How is the digital Yuan different from other cryptocurrencies?

In 2019 the second largest population country, china, declared that they are working on making their digital currency. There was massive speculation about this digital currency and whether any blockchain would work in the digital Yuan. The reason behind it was that the news got declared after the moment when Facebook announced that they were launching their digital currency named libra. After some time, they changed its name to Diem. However, this digital currency failed because it sold its assets. The fact is that warning signs of the regulations-related hassle faced by the Facebook platform were only there from the start. But it was not a specific thing that a successful company like Facebook would fail. So china declared that they are moving the timeline of launching their digital currency. The head of the public bank of china said that the digital Yuan is not crypto like bitcoin.

Moreover, it is not created for speculation. At the same time, the authorities have started to promote making use of blockchain for international financing and payments. So we can say that the digital Yuan and crypto have tiny things in common and nothing else.

What makes the digital Yuan different from crypto?

Undoubtedly, the digital yuan currency got huge attention because people compared it with cryptocurrencies. However, the fact is that the digital Yuan is as different from the crypto as these digital currencies are from fiat money. It is because the blockchain is dubious about being used to mint central bank-issued digital currency. You must know that the other database technologies are well suited for scaling the whole population. When Satoshi created bitcoin in 2009, the one significant asset of blockchain was that it was the first ever digital currency that didn’t involve the interference of banks. At the same time, the digital Yuan doesn’t work like this because they are part of the vast money supply directly under the central bank’s control. If you look at the innovative database technologies, you will see that they are very well for securing all the transfers. It is the thing which banks are also using now.

Undoubtedly, we use it while checking mils or writing on texts and Google documents. All this data is kept in a centralized manner, which is secure. Currently, the money supply is higher than the numbers we find on computers. You can think of the digital Yuan as an extension of this thing. The big difference is that the digital Yuan is backed up by the government, which means it is the direct liability of the government. The public doesn’t have access to the central bank’s liabilities. But the fact is that this process includes the customers reaching the bank and then getting their services approved by these banks. The motive of crypto was to eliminate this complicated procedure. Cryptocurrencies make use of blockchain for storing and managing their transfers securely. Crypto blockchains are open source, which means they are open to all and don’t involve intermediaries. The value of these cryptos comes from the faith and demand of people.

Is it true that the digital Yuan is safer than crypto?

The most striking fact about cryptocurrency like bitcoin is that it has lasted more than a decade without having huge security issues because of its robust blockchain. There is no flaw in the blockchain. It is a matter of fact that the blockchains are resilient to hacks which helps give reputation to cryptocurrencies. However, security experts are still raising concerns about the security of blockchain. The one significant weakness of the blockchain is that its cryptographic key cannot change. A digital wallet is identified through its public key, which matches the private key for accessing the wallet. So to provide higher advantages over the cryptocurrency’s security and privacy, the digital Yuan needs to be minted using a database.

Digital currencies get higher security when people can transfer them offline through a hardware wallet. And according to some reports, companies in china are creating a way through which the digital Yuan can be transferred to this hardware wallet. Still, the bank of china is fearing to make digital Yuan completely decentralized because it will make it difficult to track. The government claims less privileged digital yuan wallets are anonymous, but name verification is required to move a higher amount.