Programmable Euro is a flexible and almost independent digital currency. The blockchain has built a brand new digital payment system in which people can conduct barrier-free digital currency transactions or cross-border payments. Moreover, because the blockchain has the characteristics of decentralization, immutability, and trust, it can guarantee the security and reliability of transactions, which will have a disruptive effect on the existing currency system. In this article, we firstly bring programmable Euro to the front, next, we illustrated the basic concept to the important of programmable Euro based on Internet of Things(IoT), Machine to Machine(M2M) and Smart contracts. Serkan Katilmis, Maximilian Forster, Hsiao-En Chen, Ya-Fang Cheng
What is programmable currency/ Euro?
Cryptocurrency could be seen as a type of programmable currencies, and stable coins created by overcoming the key problem, which is volatility, are also included in this category.
Simply defined, programmable currency is real money represented in digital form, also known as tokens. That means, programmable Euro is Euro represented in digital form. However, when we look into digital currencies issued by the central bank (also called as Central Bank Digital Currency, CBDC), we might think about the possibilities of CBDC to be programmable. The truth is the People’s Bank of China (PBoC) suggested that its CBDC could function with smart contracts which means that it is programmable emphasized by Yao Qian, former head of PBoC’s Digital Currency Research Department. But there is one thing need to notice is its CBDC would not run on contracts that provide functionality beyond that of “basic monetary requirements”. This is due to concerns that it may add additional value to the CBDC and “downgrade” this CBDC into some kind of security, consequently reducing its stability and usability, and adversely affecting the internationalization of the renminbi (RMB).
Why we need programmable Euro?
The programmable money has been discussed in the past two decades. It contains both positive and negative influences. For example, it proved the feasibility of a self-regulating, global and digital, peer-to-peer payment network and it can also operate without a trusted third-party intermediary (e.g. a bank, credit card company or any payment company). However, it will also increase the concept from the masses that the bank is not necessary to exist in the world.
Libra: a digital currency was launched by Facebook
Facebook’s announcement of its plans to launch a digital currency named Libra within twelve months has attracted considerable attention but also strong opposition worldwide. There are currently 1.7 billion people worldwide without a bank account, accounting for 31% of the global population. In the traditional financial field, cross-border transfers and remittances are cumbersome and take 3–5 business days to complete. And because of the use of cash, the United States has to steal $ 40 billion in cash a year. For those who do not have a bank account, in order to participate in social finance, they must pay a handling fee of more than $ 4 per month. The emergence of Libra stablecoins can allow everyone to participate in the financial world. It has functions that have both the characteristics of blockchain finance and traditional finance, such as stable value, fast transactions, scalability and security. This time Facebook has redefined “money” and changed the global economy.
The response from German banks
About one month ago, the Association of German Banks, representing over 200 private commercial banks and 11 member associations, has proposed the concept of a “programmable digital Euro” in a position paper (Bankenverband 2019). In this paper, it indicated what contribution banks can make towards a sustainable and innovative monetary system, how the general environment should be designed so that banks can operate alongside new competitors, and what is needed to ensure the stability of the financial system.
Industrial 4.0 and Internet of Things(IoT)
When blockchain combined with IoT, at the same time it supported by other enabling technologies such as Big Data, artificial intelligence, and cloud computing, will further accelerate process automation. It will create new automatized business models and facilitate integrated ecosystems Internet-connected machines, sensors and other everyday items such as cars, televisions, kitchen equipment can interact with each other and therefore form an own ecosystem, to exchange data, and to make intelligent decisions. This innovation has the potential to once again radically change the way we pay and how we store value. This makes it all the more important to achieve a social consensus on how programmable digital Euro can be integrated into the existing financial system. The main burden of this public-policy task rests with central banks, governments, parliaments and regulators. But one thing is certain: banks, in particular, are challenged as well since innovation and digital change will permanently transform their world.
Until now, we have known what is the programmable currency/Euro and what is the situation we face, however, why is it so important? What are the advantages of programmable Euro bringing to us?
The advantages of programmable Euro
After noticing the rapidly growing trends of programmable Euro, a bunch of curiosities are raised up. We should know what bonuses can programmable Euro bring to us.
Smart contracts and IoT
Smart contracts are computer protocols that depict and verify contract terms. Take an example is they can automatically initiate payments on performance of a transaction. In order to fulfil this action, we need “programmable digital money”. In smart contracts, not only cryptocurrency can be used, but account-based book money can also be exchanged to tokens and be utilized. Thus, there is a programmable and non-programmable digital currency. For example, Libra is a crypto-based, programmable digital money. Programmable digital currency, whether account-based or distributed ledger technology (DLT)-based, will be a key element of the digital transformation and play a major role particularly in connection with smart contracts.
Distributed ledger technology (DLT)-based smart contracts
Since the judgement mechanism and if this/ then else conditions are all written in the smart contracts, it can (for example) let the payment execute automatically and correctly if predetermined terms and conditions are met. There are some unique features that equipped by smart contracts due to blockchain, that is, transparency. They are executed in a deterministic way by third parties and nobody can affect their execution output, they provide means for user authentication and token transfer. However, on the other side, they also come with risks and weaknesses, which are, it cannot be modified, not preserve user privacy and not store or create secret information.
IoT & Machine to Machine(M2M)
More and more appliances are being connected to the Web because of the Internet of Things. Thus, data can be generated, exchanged and processed between machine and machine (M2M) and between machine and person (M2P). This interaction can also be fully automated with the help of smart contracts. A key point in this context is that customer data are encrypted and thus transferred securely, with control over access to the data remaining with the customer. The audibility and availability of historical transaction data can significantly reduce the risk of misuse and cybercrime.
There is no doubt that smart contracts have had a profound impact on the cryptocurrency community, and it can indeed completely change the field of blockchain. Although end users will not directly interact with smart contracts, in the near future, there will be a wider range of applications, ranging from financial services to supply chain management. Smart contracts and blockchains will collectively disrupt almost all areas of our society. But only time will tell if this breakthrough technology is powerful enough to overcome many barriers to eventually mass adoption.
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Serkan Katilmis is tech entrepreneur and investor, who has more than 20 years of experience in top-tier management consulting. As CEO of CASH ON LEDGER, he promotes the Euro on blockchain systems such that smart contracts can be used in an industrial setting or in B2B contexts. Prior to that, Serkan was working for leading organizations Goldman Sachs, accenture and PwC as an executive. He holds an MBA from Duke University and completed several executive strategy programs at INSEAD. You can contact him via Linkedin.
Maximilian Forster focuses on business development working for CASH ON LEDGER. He is also in close connection with the blockchain ecosystem being a co-founder of the Blockchain Bayern e.V., member of INATBA and member of the Blockchain Taskforce at Bitkom e.V.; previously, he helped to build up the DLT and blockchain service offering of KPMG and Accenture and worked on the blockchain investment strategy for Picus Capital. He is also in close connection with financial organizations and industrial companies: e.g., he has contributed to the Goethe University Frankfurt’s “Digital Banking Practical Handbook” and DHL’s “Blockchain in Logistics” publication. You can contact him via Linkedin.
Hsiao-En Chen studied TUM-BWL at the Technical University of Munich. Her fields of interests are mainly blockchain technology, cryptocurrencies, e-commerce. She participated in several projects related to Fin-tech applications, previously worked as an Assistant editor in “MIS Review” and Research Assistant in the Department of Management Information Systems in National Chenchi University, Taiwan. You can contact her via Linkedin.
Ya-Fang Cheng has studied Finance and Informatics at Technical University of Munich (TUM). As an professional auditor in PricewaterhouseCoopers(Pwc) for two years, she had advanced her practical experiences in the field of finance and business by providing audit and tax assurance service to multinational corporations. Further, she is also an active attendee of various blockchain and technology forums. You can contact her via e-mail or Linkedin.
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