What role will digital currency and blockchain play in a centrally controlled country?

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by Maria Novella Rossi

June 15, 2021Not just 5g, AI, big data, space exploration, or control of strategic raw materials such as rare earths;

in the field of innovation and technology, China is expanding its sphere of interest to increasingly extensive fields: massive investments will be destined for blockchain, a sector in which the Asian giant aims to be a leader by 2025 according to the objective of the new plan implemented by the Ministry of Industry and Information Technology and the Cyberspace Administration of China. 

China occupied most of the talks between world leaders at the just concluded G7 and was at the center of the NATO summit; on the one hand Atlanticists and Europeanists who announce the common effort (each with different nuances) to reaffirm their values ​​and stem the advance of the People's Republic, on the other China, which from time to time plans and continues its course. 

"A small group cannot decide the fate of the world", the meager comment of the Chinese authorities on the position of the US and the EU at the G7, while Beijing promotes the commercial expansion of China and the technological self-sufficiency of the country, an objective for which for some time invests huge resources, aware that this will be the main area of ​​global confrontation. But not all new technologies can adapt to the authoritarianism of the Chinese system, starting with the blockchain, distributed register of transactions, freely accessible and based on the consensus that takes place among the participants to the network itself, the technology behind digital currency.

But how can this free transparency be reconciled with central state control in China? In the financial field, Beijing wants to make the internal Chinese currency (RMB) more international, a now essential requirement to free itself from dependence on the US dollar, but the rules of cryptocurrency are badly suited to the CCP's leadership.

How then could the Chinese digital yuan develop, what is it and how does it differ from bitcoin and the cryptocurrency rules that are taking hold in Western economies? We asked

William Nonnis

, for a long time Full Stack & Blockchain Developer for the Ministry of Defense and today for ENEA

Can we talk about cryptocurrency in China?

"Cryptocurrency (also crypto money) was born thanks to blockchain technology, which is based on very advanced cryptographic procedures such as hash functions and digital signatures, through which it is possible to: track transactions, generate money and assign it to its legitimate owners. physical form, but only digitally and, therefore, does not come from a Central Bank that deals with its production and placing on the market. The cryptocurrency comes from a decentralized and distributed system, which operates online, without an apical hierarchy. Cryptocurrencies are guaranteed by a technology called Blockchain 

How does blockchain work, a technology on which China is also focusing a lot?

The Blockchain is called the “NEW INTERNET” and is a distributed ledger

of transactions, freely accessible and based on the consent that takes place between the participants in the network itself, with the intensive use of cryptography and digital signature; in it, as already seen for cryptocurrency, there is no longer a centralization logic (even in its decentralized evolved forms), but a distributed and horizontal form of information. By virtue of the immutability of the data entered in its circuit, which is why each registered transition cannot be modified or eliminated, the Blockchain confers total trust and transparency to the subjects and operations involved. This protocol, that is the set of rules and conditions on which the movements of cryptocurrencies occur on the network, is absolutely inviolable, thus offering in terms of guarantee, the maximum of their validity.

Is China one of the first countries to increase the use of digital currency? How? In what areas?

China, either by culture or by its IT skills, is one of the very first countries in the world to start using digital payments. Exactly on the contrary, however, of the egalitarian and democratic ideology, which assumes the use of the blockchain, with its distribution assumption, the Digital Yuan, electronic money of the Chinese state, becomes, thanks to the Central Bank Digital Currency, which holds the control for having coined it, a perfect instrument of control by the state on the economic situation of its citizens, in real time. To favor this state of affairs, Chinese national banks, obviously headed by the central bank, dispense cryptocurrencies directly into e-wallets, electronic wallets of customers, while, from ATMs, the smartphone can be recharged with e-yuan.with which you can then make payments. It has been said several times that the Chinese digital economy is far from the principles of the Western one in which, precisely the blockchain with its ideals of decentralization, insists and advocates a technology that starts from the bottom up and not with a pyramidal but circular formation. To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.It has been said several times that the Chinese digital economy is far from the principles of the Western one in which, precisely the blockchain with its ideals of decentralization, insists and advocates a technology that starts from the bottom up and not with a pyramidal but circular formation. To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.It has been said several times that the Chinese digital economy is far from the principles of the Western one in which, precisely the blockchain with its ideals of decentralization, insists and advocates a technology that starts from the bottom up and not with a pyramidal but circular formation. To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.precisely the blockchain with its ideals of decentralization, insists and becomes the champion of a technology that starts from the bottom up and not with a pyramid formation, but rather circular. To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.precisely the blockchain with its ideals of decentralization, insists and becomes the champion of a technology that starts from the bottom up and not with a pyramid formation, but rather circular. To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.To comply with this neuralgic principle of the blockchain that does not require centralized approval, the criterion of responsibility and awareness of the digital tool becomes fundamental, in a horizontal and liquid way, thanks to clear information and following training that educates the citizen to correct use. of the digital tool to ensure that it is man who governs technology, and not vice versa.

So how does China intend to advance the use of this technology?

"China will rather use the DLT, a system compatible with a centralized authoritarian state where the state bank is the one that validates all incoming and outgoing transitions and which at the same time guarantees the transition from cash to digital currency (different from cryptocurrency such as bitcoin, managed by the public blockchain and not as in the financial technological system implemented in China which is based on different criteria. So when we talk about blockchain applied to the Chinese financial system it is simply a software that uses DLT distributed directors "

What does this entail?

"Since the so-called Chinese blockchain does not represent a technology that involves all citizens in their freedom of expression even in a strictly commercial and financial sense, the Chinese digital currency could remain within a closed system managed only by China itself and therefore could remain confined within the People's Republic. This is why in my opinion China will never be able to dictate the rules of global finance even if it is doing everything to implement its own technology in the footsteps of the blockchain "

There seem to be a lot of contradictions on the matter, including when it comes to mining. Can you explain to us what it is? China has relocated to countries such as Iran and Yemen the construction of huge computers that would physically occupy large areas of land creating environmental problems ...

In fact: mining (solving a mathematical problem in the shortest possible time) is a sector in which China has a strong advantage for greater ease in environmental policy: the hardware devices that allow with their computational capacity to carry out mining operations in times as fast as possible, require a considerable expenditure of electricity: this is why these brains have been relocated from China to countries like Yemen, where energy has much lower costs, although 40% of the energy is derived from renewable sources .