A little knowledge about DCEP (Digital Currency Electronic Payment)

(From Weibo @币印矿池@星球日报Odaily)

A photo of the Agricultural Bank of China has been circulated on major social platforms recently. This is actually an internal test of the digital currency DCEP in the Agricultural Bank of China. According to this screenshot, the "Digital Currency" page of the wallet has several modules: DC exchange (effective management of targeted funds), DC query (real-time recording of each transaction), wallet management (flexible management of your e-wallet) and wallet affiliation (careful care of associated accounts). It also supports scan code payment, remittance, payment and collection, and touch. Recently, some miners have also come to ask what the cute DCEP is.

1.

What is DCEP?

DCEP is a digital currency project of the central bank. Its full name is Digital Currency Electronic Payment. DC refers to digital currency and EP refers to electronic payment, that is, digital currency electronic payment. The central bank's digital currency DCEP is issued by the People's Bank of China. It is an encrypted digital currency based on blockchain technology. At the same time, DCEP is a replacement for anchoring M0 and has the same value as the RMB. In the future, it can replace paper RMB for circulation, that is, electronic RMB.

2.

What is M0?

M0, M1, and M2 are three definitions of money supply:

M0 refers to cash in circulation, that is, paper money issued by the central bank.

M1 refers to narrow money, which is the sum of M0 and demand deposits of non-financial companies.

M2 refers to broad money, which is the sum of M1 and time deposits, savings deposits, and other deposits of non-financial companies.

In other words, M0, in addition to being converted into online payment methods in the form of payment, does not require pre-binding of bank cards such as Alipay and WeChat Pay (Alipay and WeChat belong to the fields of M1 or M2, and have basically been electronicized and digitized in China).

3.

DCEP and currencies such as BTC and USDT?

On June 18, 2019, Facebook released a white paper on the Libra project, which not only sparked heated discussions in the circle, but also attracted the attention of central banks around the world. During this period, the trading price of BTC/USDT also gradually climbed.

(BTC/USDT trading pair)

But in fact, DCEP is not very related to BTC. It is more of a partial similarity in the form of currency, but there are essential differences. As a substitute for M0, DCEP is associated with the RMB, while Libra is anchored to a "basket" of low-volatility assets, and the associated legal currencies are the US dollar, euro, yen, etc., while BTC, as a decentralized currency system, is not associated with any legal currency and has great stored value. At the same time, as a legal currency issued by the central bank of the country, each unit of DCEP is endorsed by the central bank and has legal effect.

From the perspective of acquisition, DCEP is a two-tier operating system, that is, the central bank exchanges digital currency to banks or operating institutions, and users use RMB assets to exchange with these institutions, while many cryptocurrencies including BTC are produced through "mining". The whole process does not involve the central bank or commercial banks. Of course, users can also use legal currency or other cryptocurrencies to exchange BTC on exchanges to achieve circulation.

Compared with USDT, which is centrally issued and anchored to the US dollar, DCEP is anchored to the value of the RMB. Although the issuing institution is also centralized, its credit is endorsed by the national government. At the same time, what makes DCEP different from BTC, USDT, etc. is its unlimited legal tender, which means that domestic merchants will not be able to refuse to accept DCEP in the future.

(Currency comparison)

(Picture from the Internet)

4.

What are the characteristics of DCEP payment?

<Compulsory payment>

For example, some merchants only support Alipay payment, some merchants only support WeChat payment, and some merchants support other payment tools for payment. With the emergence of DCEP, there is no need to consider the restrictions of payment methods, because it has the same compulsory payment as RMB.

<Anonymity of payment>

At present, electronic payment methods represented by Alipay and WeChat do not actually have the characteristics of "anonymous payment". Every payment will form a record, which will be stored in the transaction parties and the payment platform as a record. DCEP payment is the same as paper RMB transaction. No record will be left. It is only the increase or decrease of the balance in the electronic wallet (specific needs to be combined with actual rules. If the amount is large, there will still be a situation where the identity information is bound. The purpose is to prevent money laundering).

<Payment completeness-two-way offline payment>

Taking Alipay as an example, although the payer can generate a payment code in an offline state, it requires at least the payee to be online to complete a transaction. However, for DCEP, even if both parties have no signal, they can still receive and transfer money.

<Stability of payment and settlement institutions>

DCEP uses the central bank's currency for settlement, while electronic payment platforms such as Alipay use commercial bank deposit currency for settlement. For the "People's Bank of China", which is the only one, there are many commercial banks, but their operations and endorsements are different. When these institutions have problems, such as the deposit return incident of the shared bicycle giant, the user's assets will become the company's "bonds" and will only become money after bankruptcy liquidation, that is, the identity changes from "user" to "creditor".

The inevitability of currency development makes currency develop in the direction of low cost, reliability and convenience, and its expression form will become more and more free. China's mobile payment is in a relatively leading position in the world, and the launch of DCEP may help the RMB strengthen its position in the world.

At the same time, under the wave of global digitalization, DCEP may become one of the representative applications in different fields of digital transformation in the next decade, just like BTC.