Digital legal tender research

Digital legal tender research

Central entity: An entity responsible for regulating and managing the monetary system, such as a central bank.

Physical currency: Currency in physical form, such as banknotes and coins.

Digital currency: Currency in electronic form, such as cryptocurrency.

Legal currency: Currency authorized by the government with legal payment capabilities.

Blockchain: A decentralized distributed ledger technology that uses cryptographic methods to link data into blocks to form an unalterable record.

Cryptocurrency network: A network composed of multiple computer nodes that jointly maintain the ledger of cryptocurrency.

Key: A cryptographic tool used to encrypt and decrypt data.

Transaction processing network: A network system responsible for processing and verifying transactions.

Server computer: A powerful computer system that provides services, such as a database server or web server.

Digital wallet: An electronic device or online service used to store and manage digital currency.

Hash: Converts data of arbitrary length into a fixed-length string for verifying data integrity.

Processor: An electronic device that executes instructions, such as a CPU.

Memory: An electronic device used to store data, such as RAM, ROM, hard disk, etc.

Exchange Entity: The entity responsible for receiving physical currency and exchanging it for digital fiat currency.

Short Answer Question

What is the main difference between digital fiat currency and traditional cryptocurrency?

The main difference between digital fiat currency and traditional cryptocurrency is its value basis and regulation. Digital fiat currency is pegged to legal currency and its value is regulated by a central entity, while the value of traditional cryptocurrency is determined by market supply and demand and usually lacks central regulation.

In a digital fiat currency system, how is physical currency removed from circulation?

In a digital fiat currency system, the exchange entity submits the received physical currency to the central entity. The central entity verifies and destroys the physical currency and generates an equivalent amount of digital fiat currency on the blockchain.

How does digital fiat currency prevent double spending?

Digital fiat currency systems use blockchain technology to record and verify each transaction. The decentralized and tamper-proof nature of blockchain ensures that each unit of digital fiat currency can only be used once.

Describe how users conduct transactions in a digital fiat currency system.

Users use their digital wallets to initiate transactions, and transaction information contains the public keys of the sender and receiver and the transaction amount. Transaction information is broadcast to the blockchain network and recorded on the blockchain after verification.

What role does a central entity play in a digital fiat currency system?

Central entities are responsible for issuing and managing digital fiat currencies and ensuring their value is stable. Central entities are also responsible for regulating digital fiat currency systems and formulating relevant policies and regulations.

What is a smart contract and what role does it play in a digital fiat currency system?

A smart contract is a computer program that automatically executes the terms of a contract. In a digital fiat currency system, smart contracts can be used to automate processes such as currency exchange and transaction settlement.

Explain the concept of "private permissioned networks" and its application in digital fiat currency systems.

A private permissioned network is a network that participants need permission to join. Digital fiat currency systems often use private permissioned networks to increase transaction speed and security and strengthen supervision.

Describe how digital fiat currency systems use keys to ensure transaction security.

Users use their private keys to sign transactions to prove their ownership of digital currency. The recipient uses the sender's public key to verify the validity of the signature and ensure the authenticity of the transaction.

Give examples of transaction data recorded on the blockchain in a digital fiat currency system.

The transaction data on the blockchain includes information such as the sender's public key, the receiver's public key, the transaction amount, the timestamp, and the transaction hash value. This information can trace the transaction history and ensure the transparency of the transaction.

Briefly describe the advantages of digital legal tender over physical currency.

Compared with physical currency, digital legal tender has higher transaction efficiency, lower transaction costs, stronger security, and higher transparency.