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Digital Renminbi: A Fiat Coin to Make M0 Great Again

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Contrary to what many think, China does not oppose blockchain technology.

Rather, it takes issue with bitcoin and other privately issued cryptocurrencies, which it fears may facilitate financial fraud and capital flight. The People’s Bank of China (PBOC) has, in fact, had an initiative for issuing a blockchain-based digital renminbi (RMB) since 2014. The project has already generated 71 patents and has initiated a trial operation for an interbank digital check and billing platform.

If successful, this digital RMB project could expand the central bank’s influence over both the domestic and international economy. It has broad implications for the geopolitics of money and for the future of private cryptocurrencies such as bitcoin. To understand the PBOC’s motives, we must first distinguish between the digitalization of fiat currency and digital fiat currency. They are not the same thing. Each has a very different impact on the money supply and on the power balance between central banks and commercial banks.

The digitization of currency, which stems from the advent of electronic payment/clearance and mature interbank IT systems, allows commercial banks to more efficiently and independently generate the credit flows that expand broad
money supply, or M2. By contrast, digital fiat currency, enabled by blockchain technology, affects the base currency measure known as M0.

Traditionally, central banks directly control base money creation/destruction but have only indirect power over the broader, credit flow-driven monetary supply. Now, with digital fiat currency, they have the potential to bypass commercial banks and regain control of currency creation/supply end to end, thereby structurally centralizing their power in policymaking.

The PBOC’s interest in this solution comes as highly advanced digital payment systems like Alipay and WeChat have created a cashless and cardless economy. This is a form of currency digitalization, built upon a network of commercial bank accounts, operating at the M2 level of money supply.

By contrast, a digital RMB would be integrated into M0, thus restoring control and influence to the PBOC. As the Vice President of PBOC Fan Yifei put it in a public interview: “With the help of technology innovation, we can gradually transit into issuance and circulation of digital RMB and impose effective supervision of in the private sector.”

High M2 supply and massive shadow banking

From 2007 to 2017, China’s M2 supply grew from 40 trillion RMB to 170 trillion RMB ($25.5 trillion), with an average annual growth rate of 15%, far outpacing the 10 percent nominal GDP growth rate over the same period. This massive expansion is largely due to the excessive issuance of commercial bank loans, primarily for real estate development, local governments’ infrastructure projects, and state-owned enterprises.

It has led to a highly leveraged banking system and left a huge debt risk hanging over the Chinese economy.

What’s more, the measurement of M2 underestimates the real currency growth rate in China due to shadow banking. High-yield “wealth management products” and structural deposits offered by banks, as well as internet financing such as P2P lending, make up a separate financial industry that’s worth 70 trillion RMB.

Wealth management products alone have grown from a 0.5 trillion RMB industry in 2007 to a whopping 30 trillion in 2017. These are not counted as M2 and are often hard to track due to their being hidden from bank balance sheets, making it even harder for the PBOC to manage the Chinese economic cycle. Current attempts to address the problem largely consist of more stringent reporting and regulation, but this merely chases behind the problem rather than stamping it out.

To get ahead of it requires a new financial system altogether. That’s what’s intended with the Digital RMB, a project that’s conceived of as a means of reasserting monetary control in the interests of financial stability.

Design methodology

While the PBOC is still considering different possibilities for network design, it seems likely to be a permissioned network in which nodes are controlled by the PBOC and major Chinese banks. This suggests transactions will be visible to the banks and government, but not to the public.

According to Yao Qian, the head of PBOC Digital Currency Research Center, the designated PBOC digital currency system has a few key elements:

  • A PBOC-managed private cloud as the IT infrastructure
  • A database on the private cloud to allow the PBOC to exercise full control over monetary issuance and ledger management
  • A reserve database accessible by commercial banks, which can either reside on the PBOC private cloud or on banks’ own private cloud
  • A digital RMB wallet client, published and maintained by the PBOC that’s used by all entities and individual
  • A verification center where the PBOC can manage institutional and user identity information
  • A registration center which records the registration of currency ownership and keeps the ledger of digital currency generation, circulation, and inventory management
  • A big data analysis center used for anti-money laundering, payment behavior analysis, and analysis of regulatory signals.

Some might wonder why blockchain or distributed ledger technology (DLT) is needed at all if nodes are not highly decentralized. The answer is that a blockchain model offers a better coordination paradigm compared to traditional currency supply management, which is heavily dependent on bookkeeping. Blockchain’s tamper-proof nature and private-key cryptography prevent false transactions and counterfeiting, while also making it much easier for the PBOC to manage the circulation flow.

Domestic impacts and beyond

The issuance of a digital RMB will not only make cash and coinage obsolete (which is already happening in China), but also make commercial banks and M2 easier to control. It means the PBOC can more effectively control and regulate an
overextended debt market. Thanks to blockchain’s traceability and programmability, it will become much more difficult to hide banking products and services from balance sheets.

This also allows for easier execution and more accurate assessment of monetary policy, and makes the measurement of currency supply, circulation speed, currency multipliers, and distribution much more accurate. PBOC can write rules at the code level regarding where digital RMB can and cannot flow to. If it wants to cool down the housing market, for example, it can simply set a program preventing digital RMB from entering the real estate sector.

As for policing individuals, a person’s spending history and assets balance are immediately evident on the blockchain, making it much easier to accurately assess creditworthiness, detect money laundering, and prevent tax evasion and capital flight. This is, of course, is likely to strengthen privacy advocates’ already mounting criticisms of China’s social credit score model, It’s not clear that such criticism is having any influence over the government’s thinking on such matters, however.

A digital RMB could even strengthen China’s influence overseas. If the One Belt One Road initiative succeeds, a digital, borderless, stable currency could facilitate international trade among its 60-plus member countries. This, coupled with the fact that China is the biggest creditor to Venezuela and it holds over 14 percent of African countries’ sovereign debt, would position it to offer a digital RMB as the next reserve currency of emerging-market economies.

This would require those countries to confer to China some degree of influence over their monetary conditions. Would they prefer that to their current dependency on the U.S. Federal Reserve’s dollar?

It’s an open question. But it will be highly synergetic with China’s rigorous effort of de-dollarization: reducing US dollar asset in both its foreign exchange reserve, largely increasing its gold reserve and selling off US Treasury debt. Either way, these moves could increase tensions between US and China and might even force the U.S. to pursue a similar digital model for the dollar.

We still have a little time before such questions become pressing. Even so, change is coming. According to people working on this initiative, adoption will come with a great deal of observation and adjustment over the course of 10 years or more, with experiments in various use cases starting in “special economic zones” like the city of Shenzhen. Eventually, the plan is to use incentives such as increasing the transaction cost of cash to push people towards using digital currency.

Cash is expected to disappear almost entirely.

The next question is: what does this mean for private, decentralized cryptocurrencies such as bitcoin?

It may seem incongruous that blockchain technology, initially introduced under the ethos of censorship-resistance, is now being used by central banks to further centralize their financial power. But from the perspective of the Chinese government, it’s not hard to see why. Over the long term, a digital RMB has the potential to make global trade more efficient and money laundering more difficult.

Yet, given worldwide concern over surveillance by centralized institutions – both public and private – and the perennial risk that monetary policy mismanagement could foster a currency collapse akin to the Venezuelan bolivar, there’s no reason to believe such programs will kill private cryptocurrencies. On the contrary, it could boost demand for them. Anonymous, non-sovereign currencies like bitcoin or privacy coins become increasingly important in an environment where government money is closely surveilled and controll.

What’s more, a programmable fiat digital currency could provide a seamless fiat-to-crypto on-ramp. Ironically, projects such as China’s, in which governments aim to concentrate control over money, could foster greater competition from private systems of money such as bitcoin.

 

 

 

source:.coindesk

Blockchain

The Blockchain That Can Beat EOS, TRON And Ethereum

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Applications have become an integral part of the modern lifestyle. There are apps for anything from monetary transactions to tuning household appliances from work. But the market of apps is evolving, just like any other market. The advent of decentralized applications, or dApps, has heralded a new era in the way we perceive software on our devices. As a result, the infrastructures for maintaining dApps is becoming a hotly contested battleground for developers.

The market has already seen the creation of 2,551 dApps being used by over 95,966 users daily. Transactions through dApps are surpassing the 4,418,078 mark a day, and 11,741 smart contracts are involved in the process. Above all else, the market of dApps is already generating the volume of $21,512,096 per day and is showing no signs of abating despite the recent slump in cryptocurrency prices. 

The growing competition on the market of decentralized infrastructures is largely due to the launch of new public protocols with their unique technical advantages, which are simplifying the development of dApps and the implementation of ideas and concepts that could not be implemented on Ethereum, Tron or EOS. The lack of the technology needed that would negate the disadvantages of blockchain, such as the inability of network scaling, low network bandwidth, low transaction processing times, and others, is the main barrier preventing dApps from becoming even more popular and widely accepted as logical alternatives to classical apps.

The Alternatives

Apart from the all too popular Ethereum, Tron and EOS networks, there are other infrastructures becoming worthy alternatives. The Credits platform is one such competitor in the field that is offering a new solution for the development of dApps.

The Credits blockchain platform is a completely open-source and fully decentralized blockchain software protocol operating on smart contracts that are designed to allow the creation of high-performance applications. 

Credits smart contracts are written in JAVA, one of the most popular programming languages ​​in the world that is both accessible to most programmers and easily configurable to suit an endless variety of needs. Apache Thrift technology is used to allow the platform to simplify the process of integration with products developed in different programming languages.

It Is Working

Credits is not just a platform, but a full-fledged company that has publicly opened access to its software for all users. Anyone willing can join the network, launch an operating node and develop their own products and services based on the Credits protocol. To date, more than 20 decentralized applications have been developed on the Credits protocol.The full list is available on Credits dApp Map.

Projects such as the 0XUniverse gaming dApps, Unlimited Tower, ExoPlanets, Royale Roulette, along with the Karma, Rare Bits and WandX projects that are currently operating on the basis of the Ethereum, Tron and EOS protocols, are considering the possibility of migrating their applications to the Credits protocol for better functioning. 

Among the more interesting products based on the Credits platform is the Crext Extension, an analogue of Metamask acting as a browser extension for storing the Credits cryptocurrency and other tokens, and interacting with products based on Credits protocol. Another dApp is the CScheduler, a Credits blockchain-based service that provides the ability to schedule smart contracts at a defining moment or at specified time intervals. Among the popular gaming dApps on the Credits platform is Dice, a blockchain-based gambling game involving casting dice under the supervision of a random number generator.

It is impossible to remain on what has already been achieved and the IT sector is the most progressive industry in the world, raking in hundreds of billions of dollars a year on apps and other products. The blockchain industry is catching up in terms of capitalization as major players are stepping in to provide the necessary infrastructure for its growth. However, the mainstays of the market are not indomitable and are gradually giving way to more advanced and progressive solutions.

The progress that the Credits platform has already made in its development and the innovative nature of its protocol have attracted the attention of many developers and giants of the IT industry, such as Lenovo and IBM. But the project team does not mean to stop on what has already been achieved and is planning to launch thematic hackathons and an Accelerator Program with a prize pool up to $2,000,000 to support the development of products and to showcase the capabilities of the platform.

If all goes as planned, the market will soon see a large number of products developed on the basis of the Credits protocol that will contribute to the development of the project infrastructure and its tokenomics. No matter the outcome of the upcoming events, one thing is clear – Credits is here to stay.

Source: newsbtc


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Blockchain

The Blockchain That Can Beat EOS, TRON And Ethereum

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on

Applications have become an integral part of the modern lifestyle. There are apps for anything from monetary transactions to tuning household appliances from work. But the market of apps is evolving, just like any other market. The advent of decentralized applications, or dApps, has heralded a new era in the way we perceive software on our devices. As a result, the infrastructures for maintaining dApps is becoming a hotly contested battleground for developers.

The market has already seen the creation of 2,551 dApps being used by over 95,966 users daily. Transactions through dApps are surpassing the 4,418,078 mark a day, and 11,741 smart contracts are involved in the process. Above all else, the market of dApps is already generating the volume of $21,512,096 per day and is showing no signs of abating despite the recent slump in cryptocurrency prices. 

The growing competition on the market of decentralized infrastructures is largely due to the launch of new public protocols with their unique technical advantages, which are simplifying the development of dApps and the implementation of ideas and concepts that could not be implemented on Ethereum, Tron or EOS. The lack of the technology needed that would negate the disadvantages of blockchain, such as the inability of network scaling, low network bandwidth, low transaction processing times, and others, is the main barrier preventing dApps from becoming even more popular and widely accepted as logical alternatives to classical apps.

The Alternatives

Apart from the all too popular Ethereum, Tron and EOS networks, there are other infrastructures becoming worthy alternatives. The Credits platform is one such competitor in the field that is offering a new solution for the development of dApps.

The Credits blockchain platform is a completely open-source and fully decentralized blockchain software protocol operating on smart contracts that are designed to allow the creation of high-performance applications. 

Credits smart contracts are written in JAVA, one of the most popular programming languages ​​in the world that is both accessible to most programmers and easily configurable to suit an endless variety of needs. Apache Thrift technology is used to allow the platform to simplify the process of integration with products developed in different programming languages.

It Is Working

Credits is not just a platform, but a full-fledged company that has publicly opened access to its software for all users. Anyone willing can join the network, launch an operating node and develop their own products and services based on the Credits protocol. To date, more than 20 decentralized applications have been developed on the Credits protocol.The full list is available on Credits dApp Map.

Projects such as the 0XUniverse gaming dApps, Unlimited Tower, ExoPlanets, Royale Roulette, along with the Karma, Rare Bits and WandX projects that are currently operating on the basis of the Ethereum, Tron and EOS protocols, are considering the possibility of migrating their applications to the Credits protocol for better functioning. 

Among the more interesting products based on the Credits platform is the Crext Extension, an analogue of Metamask acting as a browser extension for storing the Credits cryptocurrency and other tokens, and interacting with products based on Credits protocol. Another dApp is the CScheduler, a Credits blockchain-based service that provides the ability to schedule smart contracts at a defining moment or at specified time intervals. Among the popular gaming dApps on the Credits platform is Dice, a blockchain-based gambling game involving casting dice under the supervision of a random number generator.

Competition Is Progress

It is impossible to remain on what has already been achieved and the IT sector is the most progressive industry in the world, raking in hundreds of billions of dollars a year on apps and other products. The blockchain industry is catching up in terms of capitalization as major players are stepping in to provide the necessary infrastructure for its growth. However, the mainstays of the market are not indomitable and are gradually giving way to more advanced and progressive solutions.

The progress that the Credits platform has already made in its development and the innovative nature of its protocol have attracted the attention of many developers and giants of the IT industry, such as Lenovo and IBM. But the project team does not mean to stop on what has already been achieved and is planning to launch thematic hackathons and an Accelerator Program with a prize pool up to $2,000,000 to support the development of products and to showcase the capabilities of the platform.

If all goes as planned, the market will soon see a large number of products developed on the basis of the Credits protocol that will contribute to the development of the project infrastructure and its tokenomics. No matter the outcome of the upcoming events, one thing is clear – Credits is here to stay.

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Hedera Hashgraph, Touted as High-Speed Blockchain Alternative, Goes Live

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Hedera Hashgraph has launched its long-awaited public network, backed by some of the world’s largest corporations and promising faster transactions and greater capacity to scale than any blockchain to date.

Since December 2018, the network had been available in a testing environment to a small group of corporations and developers. As of 00:00 UTC Tuesday, anyone can open an account or build a decentralized app (dapp) on the hashgraph, which is similar to a blockchain but uses a different mechanism to achieve consensus about the state of the ledger.

With the public network now live, the Hedera treasury is set to begin distributing the system’s HBAR tokens around 01:00 UTC. The first tokens – more than 379 million – will go to investors who participated in a $124 million crowd sale that took place in three rounds from March 2018 to August 2018.

Another 1.95 million tokens will go to advisors, vendors and other participants on day one. The balance of the 50 billion supply of HBARs is to be released over the next 15 years by the network’s governing council.

Twelve cryptocurrency exchanges and over-the-counter (OTC) desks plan to list HBAR for trading: AlgoZ, BitOoda, Bering Waters, Bittrex, Galaxy Digital, GSR, Liquid, OKEx, OKCoin, OSL, Upbit and xFutures.

A year and a half in the making, the hashgraph stands out from other distributed ledger technologies (DLTs) in several ways. Its creators claim it works more efficiently than blockchains, making it more suitable for enterprises and commerce. Specifically, Hedera says the network can support up to 10,000 transactions per second, compared to 2.8 per second for bitcoin and 15 for ethereum, the two largest blockchains.

“This is the first instance globally of hashgraph being put to the test,” Hedera CEO Mance Harmon told CoinDesk. “It’s a different data structure, different technology and looks nothing like a blockchain, but solves the same kinds of problems with better security and better performance.”

Hashgraph proponents also say its proof-of-stake consensus mechanism is fairer than bitcoin’s proof-of-work, allowing transactions to come in the order they were recorded and to all settle in the same amount of time. Hedera’s code is patented rather than open-source, a condition the network says it will enforce to deter copying of the codebase or forking.

Not least of all, Hedera boasts the imprimatur of blue-chip names, with IBM, Boeing, Deutsche Telekom, Tata, Nomura and bank tech vendor FIS represented on its governing council, whose members run nodes and vote on software updates.

Praise and pans

In the lead-up to the launch, Hedera Hashgraph has gained its share of admirers and critics.

Among its fans are Steve Wilson, a principal analyst at emerging technologies advisory firm Constellation Research, who says Hedera’s size is the key to its speed.

While regular blockchains are a couple of gigabytes large, the hashgraph is smaller because it does not store all transaction history on the ledger (though it can be optionally stored on a “mirror” network). In addition to its speed, the hashgraph promises finality and instant payments as opposed to around 70 percent of transactions settling every ten minutes for bitcoin and a handful of transactions never reaching finality, Wilson said.

“If we think crypto is going to be viable for retail transactions, it’s not acceptable for you to walk out with the merchant unsure if they’ll get paid,” he said. “Hedera has a quality of service that others are not as committed to.”

That speed, however, only applies to certain kinds of transactions, said Eric Wall, the former blockchain lead at Nasdaq-owned fintech vendor Cinnober.

“A dapp requires smart contracts and since Hedera is currently throttling 10 transactions per second with smart contracts, then it doesn’t make this any more interesting than ethereum,” said Wall, who recently wrote a pair of skeptical Medium posts about Hedera.

Hedera’s consensus service is also nothing new, Wall maintained. Sidechains have also been created off of public blockchains that take advantage of the consensus strength of the underlying system.

“I can’t predict the future of what Hedera will transition to in the future, but moving away from a model that is based on economic and game theory guarantees to a trusted model is a severe reduction in the neutrality model of the system,” he said.

Link to private networks

Since October, hundreds of developers have been building on the network and 25 are now running dapps that were integrated into the mainnet prior to launch, Harmon told CoinDesk.

Nevertheless, the hashgraph is considered to be in a beta testing phase because the network still lacks the Hedera Consensus Service (HCS) and a few other features which will be included in version 1.0.

The HCS is to serve as a link between private blockchain networks and the hashgraph. It allows a hash of transactions from another network to be ordered in the Hedera network by time, showing a searchable record of when transactions occurred with the trust of a decentralized network.

For example, Certara, a drug development and decision-support company, plans to use the HCS to create “tamper-proof” recording of health data transactions while using a private network like Hyperledger Fabric to ensure privacy, said Jim Nasr, vice president of technology and innovation at Certara subsidiary Synchrogenix.

The HCS will also allow Fabric to run on top of mirror nodes that provide insights into all the transactions flowing over the hashgraph but do not participate in the consensus mechanism like a regular node.

“Getting computational trust is why you want to go down the blockchain path for healthcare,” Nasr said. “With the consensus service, your transactions finalize on the mainnet yet can still leverage a private blockchain.”

source.coindesk.

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