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The digital yuan launched by China has the potential to change the monetary system as we know it. I wrote a short essay about it recently and wanted to share it with everyone.
The digital Yuan- what is it and what does it mean?
The digital yuan is China’s attempt at converting physical cash into digital currency, allowing it to tinker with the domestic and foreign markets at the push of a button.
The PBOC is leveraging blockchain technology to issue the digital yuan.
So, what’s special about the Digital Yuan?
Generally central banks across the world can only control the stock (quantity) of money in the domestic market. By controlling the flow and stock of money, China can jump start the economy or remove excess liquidity depending on the situation.
Say,
If you’re thinking of extending cash to farmers so they could buy fertilizers using this money, then you could technically program it in a way such that it could only be used to buy fertilizers. If you want to then measure the efficacy of the program, you could track this money and see where people are spending it. – From Finshots.
As the government has control over the data such as where is the money being spent, how much, who is the recipient, what for, it could manage commodity prices and thereby inflation. It could make the markets dance to its tunes but with a massive hit to privacy.
However, adoption of the digital yuan could boost the economy. Currently shop owners are not charged any transaction fees for accepting the digital currency. Thereby they save ~0.6% in fees. Furthermore, to transact in the currency it does not need an internet connection, or a bank account. Crazy, I know. Thereby money could flow to China’s unbanked population estimated to be 225 million people.
The idea of a digital currency came from the birth of Bitcoin. Bitcoin and Facebook’s stable coin was viewed as a threat to national security as it could reduce government oversight in transactions. Where Bitcoin gives anonymity to the user the digital yuan does the exact opposite.
China has become the first major economy to have its own digital currency. Government driven innovation combined with consumer-tech giants such as Alipay and WeChat pay for distribution to the public has upended the traditional financial system.
With the adoption of the digital yuan the boundaries of the walled garden are becoming tighter.
“The government could force Chinese companies to only accept payment in digital yuan which would then force the foreign companies to use the digital yuan.”- From the WSJ.
Especially for BRI related transactions. This forced internationalization is a threat to the dollars dominance in international trade. As it gives those the U.S. seeks to penalize a way to exchange money without America’s knowledge.
“The Chinese have created a problem for us by taking away our sanctions leverage.” As per Nicholas Burns, a long time American diplomat.
The evolution and real-world application of the digital yuan will be a case study that the world will watch closely. Is it a solution which wipes out corruption and allows hyper targeted interventions or a tool that erodes privacy completely and wrests control of the global economy away from the greenback? Only time will tell.
I also took a closer look at the modern marvel that is Wikipedia in a series of short essays, here it is as a consolidated piece.
I was fascinated by what Wikipedia could be worth if it did try to monetise and that led to the first short essay.
3 reasons why Wikipedia left $5 billion on the table
If Wikipedia promoted advertising on its platform, it would easily be worth $5 billion.
But that would have led its volunteer army to revolt.
Its volunteers are vital to achieving Wikipedia’s vision which is;
“Imagine a world in which every single person on the planet is given free access to the sum of all human knowledge” Jimmy Wales, co-founder.
Here is why-
The force keeping Wikipedia running are the contributors who write/ edit the articles. From maintaining the servers hosting the website to edits in an article everything is managed by the community. Wiki-authors are not paid for their work. They do it for fun because it’s a community and project they value. If Wikipedia promoted advertising people would expect to get paid for their work and harm the ethos of the project.
To be a working encyclopaedia, it needs inputs from a wide range of people from across the world. One of the reasons Britannica failed was due to its traditional organisational structure. It needed to hire writers and fact checkers to compress world knowledge. Wikipedia on the other hand allows anyone to edit its articles and add to the library.
Here is why contributors such as Steven Pruitt spend three hours a day editing on Wikipedia-
"The idea of making it all free fascinates me. My mother grew up in the Soviet Union ... So I'm very conscious of, what it can mean to make knowledge free, to make information free,"
If Wikipedia promoted advertising, it would lead to lower quality of articles. The articles on Wikipedia are written as a statement of facts. As there is no revenue to be made from the reader there is no incentive to keep the reader glued to the page. Thus, articles are not sensationalised nor are there any overt biases. There are only facts from reliable sources.
Once I looked at how much it was worth, I wanted to dig deeper into why people trust it so much and how it attracts so much traffic. That led to the second essay.
4 reasons why Wikipedia averages 18 billion page views per month
Yes, it is a free resource available to anyone with internet access but that is not why so many users read it.
Here is why Wikipedia is the 13th most popular destination on the web-
It is reliable- For example information about COVID-19 has been kept incredibly current. Over the last year, hundreds of editors have contributed and kept us up to date about every aspect of the pandemic. Wikipedia's policy on reputable sources for medical information keeps up the quality. But this does not stop editors debating the best way to present information, suggesting, and sometimes voting on changes till enough people are satisfied. This open collaboration ensures the quality of the articles remains high.
Its matter of facts style of writing. As there is no incentive to keep the reader reading, it does not sensationalize or dramatize any article. For example, the article describing Trump does not depict him as a good or bad person. The article lists facts so you can decide for yourself. No fluff.
There are no advertisements. There is no video blaring in your face pushing you to buy cat litter. As there is no money to be made there is no overlord distorting facts to support one side.
It is not English language centric- Only a small subsection of its articles are in English. It lists historical events, monuments, people from all over the world at the readers fingertips. Wikipedia has 55 million articles in 309 languages with only 6 million of them in English. It democratizes knowledge for its readers.
Finally, while everything might seem great from the outside, organizations with as much leverage as Wikipedia always have areas they can improve. Diving into the criticism of Wikipedia led me to my last piece of the series.
4 reasons why Wikipedia is broken
Not everything is roses in the world of Wikipedia.
Here are 4 areas it needs to look at improving -
Systematic gender and racial bias. The platform is male dominated with 80% to 90% of the editors being male. Stories of women along with people of color can often get forgotten. For example, only 18% of English Wikipedia's biographies are about women.
Inaccurate information can creep in. Sometimes inaccurate facts go uncorrected for long time periods. Hillary Clinton had been incorrectly listed for 20 months in her Wikipedia biography as having been valedictorian of her class of 1969. To its credit though, the inaccurate information was removed within 24 hours after the inaccuracy was brought to light.
Intense levels of debate and edit wars on all things Wiki. Wikipedia allows users to collectively create, add and edit content — and more than a million people have edited at least one entry. But the veracity and updating of its more than 55 million entries relies largely on an army of more than 80,000 dedicated volunteers. This can also lead to online hysteria and “edit wars” over minutia like how to categorize hummus. Is it an Israeli or an Arab food item?
Harassment leading to reduction in number of editors. Initially Wikipedia attracted lots of editors who were “tech-oriented” men. That led to a culture that was not always accepting of outside opinions. Furthermore, spirited debate over a detail in an article can spiral into one user spewing personal attacks against another.
“If you out yourself as a feminist or L.G.B.T., you will tend to be more targeted,” said Natacha Rault, a Wikipedia editor.
Trying to look at an organization from multiple angles is always fascinating and I hope you know a bit more about Wikipedia just like I learnt.
If you’ve liked reading my short essay’s I have more of them over on my twitter handle, you can them all on this thread: