In the past six months, there has been a lot of news on the Internet about the central bank’s issuance of digital currency (DCEP). Just the following photo of the "secret exposure of digital currency" has been forwarded by major media to the point of appearing electronically.

But what’s interesting is that everyone is still a little unfamiliar with central bank digital currency.

I don’t know if you guys have heard of this old joke, “I want to buy an iPhone, which brand is the best?”

In fact, many people have doubts about the central bank. The understanding of digital currency is quite similar to this joke.

Just like when everyone thinks of smartphones, they think of iPhone, things like Bitcoin and Ethereum have also become the template for everyone to understand digital currencies.

What is this thing? What is the difference between it and Alipay WeChat? Is the central bank going to cut leeks too? Many question marks also appeared on the foreheads of netizens who did not post much.

If you fellow missionaries have questions similar to these, then you have come to the right place.

Because today, I am going to try to talk to you about central bank digital currency.

First of all, let’s talk about what exactly a central bank digital currency is.

The English abbreviation of the central bank's digital currency is DCEP, which is the abbreviation of Digital Currency Electronic Payment. Simply put, it is the digital RMB. Don’t doze off in a hurry, the name is actually not the important point, just make it familiar to everyone.

According to the description of the director of the Central Bank’s Monetary Research Institute, DCEP has a very clear positioning, which is to partially replace M0. In human terms, it is to partially replace the banknotes and coins in your hands.

Do you remember the last time you used cash? You may not believe it, but you can hardly remember what the RMB looks like.

But banknotes and coins are so cute, why partially replace them? How can hip-hop singers show off their wealth?

In fact, those banknotes and coins that we use less often are quite expensive in themselves. Yes, you heard it right, money is expensive.

According to the U.S. dollar cash production cost table published by the Federal Reserve, we can see how much U.S. dollar production costs are for each denomination. And our RMB is almost the same.

In addition, including the transportation, storage, circulation, destruction, etc. of RMB, all of them require money to be burned. Some research institutions have estimated that the operating cost of traditional RMB cash is approximately 276.7 billion yuan per year.

After the implementation of digital renminbi, this large amount of operating costs is expected to be saved by more than half, and problems such as counterfeit currency will also be greatly solved.

With this explanation, can we understand the good intentions of the central bank?

Seeing this, some friends will definitely ask, can’t Alipay and WeChat Pay solve these problems? Moreover, third-party payment is now well used. What is the difference between DCEP and them?

Don’t be impatient, don’t be impatient, let the bad reviews tell you.

The differences and advantages between DCEP and third-party payment.

First of all, I would like to say that for ordinary consumers, DCEP may not bring earth-shaking changes to our daily lives.

In the future, we may just have one more digital wallet and one more payment method, such as Alipay and WeChat using DCEP for payment.

What is more intuitively different from other third-party payments is that DCEP supports dual offline payments. In other words, two devices that are not connected to the Internet can also complete payment and collection. (Specific technical details have not yet been announced). In addition to scanning, NFC payment (touch and touch) has also been introduced, and there are no handling fees for transfers and cash withdrawals.

But if you put aside the surface of DCEP and take a closer look, the difference between DCEP and third-party payment is huge!

To understand the difference between DCEP, you may first understand that the money you have in Alipay and WeChat is not the same thing as the cash in hand and DCEP bills. (You can skip the following part if the content is too long)

Because according to the supply and liquidity of currency, we generally divide currency into several levels: M0, M1, M2, M3.

To put it simply, M0 generally refers to the cash in our hands, M1 = M0 + unit demand deposit, and M2 = M1 + various quasi-currencies.

So, the balance in Alipay and WeChat is generally considered to be M1, cash and DCEP are M0, and personal savings deposits are M2.

The central bank can estimate the economic situation by counting currencies at all levels in the market, and then adopt corresponding monetary policies. To put it simply, more M0 means that people have money on hand, and more M1 means that both companies and people have money on hand.

Among them, the digitization of M1 and M2 has already been carried out, and now only M0 is missing, which means that the cash in everyone’s hands has not yet begun to be digitized.

I believe that some blind students have discovered Huadian. When we use Alipay or WeChat to make purchases, we clearly use the balance M1 or the bank card savings M2, but it seems to be doing the work of M0 before. Son.

M0, which should have the highest liquidity, is lying in your pocket, waiting for everyone's luck. (Some economists also count funds in payment scenarios such as Alipay and WeChat as M0)

Isn’t this a mess? Are such statistics still meaningful?

By the way, this is the second meaning of promoting DCEP. Digitizing M0 allows the central bank to collect currency flow data in real time and influence monetary policy more accurately and efficiently.

And you may not believe it. In order to make the data more accurate and the payment system more standardized, the previous central banks have made a lot of efforts, and DCEP can be said to be the general trend.

Five-stage development diagram of the payment industry:

In the era of two powerful mobile payments, the relationship between third-party payment platforms and banks is as follows: third-party payment institutions and commercial banks Direct connection.

Before the direct connection was cut off:

The reserves* belonging to everyone were stored in commercial banks in the name of third-party payment institutions. Many of them misappropriated the reserves, laundered money, and even The problem of fund theft is endless. The efficiency is okay, but the security is not high.

So in 2017, the regulatory authorities launched the "NetLink" platform, requiring third-party payment institutions and commercial banks to cut off direct connections, and capital flows and data were also supervised by the central bank.

After disconnecting the direct connection:

For example, the reviewer used the China Merchants Bank card to deposit 925 yuan into Alipay, and this is what happened behind the scenes:

< p> The negative reviewer’s deposits with China Merchants Bank decreased, thereby indirectly reducing China Merchants Bank’s deposit reserves* with the central bank, while the reserves deposited with the central bank in the name of Alipay increased.

Moreover, after the direct connection is cut off, 100% of the reserves of third-party payment institutions such as Alipay and WeChat are centrally deposited in the central bank. In other words, the possibility that the two Ma bosses want to misappropriate everyone's money in their accounts is 0%, and everyone's money has become much safer.

Are you confused? A simple deposit and withdrawal of money can be so complicated

Yes, the central bank thinks so too. Let’s take a look at the simplicity of DCEP Rough logic. Directly exchange the digital currency to commercial banks, and then exchange it to ordinary people.

So, do you think DCEP is great? There is no middleman making a profit, and safety and efficiency are guaranteed.

Of course, another point is that unlike Alipay and WeChat, DCEP has unlimited legal compensation and is mandatory. In fact, just like cash, no one can refuse to receive digital currency because it is endorsed by the state.

The difference with Bitcoin and Libra

Seeing this, everyone must have understood the difference between DCEP and third-party payment. So what is the difference between it and Bitcoin and Libra, which are both digital currencies?

If you take a closer look, the difference between them is quite big.

First of all, Bitcoin is actually not endorsed by the government. It was invented by a mysterious person named Satoshi Nakamoto. If the man at the canteen downstairs doesn’t want to accept Bitcoins, there’s really nothing you can do about him.

And because of the overemphasis on decentralization and security, Bitcoin can only handle up to 7 transactions per second. . .

You must know that during Double Eleven, Netlink’s transaction peak reached nearly 100,000 transactions per second. Let Bitcoin experience Double Eleven, and it may be able to cure all of your hand-chopping diseases.

Coupled with a series of problems such as the large number of speculators in the Bitcoin market and the unstable currency value, the application scenarios of this thing are still quite narrow.

Based on the performance of these digital currencies, DCEP, in addition to being endorsed by the government, adopts a framework that combines traditional encryption and blockchain. In other words, there is no need to worry about transaction speed, and a certain degree of anonymity can be achieved.

Of course, because it is partially anonymous, if you are involved in illegal activities such as money laundering or corruption, you can still be caught immediately.

Libra and DCEP will be more similar.

Libra is an encrypted digital currency launched by Facebook. It does not pursue a stable exchange rate against the US dollar, but pursues relatively stable actual purchasing power. It is a plan to promote digital currency on a global scale.

Compared with Bitcoin, Libra's currency value is much more stable. It is linked to a series of currencies such as the US dollar, the euro, the Japanese yen, etc. Moreover, the maximum number of transactions per second can reach 1,000, and security and anonymity are also guaranteed.

But the difference between it and other legal currencies including DCEP is also obvious, that is, it has no national endorsement and cannot be controlled by central banks of various countries.

Forget China, even the United States, which gave birth to it and raised it, is frantically suppressing Libra.

Because the implementation of super-sovereign digital currencies such as Libra will damage the monetary sovereignty of various countries, everyone is not stupid. The weakening of monetary sovereignty was one of the causes of the Southeast Asian financial crisis in the last century.

Libra’s wave of challenges to central banks around the world also came to an end with firm resistance from various countries.

All countries are taking action

Not only China’s DCEP, but also various countries have recently launched their own digital currency plans.

For example, the United States announced a digital dollar project in the first half of this year, and the Bank of Japan also announced that it would try digital currency in July this year. France, Singapore, Canada, South Korea and other countries are also on the way.

As we proposed the digital currency plan six years ago and started research and development three years ago, we have accidentally been at the forefront of digital currency. I have to say that this time we were the first to take the lead.

Currently, our DCEP is also undergoing intensive pilot testing.

According to the description of the former president of the Bank of China: In the future, DCEP and the already popular third-party payment will develop in parallel. In the development process, who can do better, be more convenient, more reliable, and have lower costs? , whoever will have a bigger market.

So for us consumers, DCEP may be a more convenient payment method in the future. For our monetary system, what is more is a more brand-new and efficient payment ecosystem.