Is there any consensus mechanism on Digital Yuan?

Is there any consensus mechanism on Digital Yuan?

There can be huge losses and little or no gains from transboundary dealings. One critical underlying issue of the global supply chain is the lack of a clear policy to manage and regulate cross-border trade for competitive advantage. The truth is ideal conditions for trade are scarce, and every country has its worldview, policy guidelines, legislation, and, most importantly, its interests in the mix. If you’re interested in trading Digital Yuan, go to websites like Yuan Pay Group.

Currently, no consensus mechanism applies globally to digital Yuan transactions. This means that each country uses different rules to manage transactions of digital Yuan within the borders of different countries (e.g., China) or with foreign entities (e.g., European Union). Moreover, it is currently tricky for digital Yuan transactions to be settled on the same day or within one business day in different countries. Still, in china, the currency has been providing immense benefits since its inception.

It has created a sharp contrast between Japan, which had adopted and implemented the Settlement Act in March of 2016, and China. Japanese companies are, at this moment, open to utilizing their digital Yen as a settlement currency, as well as other countries (such as the US). However, Chinese companies have not received this kind of treatment from the Chinese government. These policy differences reflect the different approaches to digital currencies by each country. Therefore, let’s discuss why the digital Yuan does not incur and requires a consensus mechanism.

The government backs the digital Yuan:

The digital Yuan is not just a simple digital version of the fiat; instead, the digital Yuan is still held by the People’s Bank of China and the Ministry of Finance on behalf of the People’s Republic of China. Digital Yuan has entered into circulation as a currency; it was only to be circulated when it became an official currency.

Furthermore, since government agencies must approve the digital Yuan before it can have a use case in business transactions or personal affairs, there is little room for misuse or fraud. Finally, since the government completely backs the digital currency, a trustless consensus mechanism is not required.

Digital Yuan functions similarly to traditional currency

However, the digital version of the fiat Yuan has complete control over it and doesn’t need to rely on any third-party services to use it. Therefore, it is entirely stable. With the approval of its liquidity and stability, it can have a use case to make payments to other users and businesses in various countries.

The digital currency is released into circulation with a minimum amount of consideration. Therefore, it can be on the same level as traditional government-issued currency such as fiat Yuan or RMB. Meanwhile, its quantity is not limited by any predetermined amount or period; the digital currency can function like fiat currency with a fixed supply in the market at any time.

Consensus mechanism

Proof of work refers to a method where stakes apply processing power to the network to validate transactions and receive the corresponding transaction fees (or block rewards). This method is also known for creating blocks on the blockchain.  However, as for why the digital Yuan does not involve this mechanism in using a consensus mechanism, it is mainly due to its different characteristics:

In traditional fiat currency, the circulation of currency requires a recordkeeping system. All transactions are recorded by governments, which are later available for companies or individuals to find out what transactions have been conducted between them. Stakeholders, however, do not have direct access to the database and must wait for businesses or the government to provide them with their reports. Digital currency has an entirely different circulation system from traditional fiat currency.

Digital currency does not require any recordkeeping system because its ledger is public, and anybody can view it anytime. Furthermore, Digital Yuan is currently in an experimental stage; therefore, there is little risk of misuse or fraud due to its low value anyway. However, suppose the digital currency receives a worldwide adoption version of fiat currency backed by its government in the future. In that case, stakeholders may have no access to the records of transactions between individuals for privacy protection purposes.

Why is there no need for consensus mechanisms in the digital Yuan?

Moreover, as it is not exempt from its circulation management by the government within the bounds of its value, it does not require a consensus mechanism for business transactions and personal affairs.

Any physical things do not back digital Yuan. In digital currency, every transaction has a record stored on a blockchain where information can be stored and retrieved. Still, since government tends to handle every aspect of digital currencies, there seems to be a minimal requirement for a consensus mechanism. The digital Yuan is entirely centralized. The ledger is user-friendly; however, there’s still nothing that backs up the digital currency. It doesn’t involve physical things like gold or precious metals like fiat currency.

Disclaimer: This is sponsored marketing content. The presented material by no means represents any financial advice or promotion. Be sure to do your own research and acknowledge the possible risks before using the service of any cryptocurrency platform.

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