Online payments are developing and growing daily, and so is cryptocurrency. While countries are questioning the reliability of crypto, certain parts of the world have already accepted and implemented cryptocurrencies like Bitcoin as legal tenders, like El Salvador. Some countries have created their cryptocurrency, like what will be discussed today, the digital Yuan. It is the Chinese crypto, and it has met the yardstick to serve as a replacement for the physical Yuan.
Though crypto and the digital Yuan are called cryptocurrencies, they have significant differences that need to be understood by investors. For instance, the digital Yuan is centralized in its structure, while the government cannot influence or manipulate crypto. Other such criteria can render prospective investors confused. However, you can now trade in digital Yuan with ease using yuan-pay-group.net. Click to learn more about trading, and start your investment journey today!
It does not matter where you are pinned on the spectrum of finances. You might be someone who favors real cash or has a keen interest in investing and trading virtual money. But you might have at least heard about cryptocurrencies like Bitcoin. Or, if you have kept in touch with the market news, you might have heard about the digital Yuan as well! However, that should not be stopped at just superficial knowledge. If you’re asking which one to invest in, you have come to the right place. Starting from these two, you will understand the weights and factors you must consider when choosing between the two.
What Is Digital Yuan?
Launched by the initiative of the Chinese government and the central bank, the digital Yuan is a cryptocurrency created to replace the current physical legal tender. It was introduced in 2015 to serve the following purposes:
Political-economic purposes: The Chinese economy relied on American trading and US foreign exchange for several years. Creating digital Yuan establishes independence from these centuries worth of bonds with America, which is currently dominating the international foreign reserves with its USDs.
Strategic purposes: The creation of the digital Yuan was not limited to independence from the western powers but also to generate competition with other companies reliant on e-payments like WeChat Pay.
Storage reasons: The Chinese government found it expensive and dangerous to store physical currency. Moreover, the production of such also proves to be troublesome. By taking examples of countries with digital payment methods, the government sought to create a profoundly centralized digital currency, the E-Yuan.
This can be seen as a paradox because of the subsequent banning of Bitcoin and the creation of its cryptocurrency. To put it simply, the digital Yuan is China’s cryptocurrency. The electronic means of accessing China’s currency led to the computerized Yuan’s origin. If you have not heard of this name, you might have heard of its variations. The digital currency of China is also referred to as e-CNY (from the word ‘Chinese Yuan’) or e-RMB (from the word ‘Renminbi’). E-Yuan is the computerized currency of China’s central bank, otherwise referred to as PBOC (People’s Bank of China). The PBOC issues it for cashless transactions and can be used just like the physical currency.
Investing and trading in this Chinese electronic currency serves the following benefits:
Decisions related to financing can be reached in a more informed manner:
Think about it. The state is now in control over where the money flows and can influence such information in a more comprehensive form. This was not possible in the case of physical capital; even if it was, it was expensive and not efficient. If there is one thing that this invention led to, then it is easy to access critical information.
Because the digitized Yuan can be tracked with greater ease than cash, the government can better keep the money flow under observation. As such, the overall financial decisions can be taken with readily available information to the PBOC. The advent of QR code transactions has made it simple for the government and the demographic.
Digital Yuan expanded the usage of digital payment methods:
Electronic Chinese currencies have been created not only to serve the public’s demand for easy payment tracking but also to favor the government to a large extent by making it more easily accessible than most forms of cash.
It is more inclusive to a large portion of the population:
It creates more inclusiveness to the demographic population, especially to that percentage who have not developed their bank accounts yet. This can serve both ways. The innate inclusivity given by this mechanism can encourage people to join the digital community. And as more and more people join, operations become much easier with the following developments and innovations.
It created status and recognition on an international level:
Another notable advantage that serves the investors is its recognition on a global level. Unlike most cryptocurrencies that have not been accepted globally, Chinese crypto competes with even the US dollar. While USD has almost 88% share in the international economy, the Chinese currency is considered on par with the help of digitalization.
- Lack Of Identity Security: While other digital currency forms have incorporated an anonymous interface in their platforms, the Chinese electronic currency would be a threat to identity leakage as PBOC and the government are highly likely to monitor transactions executed through this medium.
- High Competition: Other companies view the electronic Yuan as a threat whose revenue is gathered mainly through electronic payment applications.
- Fraud: This is a significant drawback for electronic platforms in general. There are plenty of fake accounts that create a digital hoax wallet. Such scammers need to be subjected to extra care.
- Risk Of Banning: There is a slight possibility that the central government would forbid electronic currency usage. If that were ever to happen, investors would suffer excessive losses.
- Highly Volatile: This could also contribute to losses for the investors.
- Uncertainty: As E-Yuan is still developing, its future value is uncertain
What Is Bitcoin Cryptocurrency?
Bitcoin is essentially a type of cryptocurrency, the oldest and the most popular one. Crypto is essentially a virtual means of payment utilizing blockchain for minting cash. A ubiquitous and popular example is Bitcoin. The fundamental difference is that crypto is secured and encrypted using cryptographic technology. This prevents large-scale counterfeiting and other illegal activities such as double-spending.
Crypto functions on the technology of blockchain networks. What exactly is a blockchain, you ask? It is a distributed ledger created by a network of computers ranging from multiple geographies. This ledger is synchronized across various websites, creating access around the world.
In a nutshell, cryptocurrency is a digital asset on a network of computers. The critical difference lies in its authority and its structure. As it is nearly decentralized, the government is never influential on this platform. This renders it utterly immune to legal tender, and it is not subjected to manipulation. Its advantage is the efficient flow of money and lack of proneness to collapsing markets. However, they are incredibly volatile, rendering them unpredictable and uncertain. Let’s examine some significant differences between electronic Chinese money and Bitcoin’s most popular cryptocurrency.
The first cryptocurrency was created in the 1990s, and Bitcoin followed in 2009. Despite such popularity, it remains misconceived by the masses. Here are some benefits that can spark an interest in its investment:
Crypto is easily accessible and very liquid:
Bitcoin is one cryptocurrency that knows no limit regarding information accessibility. Being versatile, a significant advantage is an ease of transferring and purchasing. El Salvador has already accepted it as an official means of payment, and other countries are sure to follow shortly. History proved that hard cash is hard to track and maintain, and making transactions is a whole different story. Crypto saw this possibility and made spending easy in the domestic arena and the global economy. With zero fees, cryptos are straightforward to sell.
It ensures anonymity between users and the public:
One feature that differentiates Bitcoin from most digital currencies and cryptocurrencies is its user anonymity. Users are assigned specific numerical codes that the public cannot influence. In a nutshell, Bitcoin is a decentralized private currency that is regulated solely by the market forces of supply and demand. crypto possesses specific public keys, which prevents any tracking by the public. Compared to traditional banking systems, where personal information leakage is expected, all the addresses and transactions remain in your wallet, which encourages privacy.
It ensures transparency:
All transactions availed in bitcoin can be available to the respective users in detail. However, this does not mean they are not secure. They are heavily protected using the technical networking of computers known as blockchains. This ensures that you are the only person who can view the number of bitcoins you have.
It is decentralized:
Another differentiating feature most cryptos possess is their decentralized structure. The governments of any country are in no position to influence or manipulate the crypto market, nor are the respective central banks. So they cannot freeze your money or impose taxes on them. This decentralization is what makes bitcoin all the more attractive.
High Return Potential:
Various calculations based on market analysis prove that although crypto is highly volatile and sensitive to other cryptocurrencies, it has a vast potential to reach prices worth $500,000. Look at the following market prices in different years:
- March 2017: $975.70
- December 2017: $20,089
- April 2023: $64,000
This volatility can be advantageous to prospective investors looking to invest in bitcoin. Its high return potential is yet to be exhausted, and many believe it can reach global money status. This market analysis can be traced back to its market cap of 21 million bitcoins.
Notwithstanding its rapid development and rising subscriber base, there are several drawbacks. Similar to many other investment choices, the more information you have, the better-informed choice you may make on whether to buy crypto. So, here are some cons you must consider a look:
It is incredibly volatile:
Volatility can be a strength and a weakness, especially in the case of Bitcoin. The creator of bitcoin, Satoshi Nakamoto, set a limit not exceeding 21 million coins. This made crypto a very scarce choice in the minds of many investors when it first came out. However, with scarcity comes value, and with such value comes volatility in prices and instability in the market. Many investors perceive it as uncertain, and as it is controlled privately, it can be prone to security leakage despite its blockchain technology.
There is no regulation from the government:
Again, a decentralized structure means no tax imposition and, indeed, no government involvement. However, this also means there is a severe lack of public regulation. This means that if you have been scammed, no action can be taken from the government’s side. Bitcoin transactions are irreversible. As it comes with zero legal protection, as noted with many digital currencies, it is very prone to scams. Another pointer is that there is no benchmark to its value. If it ever happens that a large number of investors sell bitcoins, the value can drop to high lengths and affect the existing users.
It is not widely accepted:
Bitcoin continues not to be universally acknowledged, despite an increasing number of organizations receiving it, including Microsoft and several Subway locations. The places you could spend your crypto funds are constrained by this, as opposed to when you use a debit card.
One factor that may jeopardize a state’s national independence is the absence of central bank control over the digital currency. Its native money might be forgotten if untraceable and unregulated electronic money is adopted. Financial institutions will experience intense competition due to the emergence of cryptocurrencies, particularly in the transaction, finance, and storage operations.
Factors To Consider Before Investing In Bitcoin
Crypto is the epitome of financial freedom, but this can backfire if not used without knowledge. Keep the following pointers in mind before investing:
- Make sure you heavily familiarize yourself with the mechanism of crypto operations
- Keep a diversified portfolio if you’re seeking long-term investing goals
- Research, research, and more research
- Learn about the importance of timing of investment rather than the amount
- Set a limit to the amount you can support and lose
Is it a better choice to invest in digital Yuan? Or should you go for Bitcoin instead? The answer is ambiguous, as with any market instrument for that matter. With risk comes return, and vice versa. Nevertheless, Bitcoin and the digital Yuan are still taking their baby steps; this can be good news for both investors. Whatever choice you make at the end of the day, make sure you make an informed decision rather than going on a whim. As long as you keep long-term financial success and patience in mind, then it would be advantageous.