Source: Sina Finance
Author: Ou Ke Cloud Chain
In 2020, digital currency, the global central bank, entered the fast lane.
The birth of digital currency, the central bank, has greatly met the growing trading needs of human society, which not only makes trading more convenient, but also greatly saves manufacturing costs. At the same time, thanks to the blessing of scientific and technological forces, digital currency can effectively prevent counterfeiting and loss.
Nevertheless, most people are still unfamiliar with the relationship among the global central bank digital currency (CBDC), the Bank of China digital currency (DC/EP) and the digital RMB (e-CNY), and the "blockchain" and "distributed ledger technology" involved behind it are often confused and misunderstood.
Today, Xiao Ou will take you to clarify some questions about digital currency.
About CBDC, DC/EP and e-CNY
CBDC, the full name of which is Central Bank Digital Currencies, is translated into digital currency, the central bank. The Bank of England, the Bank of England, defined it in its research report on CBDC: the central bank digital currency is an electronic form of central bank currency, which can be used by families and enterprises to make payments and store values.
Every country in the world has its own version of CBDC, and the research and development project of China version of CBDC is called DC/EP (digital currency electronic payment), that is, digital currency and electronic payment tools.
Regarding DC/EP, Xiao Ou has also mentioned it in previous articles. For details, please poke "Digital RMB doesn’t bear interest" and rushed to Weibo for hot search, and posted about the central bank’s "literacy" in digital currency.
Recently, Zhou Xiaochuan, president of China Finance Association and former governor of China People’s Bank, further explained DC/EP, saying that DC/EP is a two-tier R&D and pilot project plan, not a payment product. The DC/EP project plan may contain several payment products that can be tried and promoted, and these products are finally named e-CNY, that is, digital RMB.
In addition, he also pointed out that the development ideas of DC/EP and CBDC are different. For example, in CBDC’s vision, both the currency ownership and the liability belong to the central bank, while in DC/EP, the second-tier commercial institutions actually have the ownership of e-CNY and the guarantee of payment.
(The picture shows the two-tier operation system of "central bank-commercial bank/other operating institutions" adopted by DC/EP.)
As shown in the above figure, in the two-tier operation system of DC/EP, there is not a simple wholesale-retail relationship between the central bank as the main body of the first-tier structure and the main body of the second-tier structure (banks, third-party payment institutions, etc.). In fact, the second-tier institutions need to undertake a series of compliance responsibilities such as KYC, anti-money laundering and user data privacy protection, and the general CBDC often thinks that these responsibilities belong to the central bank.
At present, the R&D of central banks in digital currency is in full swing. Although the causes, technical design principles, public standards, legal and regulatory framework are different, no country wants to lag behind.
DC/EP does not adopt blockchain technology.
Nowadays, when talking about digital currency, many people subconsciously associate it with blockchain technology, and some even threaten that DC/EP uses blockchain technology, but this statement is actually incorrect.
On August 10th, 2019, Mu Changchun, then Deputy Director of the Payment Department of the Central Bank, made it clear in the popular science DC/EP at the 3rd China Financial Forty Yichun Forum that the central bank digital currency (DC/EP) did not use blockchain technology at the central bank level.
The reason is actually not difficult to understand. The natural "decentralization" feature of blockchain technology is both an advantage and a defect. As legal tender, the central bank needs to control the circulation to avoid excessive issuance, and at the same time, it needs centralized control to make use of supervision. Therefore, any statement that DC/EP is based on blockchain is irresponsible.
(Photo: Image from the Internet)
Then someone has to ask, since blockchain technology is not adopted, what is the technology behind DC/EP?
At present, the disclosed technology is that DC/EP will be properly adjusted according to the existing currency operation structure to form a structure of "one currency, two banks and three centers".
Remarks: The so-called "one currency" is an encrypted number string that represents a specific amount and is guaranteed and signed by the central bank. The "two libraries" are the central bank’s issuing library and the bank library of commercial banks, in addition to the digital currency wallets of individuals or unit users in the circulation market; The "three centers" are certification centers, registration centers and big data analysis centers.
According to Babbitt, the head of the digital currency Research Institute of the People’s Bank of China said in an interview with the media,
When DC/EP is designed for security, it refers to the relevant requirements in the Technical Safety Specification for Financial Distributed Accounting Books issued by the People’s Bank of China.
Distributed Ledger Technology (DLT) is essentially a database technology that can share data in real time in a network composed of multiple sites, different geographical locations or multiple institutions.
In a network based on DLT, all participants can get a copy of the only real account book, and any changes in the account book will be reflected in all copies in a few minutes or even seconds. The records of the account books are updated and maintained by one, several or all participants according to the preset consensus mechanism.
From the definition, DLT seems to have some commonalities with blockchain technology. Indeed, generally speaking, both refer to information records distributed on the network, which are more transparent and open than the early centralized databases or digital records.
Based on these commonalities, many people will confuse the two, but in fact, DLT existed long before the birth of blockchain technology. Blockchain technology, as the basic layer of encryption exchange in database work, exists in the field of DLT or distributed classification technology. In other words, we can think of blockchain as a subset of DLT.
However, there are still some essential differences between DLT and blockchain. The biggest difference is based on permissions and roles. DLT can assign multiple roles to different users, such as administrator, operator, etc., that is, only the selected participants can access it. In the blockchain, all users have the same authority and rights, and anyone can participate. In other words, DLT is not 100% decentralized like blockchain.
However, as the person in charge of the digital currency Research Institute of the People’s Bank of China said, DC/EP adopts mature and robust technology and gives consideration to innovation in technology selection, which integrates the advantages of traditional centralized architecture and blockchain technology, and also draws on the core connotation and advantages of blockchain technology to avoid its shortcomings.
Now, following the launch of "Digital RMB Wallet" in Shenzhen, Suzhou has also launched a new DC/EP pilot. It is foreseeable that the era of no network payment is coming to us at a speed visible to the naked eye, and are you ready?
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