The expansion path and future of digital payment systems from the perspective of Cypherium

Digital currency payments are transitioning from the experimental phase to the implementation phase. This transition is the result of innovations brought about by blockchain technology and smart contract platforms like Cypherium.

Decentralized payment systems can effectively prevent data misuse, platform outages, and reliance on intermediaries. Blockchain can process transactions instantly, even across borders. Unlike any other system, smart contracts will enhance system transparency, improve the programmability of currency, prevent fraud and tax evasion, and accelerate the implementation of monetary policy. Billions of people will have access to mobile banking. These systemic aspects and the launch of central bank digital currencies reflect that digital transformation is underway.

Digital payment systems help underfunded individuals and those excluded from participation engage in global business activities, while making the process more efficient and convenient.

Today, millions of people use digital currencies and wallet services. bKash and M-pesa have the most registered users, with sixteen million and forty-two million, respectively. Many emerging projects are focused on the African region, making agricultural economies more efficient, such as democratizing savings, lending, and payments. These projects largely predate blockchain technology solutions and are now seeking scalability and security.

Digital payments are sprouting alongside various national digital banking initiatives around the world. According to a report by the Bank for International Settlements, as of mid-July 2020, at least 36 central banks globally had released work on retail or wholesale CBDCs (Central Bank Digital Currency), with 18 central banks publishing research on retail CBDCs and another 13 banks announcing they are developing wholesale CBDCs.

However, most experiments are being implemented in developed countries in Europe and Asia. In Europe, there is Sweden's Riksbank eKrona project, which has called for France and the Netherlands to join. In Asia, the People's Bank of China's digital currency/electronic payment project is the most advanced.

As the influence of traditional payment systems diminishes, Mastercard, VISA, and PayPal are seeking ways to maintain their market position in the future. Their role may be as intermediaries between CBDCs and private enterprises or as service system providers.

Moreover, since CBDCs are closed systems, they cannot transact with each other without intermediaries, creating interaction barriers. Central banks cannot allow access to their systems for security reasons. Diem and other international organizations intend to become retail digital currencies for billions of users. However, this is also in vain, as no country is willing to authorize third parties to scrutinize domestic financial transactions and influence its monetary policy.

Therefore, central bank digital currencies require a new infrastructure rather than relying on systems like SWIFT that require manual entry of CPN information. After all, if CBDCs continue to use this system for cross-border transactions, their performance will be bound by the limitations of a lower-level system, while adopting a new infrastructure can unlock all the benefits of CBDCs. In fact, blockchain technology can meet all the requirements for access, interoperability, accuracy, functionality, transaction speed, and privacy protection design for central bank digital currencies.

Currently, Cypherium offers a relatively perfect solution. It has developed a unique Digital Currency Interoperability Protocol (DCIP) that supports central banks in autonomously issuing, distributing, or supervising the transfer of their national CBDCs without external third-party interference. This novel approach consists of six main modules: central banks, CypherLink (a notarization mechanism), Cypherium Connect (a plugin module for banking systems), Cypherium Validator (verification machine), intermediaries, and finally, users.

Specifically, Cypherium can be applied in two scenarios for central bank digital currencies: one where the payer does not have an account and pays the recipient with a specific CBDC, and the other where the payer pays the recipient with another CBDC they have received. These two scenarios are not easy for CBDCs, but they must be interoperable. At this point, Cypherium's characteristic of instant transaction settlement and the ability to process thousands of transactions per second using the fastest Byzantine fault-tolerant consensus algorithm can solve the interoperability issue.

A possible future scenario is that blockchain will be adopted as part of a new system, serving as public-private cooperation in the transitional domestic economy of countries, as well as facilitating interactive transactions among the international public. Leading payment companies and banks will continue to develop their blockchain teams, such as JPMorgan, Square, and Facebook.

Ultimately, following the independent development of blockchain networks by developers, such as Cypherium, stands at the forefront of the industry and breaks down barriers between cryptocurrencies and central bank digital currencies, promoting the large-scale implementation of digital payments.