What are the currency levels of digital currency?

The monetary tiers of digital currencies classify them as: Layer 0 – native cryptocurrency (decentralized), Layer 1 – stablecoin (pegged to fiat currency), Layer 2 – central bank digital currency (fiat currency) , issued by the central bank).

Currency Hierarchy of Digital Currency

The currency hierarchy of digital currency refers to one that classifies it from traditional fiat currency There are mainly three levels:

Layer 0: Native cryptocurrency

• Completely independent of any central agency or government.
• Mainly used for speculation and decentralized finance (DeFi).
• represents Bitcoin, Ethereum and Litecoin.

Layer 1: Stablecoin

• is linked to legal currency (such as the US dollar or euro), and the price is relatively stable.
• Provides the convenience of cryptocurrency trading while reducing the risk of volatility.
• Representatives include Tether, USD Coin and Binance USD.

Layer 3 and 2: Central Bank Digital Currency (CBDC)

• Is issued by the central bank and has legal tender status.
• Similar to traditional banknotes, but using blockchain or other distributed ledger technology.
• It is still in the development stage and its future impact is uncertain.

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