Zimbabwe has a difficult history and many problems to solve. The good news is that its central bank is taking a progressive stance when it comes down to digital currencies. According to several media reports, Zimbabwe is looking forward to reinstating trust in the Zimbabwe Dollar by moving forward and using cutting-edge technology. This raises the question if a government-issued digital currency is better than Bitcoin.

What are Zimbabwe’s plans for a digital currency and why is Bitcoin still better?

A gold-backed digital currency

According to The Sunday Mail, Zimbabwe is planning to issue digital tokens that are backed by gold. This is idea is very similar to stablecoins that are already existing on the free market. A digital token is issued and represents an underlying value such as the dollar, euro, or in this case gold.

The problem for Zimbabwe is that its currency loses value against the US dollar for several years. This effect creates a heavy burden on the economy and the central bank believes that a digital token could reinstate trust in the local currency. In March the inflation in Zimbabwe was about 87.6% and in January the country saw a crushing 229.8% inflation rate.

Needless to say, citizens tend to store value by holding foreign currencies since they tend to be more stable. This is a very similar picture as with other countries that are dealing with sky-high inflation rates. The central bank is hoping to change that by offering a gold-backed token to the public.

Bitcoin is trustless, a token is not

The problem with a token is that every investor has to trust the issuing party. How to tell if the gold is there? There is no way to check whether the central bank is issuing more tokens than they have gold in their vaults.

Of course, one could argue that the government and related bodies are the most trustworthy parties since they are acting on behalf of their citizens. But it doesn’t require a malicious government to harm citizens and cause a gold-backed token to fail.

Bitcoin is very unique because it is more limited than gold and transparent. Everybody can check every aspect of BTC’s monetary supply and transactions. There is no trust in a third party and its intentions involved. All it requires is running a full node to participate and verify every block that is propagated within the network.