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Edited by Shri333 at 22-12-2023 05:34 AM
1. Evolution of Digital Currency
With the development of information technology, including mobile internet, cloud computing, secure storage, and blockchain technology, payment methods worldwide have been undergoing significant changes. In June 2019, Facebook introduced the cryptocurrency Libra, which gained widespread attention and published the Libra whitepaper, claiming to establish a simple global currency and financial infrastructure. This concept of digital currency drew market attention. Even the Federal Reserve, which previously expressed reservations about issuing digital currency in the next five years, is now showing a more positive attitude towards digital currency, indicating collaboration with other central banks to enhance understanding of ""central bank digital currency."" Research on digital currencies by central banks worldwide is expected to accelerate in 2020.
The concept of digital currency has evolved over nearly four decades since it was introduced in 1983, with significant developments in both theory and practice. It has transitioned from complete anonymity to controllable anonymity, from online to offline, from single-bank digital currency systems to multi-bank digital currency systems, and from centralization to decentralization.
2. Digital Currency, Virtual Currency, Electronic Currency
(1) Electronic Currency: It refers to currency payments made electronically. Essentially, it involves the electronic and network-based conversion of legal tender currency. Depending on the issuing entity and application scenario, electronic currencies are categorized as stored-value cards, bank cards, third-party payment methods, etc.
It usually involves users, such as consumers, businesses, and financial institutions, conducting digital transactions using various electronic payment methods via the internet to facilitate money transfers or financial transactions. According to N. Asokan's classification method, electronic payment systems can be divided into two major systems: account-based and digital currency-based payment systems. Account-based payment systems involve users creating accounts with payment service providers and authorizing them to make payments, like debit and credit card systems, which initiate fund transfers based on instructions using account numbers.
Digital currency-based payment systems, on the other hand, involve users purchasing electronic digital tokens from the currency issuing entity, and these tokens possess a certain value, serving as a means of payment for businesses or can be stored for use as cash within digital environments.
(2) Virtual Currency: The European Central Bank, in its October 2012 ""Virtual Currency Schemes"" report, defines virtual currency as an unregulated digital currency issued and controlled by a specific developer, accepted and used by members of a specific virtual community.
In simple terms, virtual currencies are issued by specific entities, accepted and used by specific members, and the currency's value, utility, management, and control are all determined by the issuing entity.
Based on this definition, digital currencies like Tencent's Q Coin, Sina's U Coin, Baidu's Baidu Coin, etc., can be considered virtual currencies. Prior to June 2009, virtual currencies like Tencent's Q Coin could be exchanged for Chinese yuan. However, in December 2009, China's Ministry of Culture and Ministry of Commerce jointly issued a notice stating that these virtual currencies could only circulate within specific platforms and were not exchangeable for Chinese yuan.
(3) Cryptocurrency: It is a transaction medium that uses cryptographic principles to ensure transaction security and control the creation of transaction units. Cryptocurrencies use encryption algorithms and cryptographic technology to ensure the security of the entire network. Many cryptocurrencies are based on blockchain distributed systems and facilitate peer-to-peer transactions using private and public keys to enable point-to-point transfers. Public keys must be disclosed on the blockchain for all to witness the ownership and transaction process of the cryptocurrency.
The issuer of a cryptocurrency does not place any restrictions on the currency's value, use, or existence, and its operation is network-based, with its value determined by users. Typical examples of cryptocurrencies include Bitcoin and Libra.
In addition, digital currencies can be categorized into central bank digital currencies and private digital currencies, depending on the issuing entity.
(1) Central Bank Digital Currency (CBDC): These are digital currencies issued and supported by sovereign monetary authorities. They can completely replace traditional paper and electronic currencies, like China's upcoming DCEP.
The essence of a CBDC is encrypted digits that serve as a substitute for paper money. The International Settlements Bank defined central bank digital currencies (CBDC) as the digital form of central bank money. CBDCs may be issued based on blockchain technology or traditional central bank centralized account systems. Due to being issued by the central bank, CBDCs inherently possess monetary attributes such as a stable value.
(2) Private Digital Currency: Also referred to as cryptocurrencies, these currencies have no central issuer. Anyone can participate in their creation, and they do not have the characteristics of legal tender or compulsion. They are essentially digital assets.
Private digital currencies lack widespread recognition and have no intrinsic value. Their value can be highly volatile due to a lack of anchoring to any asset. Private digital currencies typically use Initial Coin Offerings (ICOs) to raise funds to support their project's development. Because private digital currencies lack corresponding regulatory oversight, they carry a significant level of risk. In China, these digital currencies have been classified as virtual goods and do not possess legal tender status, with any organization or individual prohibited from engaging in token issuance and financing activities. |
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Post time 9-11-2023 12:39:19