Digital currency comes in many forms and types. However, the fundamental need – to collaborate on digital currency development –remains unfulfilled because an explanatory framework of terms and characteristics that describes the various digital currencies is unavailable. A working group has been formed through the Digital Currency Global Initiative (DGCI) to fill this lacuna. The working group has been set up to establish a common classification framework for all digital currencies.
Recently, countries from Sweden to Jamaica have started exploring or piloting their own Central Bank Digital Currencies (CBDCs). Even though there is an openness in embracing digital currencies, there are divergent views on digital currency terminologies. This lack of standardization has been a significant roadblock preventing regulators, technologists, and decision-makers from collaborating on digital currency development.
Consequently, the working group introduced a new tool to help overcome terminology problems. The missing ingredient amounts to an ontology that describes what constitutes different kinds of digital currency precisely. The ontology is based on a cascading matrix or interactive table. It enables users to access increasingly granular levels of detail.
The overlying matrix describes digital currencies using five main attributes – supply, value, ownership, agreement, and recording –defined with the help of digital finance policy and technology experts. Each of these attributes affects the unit value of a digital currency, which changes as each parameter is adjusted.
Every distinction in the matrix affects the architecture and technology of the digital currency type. For any choice, the resulting digital currency type changes accordingly. The matrix is still a work in progress. The working group meets regularly to advance the ontology and ensure its real-world applicability.
The ontology should help decision-makers weigh digital currency design and implementation options. Furthermore, whether one looks at digital currency from a tech, design, operational, or maintenance point of view, the matrix can be seen as a prism that enables the viewer to see the immediate implications of a specific policy.
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