Federal Reserve Looking to replace Currency with Cryptocurrency

The Federal Reserve today met with IBM to discuss plans on creating a digital version of the dollar, or a cryptocurrency US dollar. As a quantitative finance major, I couldn't be more happy. Cryptocurrency is more secure, convenient, and cheap than its paper-based counterpart. For anyone wondering how it works, here is an analogy (bare with me on my understanding). Computers mine for Bitcoins by completing a very hard math problem. Upon completion, it will find a random bitcoin with a random number attached to it called a block chain. That block chain is then "checked" to see if it already has been discovered. The more bitcoins that are discovered, the longer it takes to find new bitcoins. The Fed is just interested in the unique block chain and security traits that bitcoin has for their idea of a centralized cryptocurrency:

"The new system would have direct oversight by the central bank it represents, unlike Bitcoin’s decentralized system. Instead of having ledgers maintained by banks that act as a record of an individual’s transactions, this kind of open ledger would be viewable by everyone using the system. It would use an agreed-upon process for entering transactions into the system."

Now the article states that the US will not be the first country to test it out, as the US is the Global Reserve Currency. Beta-tests in another country could begin as soon as the end of this year if all plans are approved before being rolled out in the US. Now I know some people love the feel of cash, the smell of new money and the looks of crisp dollar bills, but I always say, function over fashion. I  am hoping for digital currency in the US. Bitcoin has made the Fed realize, if you can't beat them, join them, because it doesn't have to be perfect, it just has to be better than cash. Currently, 95% of US currency is digital, meaning they are just numbers on computers, while the remaining 5% is physical. We are using an aging system of printing paper money for the masses to use, where most of the world works solely on electric fund transfers. Direct deposit of paychecks, credit transactions, gift cards, pretty much all transactions today are digital. Your bank doesn't have all of everyone's money at once. If everyone wanted to withdraw money at once, they bank wouldn't be able to fund out. But if everyone was using a digital currency, withdraw orders could be filled quickly. The liquidity of currently the most liquid asset (cash) would become even more liquid (is that even possible!?!?!?) The Fed wouldn't have to print more money every year, it would just have to add a few zeroes to the system to stimulate the economy. It makes the economy much easier to oversee and regulate. This is just another example of how digitization of many aspects of our lives will bring increased efficiency to those aspects and more.

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