What is the difference between China's cryptocurrency and bitcoin?

A very common term in the crypto industry is the acronym CBDC, which are cryptocurrencies issued and controlled by governments, considered as complements, not substitutions, to national currencies

This is because many governments do not trust bitcoin, as it is a decentralized cryptocurrency, that is, it was programmed to work without an authority that can change its functions when it is convenient.

In 2019, the Chinese government began to show signs of issuing its own cryptocurrency, the digital yuan - also called the DCEP (Digital Currency / Electronic Payment) system.

There are not many details about the digital yuan yet, but large Chinese cities are conducting pilot tests.

In October, to test the viability and technology of DCEP, the city of Shenzhen held a kind of lottery, asking users to register on the system to compete for $ 1.5 million yuan.

According to Decrypt, this lottery allowed the country to analyze more than 6,700 use cases for the digital yuan, such as bill payments, catering services, transportation, shopping and government services.

DCEP is one of the most ambitious technological and financial solutions to date because, due to the constant US dollar impression, the largest currency in the world may have its days numbered.

Bitcoiners, supporters of bitcoin, consider CBDCs a blessing, but also a curse. On the one hand, it can boost the take-up of digital currencies as a whole, but on the other, the centralized nature of CBDCs goes against the ethos of cryptocurrencies like bitcoin.

Bitcoin was created to give financial autonomy to those who suffer from high bank fees. DCEP is quite the opposite

Decrypt asks: if DCEP has broad membership, can it threaten bitcoin as the end-to-end e-money system that Satoshi Nakamoto developed? It is very unlikely.

Both bitcoin and DCEP are digital currencies, but because they are issued by completely different entities, they have diverging philosophies

📌 bitcoin: launched by an anonymous cryptographer to facilitate international transactions, without the intermediation of centralized entities;

📌 DCEP: system created by the central bank of China to digitize the circulation of physical money across the country, ensuring that the government has complete control over the “path” taken by every penny of the digital yuan.

Regarding the use cases, DCEP will be used according to the preference of the Chinese government, as the “mega-seine” of the city of Shenzhen, whose winners could spend their yuan only on specific businesses.

Bitcoin, on the other hand, is governed by a consensus mechanism, which dictates its functionality.

It cannot be simply distributed to millions of users or defined by a central party. It was scheduled to have only 21 million units, which are issued through the mining process.

Another point is that DCEP is not really international.

While it can boost the effectiveness of international agreements with China, as the digital yuan allows the country to bypass all existing financial systems, it can significantly impact China's economic stability if the issuance of digital yuan is rampant, as well as that of the US dollar. .

Bitcoin has a fixed and pre-programmed supply (scarcity), generating transparency and security. Click here to understand more about the bitcoin scarcity.

What if the DCEP system is a gateway to bitcoin? Wouldn't all that digital money facilitate the transfer from one wallet to another? This is the attraction of stablecoins, digital currencies paired with a national currency, such as tether (USDT) and USD Coin (USDC), paired with the digital dollar.

However, China has always been against bitcoin blockchain, not bitcoin ... so the transfer system would not be as decentralized as that of bitcoin.

When you transfer bitcoins from your wallet, your name does not appear on the blockchain (as in a bank transfer), but an alphanumeric address, ensuring privacy and security.

However, DCEP is supervised by the Chinese government, so any amount sent would be easily identified by the authorities.

China is known for blocking any type of content related to decentralized cryptocurrencies on the internet, something that only piqued the curiosity of users.

In addition, the region is famous for concentrating most bitcoin mining, due to the low cost of electricity consumption, which is very necessary for the operation of large mining machines.