Currency Revolution. Top | What is a central bank digital currency?

"Technology is the key factor for the progress of productivity and the leading driving force for social development. As a social relationship, currency is no exception. Its previous evolution and connotation expansion have been profoundly affected by scientific and technological progress." China Securities Regulatory Commission Technology Supervision Bureau Yao Qian, director and former director of the Digital Currency Research Institute of the People's Bank of China, wrote in "Preliminary Exploration of Digital Currency" (hereinafter referred to as "Preliminary Exploration").

"Central bank digital currency/central bank digital currency" is the latest form of currency that has evolved in the development of science and technology. It has two characteristics: one is issued by the central bank, and the other is digital form.

From the perspective of currency connotation, the central bank's digital currency follows the existing credit currency system, that is, the value support is the credit of the central bank and the direct "liability" of the central bank.

The real big change occurs in form, because the emergence of blockchain technology has transformed currency from a paper entity with a history of hundreds of years into a virtual number, which is completely different from traditional currency and electronic payment.

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"Central Bank Digital Currency/Central Bank Digital Currency" is the latest form of currency that has evolved in the development of science and technology.

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No internet, no fee

The think tank "Unity Hong Kong Fund" published a research report "Central Bank Digital Currency - Building the Cornerstone of Digital Finance" last year. One of the authors, Chen Yingyin, a researcher at the United Hong Kong Fund, likened the central bank's digital currency to "digital cash": "CBDC is very similar to cash, They are all issued by the central bank and are very reliable. Secondly, cash does not require the Internet, and CBDC can also be paid offline. You can imagine any cash payment scenarios that you can imagine, and CBDC can be used.”

The offline payment technology in Chen Yingyin's mouth is the most different point between the central bank's digital currency and other mainstream electronic payments, which greatly expands the application scenarios of this payment technology.

This is nothing new, it is actually the near field communication technology/near field communication (NFC) that Octopus is using.

Similar to Octopus, the payment terminal technology of the central bank's digital currency requires only a small chip to facilitate access to different wearable devices. For example, Beijing has launched a Winter Olympics gloves with a built-in chip.

Chen Yingyin continued that the central bank's digital currency is expected to solve the current "digital divide" that groups such as young children and the elderly cannot effectively apply mobile payments: "In fact, different countries will have different designs, and young and elderly groups can use watches and bracelets." For example, Beijing recently launched a visual card that allows users to see the instant payment amount and balance. "Foreign tourists who are unwilling to download digital RMB software on their mobile phones can use this card."

But unlike Octopus, the central bank's digital currency does not involve intermediary fees, which is more conducive to the promotion of electronic payment and cashless transactions.

The above-mentioned research by the Hong Kong Solidarity Fund pointed out that Octopus charges a 1.5% handling fee for each transaction, a terminal deposit of HK$2,000, and a monthly rent of 200 yuan. The digital currency provided by public institutions such as the HKMA and the People’s Bank of China is practical in practical applications. Completely free of brokerage fees.

It can be said that for small and medium-sized businesses, the central bank's digital currency can save a lot of transaction costs, which is beneficial to consumers and enterprises.

The Beijing Winter Olympics is about to be held, and the application of the central bank's digital currency has become the focus of the outside world.

(AP)

Blockchain, safe and reliable

As for the biggest difference between the central bank's digital currency and traditional electronic wallets, it is the underlying technology - distributed ledger technology / distributed ledger technology (Distributed Ledger Technology, DLT), the most common application is the blockchain, which is also common in central bank digital currency one of the techniques used.

The principle of this technology is that each holder has a ledger (block), and when a ledger is updated (such as a transaction), each ledger in the system will be "recorded once".

Based on the public ledger system, the security and reliability of the central bank's digital currency far exceeds that of traditional electronic wallets.

"There are usually two ways to protect the security of property: hide it, only the owner can get it, such as gold; declare the ownership of the property to the outside world, and endorse it with the law, such as real estate. The traditional security scheme is the first idea, block The chain is the second type." Yao Qian explained in "Preliminary Exploration" that each block has the latest ledger, supplemented by cryptography and consensus algorithms, if someone wants to tamper with the ledger, they need to change the data. Accounting records, that is, it is extremely difficult to crack multiple passwords; and because the operation of the entire system does not depend on a single block, even if a block is attacked by hackers, it will not affect the operation of the system, and blocks can be selectively offline for maintenance. , and the system can keep working 24/7. "Practice has proved that such a database can ensure the stable operation of Bitcoin with a market value of nearly 100 billion US dollars under the attack of global hackers."

The central bank currency after "blockchainization" has three characteristics of anonymity, traceability and programmability.

Relying on these three technical characteristics, if the central bank's digital currency is implemented, it will fundamentally change social economic activities and business behavior.

Let's talk about anonymity first.

In the blockchain, each block will be equipped with two "keys", a public key and a private key, in the form of a string of passwords, which can be simply compared to "door keys" and "room keys".

Chen Yingyin explained: "When I trade, I only need to show my public key to prove that I am the owner of this asset, but because the other party doesn't know my private key, he doesn't know my information." For example, Bitcoin and other markets The popular digital currency has extremely high transaction anonymity; only the public key is used in the transaction, and the identity of the other party is unknown, so it is often used in illegal transactions such as dark web and black market.

Of course, the central bank's digital currency cannot be completely anonymous, but "controllable anonymity", that is, a credit ladder is designed. Transactions below a few hundred yuan do not require real names. If a larger transaction is required, a mobile phone number is required. Onwards, you need an ID card, and so on.

Chen Yingyin (left), a researcher at the United Hong Kong Fund, likens the central bank's digital currency to "digital cash".

(Photo by Yu Junliang)

The efficiency of currency circulation will reach its peak

Chen Yingyin said that the requirements for "controllable anonymity" are similar to the use of cash: small-value transactions are not regulated, while large-value transactions have always had regulatory requirements in the traditional banking system, requiring real names.

In the digital currency system, although the transaction identity is anonymous to a certain extent, the transaction behavior is extremely transparent, because each transaction is recorded in the shared ledger, which is difficult to be tampered with, so each transaction is traceable sex.

Relying on highly credible data will significantly reduce the cost of monitoring illicit financial flows and financial crime for regulators.

Based on a highly transparent accounting system, blockchain technology can realize smart contract functions through programming, which is also the most irreplaceable feature of digital currency.

According to Yao Qian, a smart contract is a piece of code that runs on the blockchain, which is not much different from commonly used program codes. "The only difference is that it is more credible."

"Once the smart contract is deployed on the blockchain, the code and data of the program are open and transparent, cannot be tampered with, and will be executed according to the pre-defined logic to produce the expected results." Yao Qian imagined that if intelligent Contracts can be recognized by the legal system. Relying on the advantages of program automation, by combining different smart contracts and applying them in different scenarios, the human society will accelerate toward a "more efficient business society".

Throughout the ages, monetary changes have been closely linked with the productivity revolution.

Yao Qian pointed out that the industrial revolution and the electric power revolution have promoted human society from manual labor to the age of machine and electrification, which has improved the production efficiency of currency and met the demand for currency to improve social productivity.

In the 21st century, the information technology revolution is rolling in like a wave, and "currency has emerged a new form after commodity currency, metal currency, and paper currency, that is, electronic currency." Yao Qian wrote, "The 'invisibility' of currency transcends With the limitation of physical form, the field, speed and efficiency of currency circulation have reached a historical peak.”

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