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The Impact of the Russia-Ukraine War on the Global Economy

It’s been more than a year since the catastrophic Russian invasion of Ukraine began. Today, as the war between the two countries continues, the rest of the world is strongly feeling its impact.

Why should we know about it?

Now, it might be slightly surprising for a few people to think of how the Russia-Ukraine war is affecting the rest of the world. Well the truth is, it is, and in a major way. The impact is being felt and seen throughout the international economic landscape. Therefore, it is important that all of us know about how this evolving situation is causing a financial slowdown globally.

What aspects are affected?

The main aspect that is affected by the war is the commodities channel. Both Russia and Ukraine are global exporters of some essential commodities that are in high demand across different parts of the world. For example, Russia is the largest exporter of wheat and countries like Egypt and Turkey are highly dependent on it for their food supply. Apart from this, Russia is also one of the largest producers of natural gas and oil. About 201.7 billion cubic meters of gas via pipelines were exported by Russia in 2021 (source 1).

Moving on to Ukraine (the breadbasket of Europe), it is known to be one of the largest exporters of wheat, corn and barley. Also, about 46% of the world’s sunflower oil demand is met by Ukraine (source 2). Countries like Lebanon and Indonesia depend heavily on Ukrainian supplies to feed their people.

Both Ukraine and Russia individually hold a strong position in the global trade market. In fact, both these countries have large reserves of precious metals and rare minerals too. But since this war all these commodities supplies have suffered, and severely been impacted.

In an effort to bring about peace, many countries have made international sanctions on Russia. To retaliate, Russia has stopped export and import trades with many of these countries. As a result of this, the global ability to carry forward usual trade channels has been greatly minimised. Therefore, a great shortage in supply of essential commodities has taken place all across the world.

Ukraine too in its bruised lands is making the most efforts in providing for its inhabitants. But on the global spectrum, its ability to export and provide to others has been reduced or completely diminished.

The ultimate impact on the financial economy

As the war continues and as seen in the past year, the insufficient supplies and cut off trade channels have stirred up the financial stability across the world.

Supply shortages have led to high commodity prices because of which inflation rates have hit a record high. In order to control the inflation situation, central banks are raising interest rates, which in turn is causing a slowdown in economic activities. All this has ultimately caused a lot of distress amongst ordinary people. Their pockets have shrunk as their spending ability has lowered due to hiked prices of essential items, lesser job opportunities and stagnant or low wages.

Stock markets have incurred significant losses too. “The average loss across countries was 0.8 percentage points through high trade exposure to Russia, with a median loss of 0.47 percentage points. For firms with an affiliate in Russia, the average loss amounted to 0.73 percentage points, and the median loss was 0.52 percentage points. The losses, operating through both channels, are substantial” (source 3).

Final thoughts on the situation

There is neither a prediction of when the Russia-Ukraine war might end, nor is there a real idea of what will this end look like. All that is known is that this war has costed us heavily. We have lost countless lives, families have been ripped apart, children have suffered their worst trauma, and humanity stands a little crippled today.

While we anticipate, calculate and measure the losses in numbers, we must not forget that these are the times when we can truly count on our hard earned resources to support ourselves as well as our larger community. It is our responsibility to use our wealth in helping the war-stricken people living in the invaded areas during this time of distress. At Cogito Metaverse, we believe in supporting our residents in becoming financially stable, so in such times we can all be empowered to help each other.

Join us today and be a part of our digital country where fairness, justice and peace prevail, always.

Sources:

Source 1

Source 2

Source 3

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Introduction to URI: Ideas for Earning Extra Income

Introduction

Our mission is centred on fostering growth in investments, businesses, and the lives of everyday individuals. The Cogito Metaverse is a space where we want to help people get ahead and to this end, has developed the concept of a Universal Retainer Income that offers individuals an opportunity to generate income and experience personal growth while working on their own terms (you can read more about this here Insight-UBI Vs URI ). We believe that there are compelling reasons why engaging in developing a Universal Retainer Income business can be a great way to supplement your income and enrich your life.

Flexibility and Independence:

One of the most enticing aspects of Universal Retainer Income is the flexibility it offers. Unlike traditional jobs, Universal Retainer Income allows individuals to set their own schedules and work at their own pace while consistently earning income. Whether you have a full-time job, family commitments, or other responsibilities, Universal Retainer Income can fit seamlessly into your lifestyle. This independence empowers you to take charge of your time and priorities, providing a sense of freedom and control over your work-life balance.

Personal Development Opportunities:

Participating in a Universal Retainer Income business can be a great opportunity for personal growth and development. You will be able to develop skills in networking, marketing and leadership; alongside qualities such as self-discipline, communication and goal setting. These are all useful abilities for wherever life takes you. Additionally, being part of the Universal Retainer Income program, gives you the chance to try something new, to step out of their comfort zones, network with diverse groups of people, and improve your interpersonal skills.

Rewards for Efforts:

Universal Retainer Income offers a unique income structure that rewards both personal and team efforts. When you develop a URI, your income potential is not limited by a fixed salary or hourly wage, instead it grows as you find a team of like-minded individuals to work together and support each other to achieve their goals. This means that your earning potential is directly proportional to your efforts and the success of your team. With dedication and perseverance, Universal Retainer Income can provide a substantial additional income stream or even become a primary source of income.

Conclusion

Being part of an Universal Retainer Income venture can be a rewarding side hustle that enriches your life. The flexibility, personal development opportunities, income potential, entrepreneurial experience, and supportive community make Universal Retainer Income an attractive option for those seeking financial independence and personal growth. As with any business endeavour, success in Universal Retainer Income program requires dedication, hard work, and a willingness to learn. With the right mindset and a commitment to your goals, the Universal Retainer Income program can become a fulfilling and lucrative side hustle that transforms your life.

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Glossary of Stock Market Terms

The world of stock market can be exciting and challenging at the same time. There’s a lot that one needs to learn before starting their investing journey here. Continuing to learn about the stock market is beneficial for making informed investment decisions and maximising potential returns. So, following on from previous insights about the stock market, we want to introduce you to some basic terms you must know before stepping into the trading business.

1. Exchange

Stock exchanges help individual investors put money to work in the stock market. Consider a market where the farmers pay the market to have some space to sell their goods. The buyers come to the market because they know they will be able to buy from many farmers selling a lot of different farm goods. Here, both the farmers and buyers benefit from the market. The market by itself doesn’t actually participate in the buying and selling of farm goods, but its role is to simply provide the space so that the farmers and buyers have a place to meet and trade. Likewise, stock exchanges bring together the companies and current shareholders who want to sell stock and the investors who want to buy stock from them. A few examples of stock exchanges are New York Stock Exchange (NYSE), US-$24.3T, NASDAQ, US-$20.13T, Shanghai Stock Exchange (SSE) and China-6.93T.

2. Broker

Stocks are traded through exchanges. However, an investor cannot directly trade in stock exchanges. To buy a stock or sell a stock through exchanges, you need an intermediary who will help you with the transaction. This middleman can be a person or a company who is authorised to buy and sell stocks and other securities on your behalf, in exchange for a small commission. Such a person or a company is known as a stockbroker.

3. Equity

Equity is the amount of money that a company’s owner has put into it or owns. On a company’s balance sheet, the difference between its liabilities and assets shows how much equity the company has. Shares or equity of companies are bought and sold by investors on the stock market. As an investor, when you buy the shares of a company, you buy an equivalent degree of ownership in that company.

4. Ask/Offer

The term “ask” refers to the lowest price at which a seller will sell the stock. The bid price will almost always be lower than the ask or “offer” price. The difference between the bid price and the ask price is called the “spread”, which is primarily determined by the demand and supply of a specific asset, including stocks.

5. Yield

Stock yield measures the growth of an investment. It is the income returned on an investment, such as the interest received from holding a security. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market value or face value.

6. Volatility

Volatility is the rate at which the price of a stock increases or decreases over a particular period. Higher stock price volatility often means higher risk and helps an investor to estimate the fluctuations that may happen in the future. Some traders profit off the risks involved in highly volatile stocks, while others prefer investing in less volatile stocks for the long run.

7. Bull Market / Bear Market

The names “Bull” and “Bear” are used to denote the trends in the stock market with reference to the ways in which a bear and bull handle their prey. Bears swipe their paws downward while bulls shove their horns upward. When stock prices are rising and the market is moving upward, this is referred to as a bull market. When stock values are dropping and the market is moving in a downward direction, this is referred to as a bear market. Both bear and bull markets have a huge influence on the investments one makes. So it’s always a good idea to take some time to determine the market trends before making an investment.

Investing in the stock market can be very rewarding, especially if you avoid some of the pitfalls that most new investors experience when starting out. Beginners should find an investing plan that works for them and stick to it through the good times and bad. The more patient you are with your investments, the better returns you get!

We hope this was helpful for you. For more such finance related insights, follow our social media pages and visit our website www.cogitometaverse.com

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Threads: fastest platform uptake in history!

Last week we saw the launch of Threads, a standalone app launched by Meta. It was amazing to see the incredible uptake of Threads over a few short days. Meta had done a fantastic job of quietly developing this app, checking it and then launching it fully developed. There were minimal glitches and it appeared in a seamless integration with Instagram and had 100 million users in just 5 days after its launch. We have seen a similar uptake with OpenAI’s generative AI-based chatbot, ChatGPT, which reached 10 million daily users in 40 days after launch and 100 million daily active users in about two months after launch. For context, it took TikTok nine months to hit the 100 million mark and Instagram a full two and a half years to reach that milestone. We can see from these kinds of numbers that people are more open to joining new platforms.

This is great news for us here at the Cogito Metaverse where we have been working full time for the last five years building the financial infrastructure for our Metaverse. We are building our systems and carrying out robust checking and testing of our systems, and all the while we are preparing ourselves for this kind of uptake by the masses.

Things that we are working on in our building of the Cogito Metaverse include:

Making sure that the platform is user-friendly and intuitive to use.

Considering the scalability requirements of our platform. We are developing systems to anticipate future growth and designing it to handle increased traffic and user load.

Implementing robust security measures to protect user data, sensitive information, and the integrity of the platform.

Making sure that our platform is optimized for mobile access.

Giving users the ability to personalize their experience, tailor settings, and adapt the platform to their specific needs when feasible.

Ensuring that our platform functions well across different browsers, operating systems and devices.

Continuous work to keep our platform up to date with the latest technologies and industry best practices.

The fast uptake of platforms such as ChatGPT and Threads gives us an indication of the type of uptake we can expect once the Cogito Metaverse hits the mainstream population. We are likely to witness a widespread embrace of the Cogito Metaverse due to its ability to revolutionize various aspects of our lives. We know that people are becoming increasingly interconnected and seeking innovative solutions for communication, commerce and entertainment, and we believe that the Cogito Metaverse offers a transformative digital space where individuals can break free from traditional limitations and boundaries, allowing them to connect, collaborate, and engage in ways never before possible.

With its promise of empowering users to build wealth, access finance, and gain a financial education, the Cogito Metaverse presents an enticing opportunity for individuals to explore new avenues for personal and professional growth. Furthermore, the platform’s dedication to making a positive impact on society aligns with the growing demand for socially responsible and inclusive solutions. Ultimately, the Cogito Metaverse’s potential to reshape how we live, work, and interact in a seamless virtual environment is likely to fuel its widespread adoption.

Let’s all of us together unlock financial growth and empowerment within this extraordinary digital realm. For more information, visit www.cogitometaverse.com

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The Power of Budgeting- why is it important and how can you start with it?

In today’s fast-paced world, managing our finances effectively has become more crucial than ever and one of the most effective tools for financial success is budgeting. Do you know that “People who plan their finances in a disciplined way reported being happier and sleeping better” (source 1). So, you can imagine that if we all started budgeting, our lives would be so much more peaceful!

What is a Budget?

At its core, a budget is a financial roadmap that helps us plan and track our income and expenses. It provides a clear overview of our financial situation and enables us to make informed decisions about how to utilize our money. A budget takes into account our income sources, such as salary, freelance work, or investments, and outlines our regular expenses, such as rent, groceries, utilities, and transportation costs. It allows us to gain control over our money, prioritize our spending, and work towards achieving our financial goals.

Many people think that a budget is merely a list of income and expenses. But that is not the reality. In fact, it serves as a tool for achieving our financial aspirations. Whether you want to save for a dream vacation, pay off debt, or build an emergency fund, a budget empowers you to take control of your money and align it with your long-term goals.

Why should we Budget?

To understand the great impact of budgeting, let us have a look at some of the ways it can help us.

-Gaining Financial Awareness: A budget provides us a detailed overview of our financial health. By tracking our income and expenses, we gain a clear understanding of where our money is coming from and where it’s going. This awareness helps identify potential areas for improvement, such as reducing unnecessary expenses or finding ways to increase our income. For example, you notice that a significant portion of your income is spent on eating out. By tracking this expense, you can make a conscious effort to cook at home more often and redirect the saved money towards your financial goals.

-Setting and Accomplishing Financial Goals: Budgeting empowers us to establish attainable financial goals and progress towards them in a methodical manner. Whether it involves saving for a home down payment, eliminating student loans, or launching a business, a budget serves as a convenient roadmap to reach these significant milestones. By breaking down large objectives into smaller, actionable steps, we can track our growth and stay motivated. For instance, consider the scenario where your aim is to pay off a $10,000 credit card debt within a year. Through budgeting, you can allocate a portion of your monthly income specifically for debt repayment and steadily pay it off.

-Preparing for Emergencies: Life is unpredictable and unexpected expenses can arise at any time. By maintaining a budget, we can set aside funds for emergencies, ensuring that we have a financial safety net to fall back on. This way, we can handle unexpected medical bills, car repairs, or job loss without compromising our overall financial stability.

How to start creating a Budget?

Now, if all that information has got you motivated to start budgeting, then here’s how you can create a Budget!

1. Assess Your Current Financial Situation: Begin by examining your income and expenses over the past few months. Look at bank statements, credit card statements, and receipts to get an accurate understanding of your spending habits. Categorize your expenses into fixed (rent, utilities) and variable (entertainment, dining out) to identify areas where you can potentially reduce spending. Also, list down the things you consider in your regular everyday expenses as needs or desires.

2. Set Clear Financial Goals: Determine what you want to achieve with your budget. Do you aim to save a specific amount of money, pay off debt, or invest for the future? Establishing clear goals allows you to prioritize your spending and make informed decisions.

3. Create a Realistic Budget: Start by allocating your income towards your needs and essential expenses, such as rent, utilities, groceries, and transportation. Then, assign a portion of your income to your financial goals, such as savings or debt repayment. Finally, set aside an amount for your desires or optional spending like going to the movies, allowing yourself to enjoy life while staying within your means.

4. Track and Adjust: Once you have a budget in place, diligently track your income and expenses. Use budgeting apps or spreadsheets to monitor your progress. Regularly review your budget and make adjustments as necessary. Your circumstances might change and you should thereby, try to make adjustments to your budget, accordingly.

You can take help from a professional or senior in your family if you find the whole idea of budgeting overwhelming. There are tons of online resources like videos and budget calculators that can help you with this as well. The idea is to begin with budgeting as in the long run it will make you money-smart and financially able. At Cogito Metaverse, we know how valuable this is and that is why we have created a digital space where people can create more wealth and be financially stable. You can find out more about us on our website www.cogitometaverse.com

Remember, budgeting is a powerful tool that puts you in control of your financial destiny. It provides clarity, enables goal achievement and prepares you for unexpected challenges. By understanding what a budget is, recognizing its importance and implementing a personalized budgeting strategy, you can pave the way towards financial success.

Sources:

Source 1

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Introducing: Using AI in Decision Making

The use of AI (Artificial Intelligence) has moved into the mainstream over a relatively short period of time and now many people are using it or experimenting with incorporating it into their daily lives. The rise of AI has caused a lot of controversy and much conversation in the public domain about whether this is a good thing or not. People have fears and concerns about AI due to various factors, these include worries about job displacement and the impact on employment, a sense of loss of control when AI systems make autonomous decisions and concerns about bias and discrimination in AI algorithms etc etc. Many people think that the use of AI in decision making raises ethical considerations such as accountability, responsibility, transparency and fairness.

AI offers several advantages that can help with the decision-making processes, such as data analysis, speed, consistency, and predictive capabilities. It can handle complex scenarios, provide decision support and improve overall efficiency. With all of these things in mind, we can see that AI has the potential to augment human decision-making by providing valuable insights, identifying patterns and aiding in the evaluation of options.

AI is fast, efficient and compared to humans, it is consistent and objective and it makes decisions without being influenced by personal biases, emotions, or external factors. It could be argued that this objectivity leads to fair and generally unbiased decision outcomes.

There are several myths and misconceptions currently surrounding the use of AI in decision making. One common myth is that AI will completely replace human decision making. However, AI is intended to assist human judgement rather than replace it entirely. AI systems lack the ability to incorporate human values, context, and subjective factors that are crucial in many decision-making processes. AI is a tool that works in conjunction with human decision makers. It requires human expertise to interpret the output, validate the results, and make final decisions. Human oversight is necessary to ensure the ethical and responsible use of AI.

AI enhances decision support by presenting relevant information, options and recommendations to human decision makers, allowing them to leverage the strengths of both AI and human judgement for optimal outcomes. However, it is crucial to maintain a balanced perspective and not rely solely on AI, as human expertise and ethical considerations are still essential in decision making. Addressing risks such as bias, transparency, accountability, and data privacy through ethical frameworks and regulations is necessary for responsible and beneficial use of AI. The effectiveness of AI in decision making depends on integration, data quality, algorithms and human oversight. When used appropriately, AI can be a powerful tool that complements human decision making, resulting in informed and effective decisions.

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The Stock Market: How to get started

We talked in a previous insight about the stock market and how a traditional stock market operates. The birth of prominent stock exchanges, such as the New York Stock Exchange (NYSE), has played a crucial role in shaping the modern stock market. These exchanges standardised trading practices and regulations, ensuring fair and transparent transactions. They also provided a centralised platform for investors to buy and sell stocks, facilitating the growth of the market. We understand that over time the stock market has evolved from a means of raising capital for companies to a platform for individuals to invest and grow their wealth.

Today, investing in the stock market can be a rewarding endeavour, which begins with understanding the process of buying shares and then choosing a reliable broker. A share broker serves as an intermediary between you and the stock market. They provide the platform and tools necessary to buy and sell shares. When choosing a broker, consider their reputation, reliability, costs, available markets and customer support. Look for reputable firms with a track record of reliable service.

Consider the research tools and analysis resources provided by brokers. Look for features like market research reports, stock screeners and financial news updates. These tools can aid your investment decision-making process and help you stay informed about market trends and company performance.

Take note of the minimum deposit requirements and any account maintenance criteria set by brokers. Ensure they align with your financial capabilities and investment objectives. Some brokers have no minimum deposit requirements, while others may have specific account balance or trading activity requirements.

Once you’ve chosen a broker and opened an account, it’s time to buy shares. Start by researching companies you are interested in. Consider their financial health, growth prospects, industry trends and competitive position. Use research reports, charts, and analysis tools available on your broker’s platform to make informed decisions.

On your broker’s platform, search for the stock’s ticker symbol. Choose the appropriate order type, such as a market order or limit order, and specify the number of shares you wish to purchase. Review the order details, including the price and transaction fees, before submitting the trade. Be cautious and double-check the information to ensure accuracy.

In the traditional model stock market, the process begins with choosing a reliable broker and understanding the process of buying shares. With the right broker and a well-informed investment approach, the stock market can help provide opportunities for companies to raise funds and investors to participate in the growth of businesses. By beginning to learn about the stock market, you can begin to explore its potential for wealth creation and long-term financial growth. The Cogito Metaverse model is slightly different to this but we will talk about that in an insight next month.

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The Cogito POS Application

At Cogito Metaverse, we are transforming the way the world of finance functions. We are constantly adding new features and systems to assist our e-residents in making the most of the offerings of our digital space at Cogito. One such system that we introduced some time back is the Cogito POS application.

Before we go into the details of the Cogito POS app, let’s understand what exactly is POS.

What is a POS system?

A POS system is a point-of-sale system that allows businesses to process transactions and manage their inventory, sales, and customer data.

It typically consists of a hardware device, such as a cash register or a tablet, and a software application that connects to a cloud-based or local database.

A well-built POS system can help businesses improve their efficiency, accuracy, and profitability by automating tasks and providing insights into their sales performance.

The Cogito POS app

The Cogito POS app has been designed for users who hold a business within the Cogito Metaverse, with an aim to simplify the transaction processes. Now, if you are wondering what is Cogito Metaverse, then here’s a quick recapitulation. The Cogito Metaverse is a digital space that uses advanced technology to allow users to interact in a digital world. It brings together people to grow investment, build businesses and create financial freedom.

Getting back to the Cogito POS app. It is a payment application specifically built for businesses registered with Cogito Metaverse. It enables its users to make payments in COG, CBC and Euro with an easy user PIN. It also allows users to make payments in cash and receive CBC and vice versa, as a business or as a customer.

The Cogito POS app has a dashboard where users can manage their wallet and make QR code based transactions all in one place. Also, the app has an easy to navigate display, where users can choose between light or night mode to fit their screen preferences.

In conclusion

The Cogito POS app is a convenient and secure way of managing finances in the Cogito Metaverse. It also helps users to become a part of the only global network that helps people build wealth in a completely new way.

You can register a business on Cogito Metaverse and become e-residents of our digital space, and access low tax rates, financial education as well as asset protection trusts.

The Cogito POS app is available for download on Google Play Store and App Store. It is compatible with all devices.

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Introduction to the Traditional Stock Market

The history of the stock market can be traced back to the 17th century when the Dutch East India Company became the first company to issue stocks and bonds to the general public. These securities were then traded on an organized market known as the Amsterdam Stock Exchange.

In the United States, the first stock exchange was established in Philadelphia in 1790, followed by the New York Stock Exchange (NYSE) in 1817. The NYSE quickly became the leading stock exchange in the United States, and it remains one of the largest in the world today.

Over the years, the stock market has experienced a number of significant events that have shaped its history. For example, the stock market crash of 1929, which led to the Great Depression, was one of the most significant events in the market’s history. The crash was caused by a combination of factors, including a speculative bubble in the stock market and a decline in consumer confidence.

Since then, the stock market has undergone significant changes and has become a global phenomenon. The rise of technology and the internet has led to the development of electronic trading platforms and the emergence of new financial instruments such as exchange-traded funds (ETFs) and derivatives.

Today the stock market has become a popular investment option for people seeking higher returns on their money. While the stock market primarily functions to allow investors to buy and sell shares of publicly traded companies, there are other types of securities that can be traded on the stock market as well.

Exchange-Traded Funds (ETFs) are a popular investment vehicle that have gained significant popularity in recent years. These funds hold a basket of securities, such as stocks, bonds, or commodities, and are traded on an exchange like individual stocks. ETFs offer investors a way to diversify their portfolio with a single investment and can provide exposure to a wide range of markets and asset classes.

Mutual funds are similar to ETFs in that they are investment funds that hold a diversified portfolio of securities. However, mutual funds are bought and sold directly through the mutual fund company and are not traded on an exchange. Mutual funds can offer investors exposure to a range of markets and asset classes, and can be a good option for those who prefer a more hands-off approach to investing.

Bonds are another type of security that can be traded on the stock market. Bonds are debt securities issued by corporations or governments, and investors can buy and sell them on the stock market. Bonds typically offer a fixed rate of interest and a predetermined maturity date, and can provide a stable source of income for investors.

Options are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset, such as a stock, at a predetermined price and date. Options can be used for hedging or speculative purposes, and can be a good way for investors to manage risk in their portfolios.

In addition to these securities, there are also derivatives, futures, and other financial instruments that can be traded on the stock market. However, it’s important to note that each of these securities comes with its own unique risks and complexities, and investors should carefully consider these factors before investing in them.

One of the biggest advantages of investing in the stock market is the potential for higher returns compared to other investment options, such as bonds or savings accounts. However, it’s important to remember that investing in the stock market carries risks, and it’s crucial to do your own research and seek professional advice before making any investment decisions.

Investors should also consider their investment goals, time horizon, and risk tolerance when choosing which types of securities to invest in. For example, a young investor with a long time horizon may be comfortable taking on more risk by investing in individual stocks or ETFs, while an older investor approaching retirement may prefer a more conservative approach with mutual funds and bonds.

In conclusion, while the primary function of the stock market is to allow investors to buy and sell shares of publicly traded companies, there are many other types of securities that can be traded on the stock market as well. Each of these securities comes with its own unique risks and complexities, and investors should carefully consider these factors before investing. By doing so, investors can make informed investment decisions that align with their goals and risk tolerance, and potentially achieve their financial objectives.

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Is the world destined to become a cashless society?

The consequences of the pandemic of 2020 were quite tragic, but if we look at the brighter side, this period pushed us to develop new digital systems and progressive ideas. These digital systems included the modes of payment that we use every day now.

Since the coronavirus had properties of air-borne diseases, it was kind of impossible to pay cash in hand to people due to the fear of disease transmission and therefore, no contact, digital or cashless transactions became popular during this time. As a result of this, a new world was born where cashless modes of payment were preferred over physical cash exchanges. This evolution definitely moved us to think if we can become a cashless society. But wait, what is a cashless society? Have you thought about it?

The cashless society

Well, let us give you a picture of the same. A cashless society is one where physical money, such as coins and banknotes, is no longer used as a medium of exchange. Instead, people rely on electronic forms of payment, such as credit cards, debit cards, mobile wallets, online banking, and digital currencies. In a cashless society, cash transactions are either rare or non-existent.

The idea of a cashless society is surely not new but it is definitely gaining momentum now. So, what do you think? Is it a good idea to completely eliminate physical currency from our world? Let us explore this by looking at the disadvantages and advantages of becoming a cashless society.

The advantages of a cashless society

One of the main advantages of a cashless society is that it reduces the risk of crime. Without tangible money to steal, criminals would have less incentive to rob banks, shops, or individuals. A study by American and German researchers found that crime in Missouri dropped by 9.8% as the state replaced cash welfare benefits with Electronic Benefit Transfer (EBT) cards (source 1). A cashless society would also make it harder for organized crime to operate, as they rely on cash transactions to avoid government scrutiny.

Another benefit of a cashless society is that it lowers the transaction costs and hassles of managing currency. Businesses and individuals would save time and money by not having to handle, store, and deposit paper money. They would also avoid the risk of losing money due to theft, fraud, or human error. A cashless society would also facilitate easier currency exchange while travelling internationally, as there would be no need to carry or convert cash.

A third benefit of a cashless society is that it helps prevent tax evasion and money laundering. Self-employed workers who receive cash payments can underreport their income and avoid paying taxes. This leads to a loss of revenue for the government and an unfair advantage for tax evaders. Just like in the UK, where a report states that the government lost £8bn in tax revenue due to ‘cash in hand payments’ (source 2). A cashless society would make it easier for the government to track and collect taxes from all sources of income. It would also make it harder for criminals to launder money through cash-intensive businesses or offshore accounts.

The disadvantages of a cashless society

Despite these benefits, a cashless society also has some disadvantages. One of them is that it exposes personal information to possible data breaches and cyberattacks. Every electronic transaction leaves a digital trail that can be accessed by hackers, corporations, or governments. This raises privacy and security concerns, as sensitive data such as spending habits, location, or identity could be compromised or misused. A cashless society would also make people more vulnerable to technical issues or hacker activity that could disrupt or disable their access to money.

Another drawback of a cashless society is that it creates a technological learning curve and dependency. Not everyone has the skills, devices, or internet access to use electronic payments. This could exclude some segments of the population, such as the elderly, the poor, or the rural, from participating in the economy. A cashless society would also make people more reliant on technology and less prepared for emergencies that could affect their connectivity or power supply.

A third drawback of a cashless society is that it reduces the control over spending and saving. Take this report for example, “A study claims that people of the same annual income spend 34% higher while using mobile wallets than those who used other payment methods” (source 3). Without a physical reminder of how much money one has or spends, it could be easier to overspend or incur debt. A cashless society could also encourage impulse buying and consumerism, as electronic payments create a psychological distance between the buyer and the seller. Moreover, a cashless society could limit the choice and freedom of how people use their money, as they would have to comply with the rules and fees imposed by payment providers or regulators.

Conclusion

Now that we have listed all the benefits and drawbacks of the cashless society, can you think of how it would look if we really implemented it? Well, some countries are already putting the cashless society idea to test. Yes, it’s true. For example, Sweden is on its way to become world’s first cashless society and currently only 2% of the country’s transactions are done in cash (source 4)!

The Swedish economy is surely serving a great example of a cashless society, but whether the world will follow through is debatable. On the other hand, there are technological innovations happening in many areas of finance and that is where we come! At Cogito Metaverse, we are bringing innovations to the way money and finance work. We are a virtual country run by the Principality of Cogito. We offer transaction facilities in digital currencies to all our registered residents. Our currencies can be used for the purchase and sale of goods as well as services in the Cogito Metaverse world. If the idea of a financial innovation excites you and you want to be a part of the revolutionary future of money, then you must sign up with us today! Head to Cogito Metaverse and explore a new way to secure your financial future.

Sources:

Source 1

Source 2

Source 3

Source 4

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Business in the Metaverse

As the concept of the metaverse continues to gain acceptance, many entrepreneurs are considering registering their business in this new digital world. The Cogito Metaverse has the infrastructure for both businesses and companies to register. A business is a general term that refers to any organization or individual involved in providing goods or services in exchange for money. It can be a sole proprietorship, a partnership, or a corporation.

On the other hand, a company is a specific form of business that is organized and registered as a legal entity under the laws of a particular country. It is a separate legal entity that can own assets, enter into contracts, and engage in business transactions.

Benefits of registering a business

There are many advantages to registering your business with the Cogito Metaverse. The Metaverse is a digital universe allowing businesses to reach a global audience without the limitations of geographical boundaries. A digital space is a cost effective place to operate a business without the restrictions of location or property ownership. In addition the concept of the metaverse offers businesses a unique experience for their customers, which can be more engaging than traditional methods of advertising and marketing.

The Cogito Metaverse has the potential to reach a global audience, the current user base is still relatively small compared to the physical world because the metaverse is still in its early stages of development. However the creators of the Cogito Metaverse have developed almost all of the infrastructure needed for businesses which is currently going through the testing and auditing process.

Taxation in the Cogito Metaverse

It is important to consult with a licensed tax professional in your country of origin who is familiar with the tax laws and regulations applicable to your specific situation. Therefore, we recommend that you seek advice from local advisers who can provide you with accurate and up-to-date information regarding your tax obligations.

In conclusion

Overall, registering a business in the metaverse can offer many opportunities for entrepreneurs to explore and expand their businesses, but it also comes with its own set of challenges that need to be considered before making the decision to take the leap into this new digital world.

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Understanding the Central Bank Digital Currency (CBDC)

Central Bank Digital Currency (CBDC) has become a hot topic of discussion in the world of finance and economics. In fact, in one of our earlier insights we did briefly talk about CBDCs. Let’s understand it in a bit more detail today.

So, what is a CBDC?

There are two main types of Central Bank Digital Currency- the Retail CBDCs and Wholesale CBDCs.

transactions, such as for the purchase of goods and services. Whereas a Wholesale CBDC is designed for use by financial institutions and other large organizations for interbank transactions and settlements (source 1).

How do CBDCs work?

Central Bank Digital Currencies work on a Distributed Ledger Technology (DLT). The DLT is a decentralized database that records transactions in a transparent and secure way. “DLT networks are permissioned, meaning only certain parties have permission to view specific information. This way, a central bank could allow only its workers to look at the network as a whole, rather than it being entirely open” (source 2).

Typically designed to be programmable, CBDCs can include smart contract functionality that allows for automated and conditional transactions. For example, a particular country might choose to program its Central Bank Digital Currency for purchase of specific types of goods or services, or control its validity by adding an expiry date to it (like bank cards).

CBDCs are also designed to be interoperable, meaning that they can be exchanged between different digital wallets and payment systems. This interoperability is important for ensuring that Central Bank Digital Currencies can be used as a widely accepted form of payment.

Why do we need CBDCs?

There are several reasons why central banks around the world are exploring the possibility of issuing a Central Bank Digital Currency. Let’s look at a few of these:

1. To remain effective and relevant

Banks have been looking out for ways to make their monetary systems as strong and modern as possible, to keep up with the advancements in financial technology. As the use of cash continues to decline and digital payments become more common, central banks need to ensure that their monetary systems remain relevant and effective.

2. Solution for the unbanked

Central Bank Digital Currency could also help to improve financial inclusion by providing access to digital payments for those who are currently unbanked (source 3). It could be used to provide low-cost and accessible financial services to people.

3. Ease of use

The ease of use and accessibility facilitated by a CBDC could probably invite people who are unwilling to get involved with the traditional banking setups, to be a part of the financial banking systems of the country.

4. Reduce financial instability

Central Bank Digital Currencies could help reduce the risk of financial instability by providing a more secure and resilient form of digital money. These are backed by the central bank, therefore less susceptible to the kinds of market fluctuations and risks that can affect cryptocurrencies like Bitcoin.

What are the challenges of CBDCs?

While a Central Bank Digital Currency offers many potential benefits, there are also some challenges associated with it.

1. One of the main challenges is ensuring the security and integrity of CBDCs. These are digital, therefore are susceptible to cyberattacks and other forms of fraud. Central banks will need to ensure that their Central Bank Digital Currencies are secure and resilient, and that they have robust cybersecurity measures in place to prevent hacking and other attacks.

2. Another challenge is in making sure that Central Bank Digital Currencies fit in the financial systems without causing unstable markets. CBDC is a new form of money, it could potentially disrupt the existing monetary system if not designed and implemented carefully. Central banks will need to ensure that their CBDCs are compatible with existing financial infrastructure and do not create unintended consequences.

3. Further on, CBDCs pose a challenge to privacy. Since these are likely to be more transparent than traditional fiat currencies, there could be concerns amongst the users with regard to privacy and surveillance. While transparency in transaction records could help improve accountability and prevent financial crime, CBDCs would need to be designed by ensuring a way that balances privacy and transparency.

4. Finally, there are also legal and regulatory challenges associated with CBDCs. With a new format of money, it is likely that new laws and regulations will be required to govern it. Therefore, to make sure that Central Bank Digital Currencies are effectively integrated into the existing legal and regulatory framework, a close coordination between central banks, financial regulators, and policymakers will be required.

How are Cogito’s CBDCs better?

We have been discussing all about the Central Bank Digital Currencies around the world so far, and while there are several examples of it being tried and implemented, do you know that Cogito Metaverse has its own Central Bank Digital Currency?

Yes, we do. At Cogito Metaverse, which is governed by the Principality of Cogito, we have two official CBDCs- the CBC and COG. The Principality of Cogito is a global principality in the digital space which brings together smart minds and is a haven for ordinary people, investors, businesses and non-profit organisations. It breaks the physical traditional borders and is open to people around the world.

The CBC and COG are currencies issued by the central bank of the Principality of Cogito. Even though they are CBDCs, the CBC and COG are different from the general government issued CBDCs. If you are wondering how, then have a look at the pointers below.

• The transactions done using the Principality of Cogito CBDCs are not entirely disclosed to the tax departments around the world.

• The Principality of Cogito CBDCs do not come with a validity period and are not programmed to be expired

• The residents of the Principality of Cogito can freely use its CBDCs as its usage is not restricted.

• The COG and the CBC are 100% cash and asset backed.

• The Principality of Cogito CBDCs are already being used to transact around the world.

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An Introduction to Escrow Payments: A Secure and Reliable Method for High-Value Transactions

Escrow payments have become an increasingly popular method for conducting high-value transactions in recent years. This is in part because of advances in technology. Online marketplaces and e-commerce platforms have made it easier for buyers and sellers to transact with each other remotely, which has created a greater need for secure payment methods. Escrow services have been able to fill this need by providing a secure and reliable way for parties to conduct transactions while minimising the risk of fraud or breach of contract. Additionally, advances in digital payments and blockchain technology have made it possible for escrow payments to be completed more quickly and efficiently than in the past. In this article, we will explore the advantages and disadvantages of escrow payments, as well as some examples of how they are used.

The Advantages

1. One of the main advantages of using escrow payments is security. By using a neutral third party to hold and disburse the funds, both parties can be confident that their money is safe and protected. This is especially important for transactions involving large sums of money or high-value assets, such as real estate, cars, or businesses. In addition to security, escrow payments also provide a high level of confidence in the transaction process, which can increase trust between the parties involved.

2. Another advantage of escrow payments is protection against fraud. Escrow services help to ensure that both parties fulfil their obligations before the funds are released. For example, in a real estate transaction, the buyer may deposit funds into an escrow account with a third-party escrow agent. The funds are held in the account until the transaction is complete, at which point the funds are disbursed to the seller. This process helps to protect against fraudulent transactions, as the funds are only released when both parties have fulfilled their obligations.

3. Escrow payments also provide a way to resolve disputes. If a dispute arises during the transaction, the escrow service can act as a mediator to resolve the issue. This can help to prevent disputes from escalating and can provide a fair and impartial resolution to the problem.

The Disadvantages

1. However, there are also some disadvantages to using escrow payments. One of the main disadvantages is cost. Escrow services typically charge a fee for their services, which can add to the cost of the transaction. In addition, the use of an escrow service can add time to the transaction, as the funds are held until both parties have fulfilled their obligations. This can be a disadvantage for buyers and sellers who need to complete the transaction quickly.

2. Another disadvantage of escrow payments is limited recourse. In some cases, an escrow service may not be able to fully protect against fraud or breach of contract. This can be especially problematic if the buyer or seller is located in a different country, where legal recourse may be limited.

Examples of Escrow Payments

Despite these disadvantages, escrow payments have become an increasingly popular method for conducting high-value transactions. Here are some examples of how escrow payments are used:

- Real estate transactions: In a real estate transaction, the buyer may deposit funds into an escrow account with a third-party escrow agent. The funds are held in the account until the transaction is complete, at which point the funds are disbursed to the seller.

- Freelance work: A client may use an escrow service to hold payment until a freelancer has completed the work as specified in the contract. The funds are then released to the freelancer once the work is completed.

- Online purchases: In some cases, online purchases may be completed using an escrow service. The buyer deposits funds into an escrow account and the seller ships the product. The funds are then released to the seller once the buyer receives and confirms that they are satisfied with the product.

- Mergers and acquisitions: In a business acquisition, an escrow account may be set up to hold a portion of the purchase price until certain conditions are met. This helps to ensure that the seller fulfils their obligations, such as providing all necessary documents and assets, before the funds are released.

- Intellectual property sales: In the sale of a patent or other intellectual property, an escrow service may be used to hold payment until the transfer of ownership is complete and all necessary documents have been provided. Once the transfer is complete, the funds are released to the seller.

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Universal Basic Income vs Universal Retainer Income

The Idea: URI vs UBI

The concept of Universal Basic Income or UBI is based on the idea that everyone should have a basic standard of living, and that by providing a guaranteed income, individuals would have more freedom and security to pursue education, start businesses, or engage in other activities that would improve their lives and contribute to society as a whole.

Moving on, we would like to introduce the concept of the Universal Retainer Income, also called the URI. The Universal Retainer Income is a concept unique to the Cogito Metaverse, inspired by the intention underlying the Universal Basic Income. The Cogito URI is an income provision for all the e-residents here and this income has a minimum value that grows over time. A resident’s Universal Retainer Income growth is dependent on their participation and the ways they engage in the Cogito Metaverse. This participation involves actively being part of the development and expansion of Cogito Metaverse.

The concept of URI stands closely with the working of UBI, however these two are fairly different in terms of their application. The concept of a Universal Basic Income is a government provision by which a fixed amount is provided to citizens of a country irrespective of their socio-economic status. The difference between the traditional model of a Universal Basic Income and the Cogito Metaverses’ Universal Retainer Income is that the income provision for the e-residents of the Cogito Metaverse is variable in nature. There is the ability for it to increase in value depending on the efforts and contributions of individuals receiving it.

What are the benefits of URI?

The Universal Retainer Income has many positives attached to it. Let’s have a look at a few of these:

a. Greater economic security- Universal Retainer Income can provide a stable source of progressive income that can help alleviate financial stress and reduce uncertainty, allowing people to make long-term plans and investments.

b. Incentive to work efficiently- Universal Retainer Income is a minimum income that grows depending on the contributions and efforts made by its users. This therefore acts as an incentive for the people to work more and contribute actively for the purpose of value addition to the society.

c. Slowdown in crime rates- crimes like theft or robbery and sometimes murder come from a place of deficiency. People who participate in such acts lack the money to meet their basic needs and with Universal Retainer Income, people may be discouraged from taking part in such activities as well as look at becoming better humans who can positively contribute towards the society’s well-being.

d. Lesser political play- Unlike many traditional social welfare programs, Universal Retainer Income will allow people access to economic benefits without any hindrance that happens due to political foul play in different countries.

e. Increased freedom- Universal Retainer Income will be a guaranteed progressive regular income, which will give people more freedom to follow their pursuits whether it is education, training, or entrepreneurship and that too in a variety of fields

f. Better physical and mental health facilitation- Universal Retainer Income will help people rise above financial burdens and take active care of their health, thereby encouraging a healthy approach to living

g. More innovations- Universal Retainer Income can provide a safety net that will allow people to turn their ideas into reality and place their belief in virtual financial inventions. Therefore encouraging more creativity and many discoveries.

UBI in the real world

The concept of Universal Retainer Income is surely unique in terms of the way it will benefit people registered with Cogito Metaverse, unlike the Universal Basic Income which will be limited to countries that implement it. And do you know there have been a few projects that have been testing the concept of Universal Basic Income? Yes. Let’s have a look at some of the notable ones:

1. Alaska Permanent Fund Dividend- This is a long running program in the US state of Alaska, where all permanent residents receive a dividend each year from the state’s oil revenue. The amount varies from year to year but has ranged from $1,000 to $3,000 per citizen (source 1).

2. Mincome- In the 1970s, the Canadian province of Manitoba implemented a basic income program called Mincome. The program was a pilot project that provided a guaranteed income to low-income families in rural areas. While the program was never expanded beyond the pilot phase, it provided valuable data on the potential impacts of UBI (source 2).

3. UBI Experiment in Kenya- A Universal Basic Income program was implemented in two counties in Kenya in partnership with the charity organisation GiveDirectly. It evaluated the possibility of providing a basic income to poor households and there were many merits recognised in this experiment (source 3).

4. Basic Income Pilot in Finland- In 2017, Finland launched a two-year pilot program that provided a basic income to a group of unemployed citizens. The amount was set at €560 per month, and participants were allowed to keep the money even if they found work during the program. The program did find quite a few positives in its evaluations (source 4).

5. South Korea’s Gyeonggi Pay- The Gyeonggi Pay is a program based on the concept of Universal Basic Income, which provides people with a lump sum pay every quarter irrespective of their income and employment status (source 5).

URI in the Cogito world

Thinking about the future, have you ever wondered how would Universal Retainer Income work in the Cogito Metaverse? Below are a few ideas that may be applicable:

> Availability of a universal currency- the COG and CBC are the official Cogito Metaverse currencies. So, all its citizens (from across borders) can access a uniform currency when being provided with the URI.

> Act as a virtual expenditure expense- Since virtual marketplaces are common now, the Cogito URI could be implemented in the Metaverse as a form of an income that users could spend on buying goods and services sold by businesses registered in the Cogito Metaverse

> Supporting social programs- The Cogito URI could potentially provide an opportunity to support education or healthcare for the registered users.

> Buying assets- Citizens of the Cogito Metaverse could use the Cogito URI for buying virtual assets and build an asset based safety net for their families’ future.

The conclusion

Looking at the speed of the technological innovations we are going through in the world of Principality of Cogito, we can surely say that the concept of Universal Retainer Income is not very far away from being implemented. Also, the way governments, like that of New Zealand, provided economic support under which all part-time workers were given 350 NZD/week and full-time workers were given 585 NZD/week for a stipulated period of time during the pandemic, is a testimony to the fact that people will receive Universal Retainer Income positively (source 6).

To conclude, only time will tell what happens with the launch of Universal Retainer Income and its universal applications. The best bet for us would be to keep preparing ourselves to walk along the curves of any economic change and ensure that our financial futures are secure.

Sources:

Source 1

Source 2

Source 3

Source 4

Source 5

Source 6

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The Use of Crowdsourcing in Technology

The Importance of Crowdsourcing

We believe that crowdsourcing technology will play a significant role in the development and management of the metaverse. This is because it will allow many people to be part of the growth and development of the metaverse and enable the creation of rich and diverse virtual experiences. It will also be important for the organisation and management of the vast amounts of data generated by these experiences.

The History

The practice of crowdsourcing has been around for centuries, although the term “crowdsourcing” itself was coined in 2006 by Jeff Howe in an article for Wired magazine. Amazingly, it was as early as 1714, that the British government offered a cash prize to anyone who could develop an accurate way to measure longitude at sea. This led to the development of the chronometer, a device that revolutionised navigation.

The Benefits of Crowdsourcing in Technology

Crowdsourcing has become increasingly popular in the growth and development of technology because it enables a large and diverse group of people to generate ideas for technology solutions. Crowdsourcing can be used to test and get feedback on new technology products, which can then be used to improve the product. Crowdsourcing has also been used to design and develop new technology solutions. This can involve asking volunteers to contribute their skills and knowledge to software coding, hardware development, and other aspects of technology design.

Examples of Crowdsourcing

Crowdsourcing is a great way to be able to organise large amounts of data. A well known example of this is obviously wikipedia. Another example is OpenStreetMap. This is a crowdsourced map of the world, created and maintained by a community of volunteers. Anyone can contribute to the map by adding or editing features such as roads, buildings, and points of interest. OSM is used by individuals, businesses, and organisations around the world for a variety of purposes, including disaster response, urban planning, and navigation.

Crowdsourcing in the Cogito Metaverse

Crowdsourcing technology will be utilised in the Cogito Metaverse to tap into the collective knowledge and resources of people around the globe to build a community, solve complex problems and create innovative solutions. It will be an effective method that will allow us to bring together great minds and deliver impactful experiences within the digital world of technology.

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Benefits of the Pocket Money App

What is the Pocket Money App?

Earning pocket money is one of the joys of childhood. Many children enjoy the opportunity of doing some extra chores to earn coins to save up for something they want. Cogito Metaverse’s new launch, Cogito Pocket Money App is going to make this a lot of fun for both parents and guardians and for children and young people.

While some may argue that children should simply do their chores as part of their responsibilities, there are actually several benefits in the rewarding process. When we give children some pocket money for their completed chores, they learn the value of hard work and the satisfaction of earning money. This is an important lesson to learn at a young age, as it helps to instil a strong work ethic that will carry over into the children’s adulthood.

The Benefits

The Cogito Pocket Money App encourages responsibility while making it an enjoyable learning process. Parents and guardians can set tasks in the App and the children and young people are able to tick off the tasks as they carry them out. This encourages them to be accountable for their actions and helps them to develop a sense of responsibility. It is a unique way of using technology to familiarise young people with the need of being responsible. The Pocket Money App allows its young users (that is children) to learn that hard work pays off and that they can achieve their goals with a bit of effort. This is a valuable lesson that will serve them well throughout their lives and can be effectively understood with the user-friendly interface of the App.

Parents, caregivers and guardians can use the Pocket Money App as an effective tool to help them on their parenting journey. They can:

Teach life skills-

developing age-appropriate life skills is important for children as it allows them to be self-dependent. With tasks like cleaning the play area, making the bed and packing the school bag, children learn to take care of themselves while forming core skills like time management and decision making

Raise responsible kids-

instilling a sense of responsibility in children can take quite some time, so it is best to start young. When children are given the opportunities to take accountability of their actions they learn to be responsible and this in turn gives them a strong sense of autonomy and self-sufficiency

Develop positive money habits-

understanding the value of money is the key to leading a happy and successful life. When children learn how to earn for their efforts, save for their future and budget for their needs, they become financially aware. They can thus make financially sound decisions

Young kids can use the Pocket Money app to understand about the working of money and the value of their effort in the world. They can:

Earn for their work-

it is important that children learn the value of the work they are doing and this only happens when they are rewarded for the same. This gives young kids the confidence to appreciate their hard work and build it into a lifelong skill that can be monetarily rewarding

Learn to manage money-

in the world today children are expected to have the know-how of money. For this it is necessary that they learn to manage their finances through regular earnings and savings. This therefore sets them for a money secure future and makes them financially literate

Grow to be independent-

when children take responsibility of their daily tasks, whether it is finishing their homework or keeping their room clean, they develop the ability to be self-reliant. As every day they earn for their learning, they gradually develop the courage and the confidence to operate as healthy independent individuals in the society

In Conclusion

With the Pocket Money App, we aim to build a world where children understand the working of personal finance while learning to be responsible and independent. At the same time, our endeavour is to ensure that our App aids caregivers on their parenting journey.

In the next few weeks, we will add an information page and some frequently asked questions to the Cogito Metaverse website. In the meantime, you can find the App and explore it through the logged in section of your Cogito Metaverse account.

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Digital Currency- the future of money, is it?

You must have heard of the word ‘digital currency’ within some regular interaction or situation in your life and it is quite likely that you even know what it means. Let us try and understand it in a little more detail today.

First, let’s begin with defining what is currency. Currency is a medium of exchange that is agreed upon to hold a certain value and it is used for the purpose of buying and selling of goods as well as services.

So what is a digital currency then?

Digital currency is a form of currency that exists in digital or electronic form and operates on a digital platform. It can be used for making transactions, storing value, and for carrying out value exchange.

What are the different kinds of digital currency?

· Central Bank Digital Currencies (CBDCs): CBDCs are digital currencies issued by central banks and backed by national governments. They are designed to provide an alternative to physical cash and offer the benefits of digital currencies, such as faster and cheaper transactions. An example of this is eNaira, a CBDC issued by the Central Bank of Nigeria in Nigeria.

· Cryptocurrencies: Cryptocurrencies are decentralised digital currencies that operate on a blockchain platform and use cryptography to secure transactions. Examples include Bitcoin, Ethereum, Ripple and Litecoin.

· Stablecoins: Stablecoins are digital currencies that are attached to a stable asset (like the US Dollar) to provide stability and minimise price volatility. Examples include Tether, USDC, and Dai.

· Tokenized Securities: Tokenized securities are digital tokens that represent ownership of traditional securities, such as stocks, bonds or real estate. They allow for fractional ownership and the ability to trade securities in a more efficient and cost-effective manner.

· Utility Tokens: Utility tokens are digital tokens that provide access to a specific product or service. They are used to power decentralised applications and platforms.

All these different forms of digital currency have their own unique features and they are designed to serve different purposes depending on the different needs of the market.

Are digital currencies any good?

It has been seen that digital currencies have both advantages as well as disadvantages.

Here are a few pros of digital currencies.

· Diversification: digital currencies can provide a valuable source of diversification to investors that allows them to spread their investment risk and yield potentially higher returns.

· All-time access: in the current banking scene money transfers often take more time, especially during holidays and out of office hours. However, with digital currency, these transactions can be made at any time of the day without time restrictions.

· Inexpensive international transfers: sending money across borders can be extremely pricey with all the international transaction charges that are laid by the banks. But digital currency can make this process quite efficient, cheap and smooth.

· Quick transactions: payments that are made from bank-to-bank can take slightly longer, generally 24 hours and more. When it comes to digital currency, this problem is easily tackled as payments are made quickly.

· Borderless transactions: the virtual place of digital currencies has helped in making it free of any geographical restrictions. Some digital currencies can be used to make international transactions beyond traditional borders.

Here are a few cons of digital currencies.

· Unstable and volatile: many of the digital currencies that we discussed above are not backed by a real asset or fiat currency and therefore, their value is highly unstable. So, what could be profit today can turn into loss tomorrow.

· Security issues: there is a perception that digital currencies are very secure. However, there are some challenges to the security these provide. For example, cryptocurrencies are so secure that if someone accidentally sends across some cryptocurrency then there is no way to trace it and get it back.

· Problems in regulation: in most cases, digital currencies are operated beyond the control of a regulatory body and this makes it challenging to monitor and stabilise these.

· Prone to hacking: there have been many situations in the past where cryptocurrencies have been hacked and million dollar thefts have taken place. Digital currencies are run by computing technologies and so there is always a chance for modern-day hackers to get into the system and steal.

· Unpredictable future: since the value of digital currencies are unstable and technology is ever evolving, the future of digital currencies cannot entirely be confirmed.

What does the future look like?

Innovations are going to continue to grow in the area of digital currencies and people have been welcoming of it. Let’s consider the latest budget announcement report in India for the 2023 financial year as proof, which mentioned the high usage of UPI (Unified Payment Interfaces), a digital payment system that allows businesses and people to carry out transactions through their phone. Another report said that about 2,348 UPI transactions are made per second in India (source: inc42.com). This example serves as an indicator to the fact that people are keen to- use technologies, be a part of innovations and practice novelty in the way they manage their wealth. We still cannot deny the fact that it is a relatively new space, so you will have to decide carefully if digital currencies are for you.

The Verdict

In the year 2022, data on the Reserve Bank of New Zealand website mentioned that only 2,562,974 100$ notes were distributed amongst a population of nearly 5 million( source 2- rbnz.govt.nz ). This means that other transactions were carried through methods like cards and digital payments, which clearly shows a progress towards a cashless society. However, as we explore this technology further, we are bound to see both success and failure. It’s a bit too early to conclude whether we are going in the right direction. All we can say at this stage is that we are at the cusp of a new tech-era. But nobody really knows what the future holds.

Sources:

Source 1 : inc42.com

Source 2: rbnz.govt.nz