What makes digital currencies "new"?

Mar 17 - 2023

What makes digital currencies "new"?

The "new" aspect is in the format. Money is a general equivalent in economics, with a value scale, means of payment, value storage, and other attributes, and it has always had a physical form from ancient times to the present. The digital currency no longer exists in physical form. In contrast, while we cannot see the physical form of electronic money, it represents the money in our bank account or money transferred frombitcoin mining app our bank account, which is equivalent to having physical currency as a support. Digital currency, on the other hand, lacks this backing and is merely an informational form of money.

The "new" is contained in the transaction. Unlike electronic currency transactions, which involve the transmission of signals over a network followed by the transfer of funds by banks or third-party institutions, digital currency transactions are carried out using smartphones equipped with digital currency security chips. It's more like the paper money transaction process, but with digital technology. Overall, it is more complicated than paper money transactions (technically, but not operationally) and simpler than electronic money transactions. Of course, the transaction process of paper money revolves around a physical entity, which provides a more secure feeling, whereas transactions based on digital technology invariably cause people to be concerned. As a result, the widespread adoption of digital currency is unavoidable. During this process, the general public can gradually develop trust in digital currencies.

The "new" is written into the regulation. The central bank stated in its explanation that payments, transactions, and anti-money laundering using RMB cash are becoming increasingly difficult and costly to manage in modern society. These issues can be effectively addressed through the issuance of digital currency. Controlled anonymity is the solution. What exactly is controlled anonymity? First, transaction records' privacy must be protected; second, criminal facts must be traceable. One issue that many people have when paying with WeChat and Alipay is that the transaction records are saved. Becauseantminer a10pro, whether it is third-party payment software or a credit card, the process of transferring funds exists, and this process then records the use of funds, making it easier to trace. It is more difficult to track than paper money, which has a unique digital serial number. Digital currency, like paper money, is difficult to track, but the central bank has the authority to do so. Controlled anonymity ensures that the privacy of transaction records is not jeopardized in daily life, and in the event of a special event, the central bank can track the funds using relevant technology.

However, just because a digital currency is "new" does not imply that it is appealing. Aside from the public's concern about its security, how to break the current payment pattern is another major issue confronting digital currency; after all, the value of digital currency is still in its application. People have become accustomed to WeChat, Alipay, and other electronic payment methods as a result of the development of third-party payment systems; however, the initial emergence of this new thing, the change in the concept and method of payment will increase people's cost of use, increasing its popularity difficulties. It is also understood that digital currency is used as an alternative to M0, which is an alternative to cash in circulation, so it may not necessarily disrupt the existing payment pattern at first, but rather serves as a supplement to existing payment forms. And, like cash, digital currency has the property of being unrestricted by network factors. In specific scenarios, such as small payments, digital currencies will outperform electronic payments.

Is the development of digital currencies unnecessary, given the costs and the limited convenience they provide?

Libra, a cryptocurrency project led by Facebook, released a white paper in June 2019 with the goal of creating a simple, borderless set of currencies and a financial infrastructure that serves billions of people. The launch of this project acted as a catalyst for global discussion about digital currencies, directly accelerating the development of digital currencies in several countries. The emergence of new currencies will invariably have an impact on the existing global monetary system as well as national capital markets.

In terms of dealing with changes and their consequences, China is currently researching its own digital currency, which is a consolidation of the status of legal tender. Unlike the "decentralized" characteristics of crypto assets that are being discussed globally, one of our digital currency's most important features is its centralization. In other words, with the stability of fiat money, the central bank remains at the center of the money delivery process, performing macro-control functions and creating a bitcoin earnstable financial environment for the economy and society. In terms of promoting socioeconomic development, digital currency can realize value transfer without the use of bank accounts, saving the time-consuming process of clearing and settlement and realizing the synchronization of transactions and settlement. This unification of capital and information flow promotes economic and trade prosperity by increasing the efficiency of socioeconomic activities while lowering costs. As a result, while digital currency may appear appealing in the short term, it is a major trend in the digital economy.

By:Anne