The Chinese bitcoin community is abuzz following positively perceived comments by China’s Central Bank Governor Zhou Xiaochuan in a recent conference regarding digital currencies, further repeated in a lengthy interview to assuage fears over yuan’s strength.
“History shows that currency has evolved abreast of technological advances and development of economic activities. The evolution from early-stage physical currency and commodity currency to the later credit currency was a result adapting to the development of commercial society. Paper money, as the last generation currency, lacks high-tech support, and it is an irresistible trend that paper money will be replaced by new products and new technologies with greater security and lower costs. With the rapid development of the Internet and the significant changes in the global payment systems, it is necessary to establish the issuance and circulation system of digital currency, which will help build the financial infrastructure and improve the quality and efficiency of the economy.” – people’s Bank of China governor Zhou Xiaochuan said.
China’s central bank governor proceeds to make positive comments about protecting privacy and the anonymity of money. However, he keenly emphasizes that the central bank must retain control over the issuance of money and its supply.
“For a digital currency controlled by the central bank, a combination of technological measures, institutional design as well as laws and regulations will be applied to ensure the security of its operation system. This differs from bitcoins at the very start.”
This is the latest in a trend towards blockchain or blockchain like technology that is being analyzed and employed by giant global companies and even governments. But, critics emphasize that security is extremely difficult to achieve to any acceptable degree where money is concerned. The attack vectors are so numerous, much of the required knowledge is so specialized, that the development of these complex systems in private, opens the system to potential hard to perceive bugs, risking devastating hacks.
As an open, global, and permissionless ledger, many argue bitcoin gains security by being open source, one of its greatest strength, as the eyes of the entire world, and the entire world’s experts, ensure any potential vulnerability is quickly fixed by a well established process that borrows from cryptography where it is learned knowledge that the best way to keep a system secure, counter-intuitively, is to actually make it fully public and see if anyone can break it.
It is not clear what system the governor has in mind for he criticizes blockchains by arguing that: “block chains have consumed too many resources, including both computation and storage resources, and cannot handle the current transaction volume” – referring to the debate over scalability – to then state that “PBOC’s digital currency research team has made in-depth studies on digital currency related technologies such as mobile payment, trusted and controllable cloud computation, cryptographic algorithm and secure chip.”
This apparent confusion is prevalent all over the financial world which seems keen to show that they will not be the next blockbuster, but nonetheless seem, as yet, unable to actually offer products that fully grasp the power of Bitcoin and its potential ramifications for reducing friction in trade and increasing inclusivity, through its global, cross border, digital native, nature.