its potential integration with other key elements for the future of the citizen, such as digital identity. If we imagine a future where a citizen's identity will also function as a wallet, a container of information but also economic resources, it is easy to understand how the digital euro can be distributed and used intuitively and immediately by everyone, leveraging technology as a vehicle to distribute value.