DREX – Brazil’s future digital currency

A topic that has been causing a stir among everyone, and especially in the financial market, is Drex, Brazil's future digital currency.

Today we are going to find out more about this currency, what is being said about it and what we can expect for the future.

Meet Drex

Drex, also known as Pix's cousin, has been a hot topic recently. This is because it is about what will be Brazil's new digital currency.

With the aim of further digitalizing the economy in our country, the Bank of Brazil brings its second innovation. After Pix launched in 2020, the Bank developed Drex, scheduled to be launched by the end of 2024.

It is a CBDC, Central Bank Digital Currency, the central bank digital currency, and is also the main form of digital money that the world is exploring.

In order for it to be used, they are developing a specific platform, and even with the launch of the new currency, the rules for the real will remain the same.

The currency is already in the testing phase, which began in March 2023, with banks and other financial institutions, such as Caixa, Nubank, Santander, Itaú and others.

For the tests, digital tokens were generated, and a simulation of converting the balances of an account to the Drex wallet was carried out.

The tests are being called a Pilot Project, and Banco do Brasil's objective is to make sure that everything is working, such as large-scale negotiations, whether transactions can be made, and of course, what the security is like.

Why is it called Drex?

And the name Drex was not given by chance, the project was called real digital, but only in August 2023 its official name was released.

As a way of alluding to reality, the letters “D” and “R” were joined, while the “E” is related to electronics, finally we have the “X” which aims to follow the same line as PIX and convey modernity.

Difference between Pix and Drex

Although they are not the same thing, Pix and Drex are causing confusion among people, who are unsure of their differences.

As a way of making jokes between the two resources that have “X” at the end of their name, many people associated Drex and Pix as cousins.

But the difference between the two is actually quite big. Pix is a system that makes financial transfers between different institutions instantly.

Meanwhile, Drex will be Brazil's digital currency, used in certain financial services that are yet to be pre-defined, and will therefore be used as a means of payment.

Difference between Drex and Cryptocurrency

As a digital currency, Drex can be confused with a cryptocurrency, but it's a little different than what a cryptocurrency would be.

The main difference that can be pointed out is the management, which with cryptocurrencies is decentralized while Drex will be managed by the Central Bank, as well as all its regulations.

Another difference is that the value of cryptocurrencies tends to fluctuate a lot according to market demand. Drex, on the other hand, will have a fixed value, R$1 real will always be R$1 real.

How does the technology work?

The technology being used by Drex is DLT, Distributed Ledger Technology, the most famous being blockchain, which emerged alongside Bitcoin around 2008.

The DLT technology that will be used in Drex is Hyperledger Besu, a network based on Ethereum. It was chosen because it provides greater support in terms of security, scalability and much greater privacy of transactions.

What are the advantages of Drex?

Still talking about Drex, Brazil's new official digital currency, we will mention some of the benefits that are being promised along with the launch of the currency.

It will be an electronic version of the banknotes and coins we have today, using the same technology as cryptocurrencies.

This new feature is being created with the aim of ensuring greater accessibility in financial transactions, in a safer, more private environment with less chance of fraud.

And just like Pix, Drex will also make transactions optimized and instantaneous, making several processes and payments more efficient.

Another point that may be more interesting for investors will be the possibility of making investments 24 hours a day. Just like Pix, which allows transactions 24 hours a day, without the need to wait for the next day or a business day.

One of the advantages that people are also enjoying is that smart contracts will be executed immediately, saving on bureaucracy and optimizing the process, making them faster.

Will the new currency have costs?

It is expected that Drex will have some operational costs for consumers, because when used it will always be associated with some type of service.

These will not be costs of the digital currency itself, but rather of the services that will be used for it and will end up charging separate fees.

However, there is still no information on how this charge will be made and what the costs will be, or whether these costs will actually exist.

Drex Assets

Another very important piece of information is that when we talk about digital currencies in Brazil, we will have three different assets on the platform in question.

These are the Digital Real, Tokenized Real and Direct Treasury Bonds. Drex will serve for wholesale purposes as the Central Bank's currency.

While the tokenized real will be used mainly in retail, it will refer to the money that an individual, a natural person, has in their bank account.

Finally, direct treasury bonds are related to the purchase and sale of federal public bonds.

According to Banco do Brasil, this division was made so that people could understand more about each of the assets and how they can be used in the environment that is being created with the aim of supporting Brazil's digital currencies.