Programmable currency is popular! This may be the next stage of currency evolution. It may be as destructive as any financial technology in development today.
Yes, China is about to launch the first central bank digital currency (DCEP) on a large scale, perhaps in the next 12 months, but if so, it will be replaced by CBDC 2.0 10 years ago, that is, digital currency attached to the blockchain smart contract. At least, many people think so.
Programmable currency is a limited currency. A similar example is food stamps. Recipients can get coupons equivalent to money. These coupons can only be used to buy food, not wine, horse racing, lottery tickets or anything else. Under the modern disguise, these "food stamps" are digital tokens traded on the blockchain platform through smart contracts.
Last month, IBM obtained a patent for "customized programmable encryption token", which is the first PM patent granted by the United States, * * * co-inventor Jonathan Rosenoer told Cointelegraph magazine.
"Programmable tokens are being discussed more and more!" Jonas Gross, research assistant and project manager of Frankfurt School Blockchain Center (FSBC), a think tank of Frankfurt School of Finance and Management, told us.
For example, in Germany, the Ministry of Finance and the Bundesbank recently set up a working group to develop the programmable euro.
Gert Cilvaistre, co-founder of Tradeshift, a commercial trading platform, said: "Coronavirus pneumonia is pushing a slow tsunami with programmable currency." It can accelerate the transition from e-commerce to programmable currency. Since the outbreak, "we have seen interest rates soar", especially in the subsequent liquidity crisis, including the slowdown in payments. He said that many companies are now ready to make programmable funds (including automatic accounts payable/accounts receivable settlement) look brand-new.
With the help of IBM's new invention ("U.S. PatentNo.10,742,398, Rosenoer et al., August 2020 1 1"), the parameters (constraints) of an encrypted token can be stored in the token itself, or "it can be stored in a chain" or referenced by a hash identifier stored in the token. "。 Co-inventor Rosenoer believes that this token has the potential to promote many social/economic purposes, including providing humanitarian assistance in case of natural disasters or wars. For example:
"Charities or refugee agencies can issue such certificates to refugees. These enterprises can also obtain similar certification. Then, a programmed token representing funds can be issued to the refugee and stored on his/her mobile phone. Refugees can only use them to pay for goods and services provided by recognized enterprises. Refugees can also transfer them to other refugees. "
He added that programmable tokens can be created by individuals ("You can create your own andrecoin"), enterprises, charities, banks, governments or other entities. On the back end, auditors can receive automatic reports on who holds tokens and where they are used. "Unexpected patterns indicate that write-offs or blackmail can trigger alarms and exception handling," Rosennor pointed out. Theft is a big problem when delivering humanitarian aid. Even when aid arrives, the recipients are sometimes robbed. Another concern is that programmable tokens can alleviate this concern. )
What is the status quo of programmable tokens? Rosenoer said that there is almost no production-level deployment of any product in the DLT/ blockchain field, but this situation may change. Governments can use programmable tokens to enforce economic embargoes. Tokens can be programmed, so their value can be exchanged anywhere in the world, but not in North Korea or Iran. He added: "People in start-ups are moving forward (use cases)." .
Kajie, Managing Director and Partner of Platinion (Amsterdam), a subsidiary of Boston Consulting Group? Kaj Burchardi said: "In the United States, it will be a good thing for the government to write a check for the coronavirus stimulus plan (the so-called helicopter is paid to every American citizen who pays taxes, if you can choose programmable currency)." ..... He told the magazine: "This could have been done in a few seconds, and there was no cost (from the point of view of distribution). This will be a problem that does not need to be considered. "
Professor George Jia Grice of Nicosia University (Cyprus) told the Daily Telegraph magazine:
Although there are many forms of this currency today, most cryptocurrencies have a higher or lower degree of programmability, and the discussion around CBDC mostly involves digital currency, not conditional currency.
Professor George Jagris added two points:
In March this year, the German government organized a hacking contest to find innovative ways to deal with the coronavirus pneumonia-19 crisis. A promising proposal is a decentralized universal euro: "Dezentraler Gemeinschaft Licher Euro" (DGE) or Diggi, which is a blockchain voucher distributed by the government and can only be used by participating enterprises in the most severely affected areas. Dorothy, German Minister of State for Digitalization? b？ "The system will enable smaller companies to participate in the aid program," R said.
Burchardi of Boston Consulting Group told us:
The German Banking Association (AGB) pointed out in its blog: "Like the traditional digital currency, the new forms of cryptocurrencies have great technological innovation: they can be linked with so-called" smart contracts ". According to the organization, German private banks regard programmable digital currency as "an innovation with great potential, which can become a key component of the next digital development".
Gross told us that although the programmable CBDC is unlikely to appear in the United States or Europe in the near future, "programmable tokens will become token-based commercial bank currency or electronic currency in the short term"-in the next one to three years. "At present, banks have stepped up their efforts to introduce programmable tokens supported by commercial bank currencies, which are linked to bank accounts. "Government-funded projects, such as CBDC 2.0, may take longer.
Providing humanitarian assistance is the expected PM use case, which was repeatedly quoted in the interview. He told us that Rosennor lived in Mumbai, India for two and a half years, which was surrounded by "shocking poverty" and the aid to the poor there was stolen by middlemen, and the amount was amazing. The poor can't get into the bank, but today many people have mobile phones. Without much trouble, they can receive digital currency through their mobile phones, completely bypassing the banking system.
Programmable tokens can strengthen the control of aid payment, track and trace the capital flow at the national level, and use contact analysis to find fraud and corruption. How is the payment? Why do so many things flow to one place? "This is the real hope!" ...... Rosennor said: Institutional corruption that made the poor poor poor has been eradicated. Developing countries need such a tool, more than "many things are good enough" in the United States or Europe.
Rosennor suggested that programmable currency can make global financial transactions comply with local laws and regulations: "Suppose you have a marked asset and you want to sell it. We call it long-term debt. According to the law, I can only sell to qualified investors, investors with certain net assets and annual income, or foreign investors. " . If Rosenthal sells its assets to them, if they are under the jurisdiction of the United States, they may have to hold the assets for a period of time, and then they can only sell them to qualified investors or foreign investors.
"I can program my token to ensure that the person who holds it meets these requirements," Rosennor continued.
"In the future, money will be programmable," said Naiha Narula, director of the digital currency project of the Media Lab at MIT. .
PM can create a world unimaginable at present. Neha Narula also said: "Imagine a world where I can rent my health care data to pharmaceutical companies. They can run large-scale data analysis and provide me with encryption certificates, indicating that they only use my data in the way we agreed. They can pay me. "
Programmable tokens can be used to help achieve environmental goals, such as eliminating plastic waste in the world's oceans. For example, in a coastal cleaning in Manila Bay last year, local fishermen collected 3 tons of garbage, most of which was plastic garbage, and paid their labor remuneration with ERC-20 tokens from Ethereum. Coins.ph helps convert encryption algorithms into legal tender. Efforts like this seem to provide a clever solution to two seemingly intractable problems: poverty in developing countries and marine plastic waste.
What obstacles need to be overcome before programmable currency becomes a daily reality? Karl Victor von Wachter of the University of Copenhagen said in an interview with Cointelegraph magazine, "The nationwide scalability of blockchain must be overcome. In addition, many technologies and applications need to be improved by end users. This technology is currently too complicated in terms of user interface and user experience. "
Freddy Zwanzger, co-founder of Anyblock Analytics GmbH and chief data officer, told us that people need to be better educated in dealing with digital currency and its practicality as a legal tender substitute. It may be helpful to help them understand this concept with daily expressions such as coupons and loyalty points.
Gross said that people generally lack understanding of the potential benefits of programmable tokens, and there is insufficient cooperation between public institutions (such as central banks and governments) and industrial sectors that will become the main users of programmable tokens. Continued regulatory uncertainty does not help.
Sylvester added that any digital payment solution must perform basic KYC (Know Your Customer) checks and make a credible governance agreement. "Once [digital] payments start to flow through different channels, they will become a challenge for regulators."
Tobias, deputy director and digital director of AGB? Tobias Tenner explained that "privacy and anonymity must be considered" if the Prime Minister wants to stick to his point of view, which many people agree with. Compared with Bitcoin (BTC), Bitcoin provides relatively high privacy-users are not easy to be monitored-and the design of programmable tokens is traceable. However, Rosenoer says there are some ways to design privacy as a token. For example, using zero-knowledge proof can confirm that a person really owns the claimed assets without revealing his true identity.
Burchardy believes that a society may only tolerate so much traceability. Not everyone wants the government to track everything they do. Therefore, it is important to consider when to apply traceability and when not to apply it. There may be a threshold, for example, transactions below 1000 dollars will not be traceable.
What is the most likely time frame for widespread use of PM? Rosennor said, "The emergence of large-scale non-BTC digital currency is very rampant!" . Either at the end of 2020 or at the beginning of 20021,it is likely to appear in the form of DCEP in China or Libra in Facebook. Tanner added, "In the next five years, programmable euros issued by private banks may be stored with other programmable electronic currencies such as Libra." .
Zwanzger said: "In my opinion, the demand exists, but in terms of user experience and adoption, technology does not completely exist. The bigger obstacle is getting into people's/users' minds (and hearts). For example, even before the blockchain appeared, there were experiments using local currency, but these experiments were not successful. I don't think the emerging blockchain technology will change this situation for at least the next one to three years. "
Kevin, a professor of financial economics at Durham University, UK? Kevin Dodd put forward a more skeptical view. "In my opinion, programmable tokens have not proved the feasibility that they can achieve better or worse results than the existing technology. He told the Daily Telegraph magazine.
As Burchardi pointed out in the blog of Boston Consulting Group, most CBDC models discussed in the past 10 years did not really solve the possibility of programmable digital currency. But they remind us that when programmable currency is adopted on a large scale at the government level, comprehensive social/economic changes may follow:
"The first generation CBDC introduced about 10 years ago has limited interoperability and programmability. The next generation is called cbdc2.0, which is likely to be national or supranational (take the European Central Bank as an example). These currencies may contribute to the automation of monetary policy, thereby reducing the risk of hyperinflation in emerging economies and reducing purchasing power inequality. "
As pointed out in the report, the most attractive value proposition for the government may be: