ICBC Analyzes Rapid Growth of Digital Currencies

In a recent analysis published by the Industrial and Commercial Bank of China (ICBC), the world’s largest lender, the rapid development and increasing diversity of digital currencies were highlighted. The report compares Bitcoin to gold due to its scarcity maintained through a mathematical consensus mechanism, while Ethereum is dubbed “digital oil” for its role in enabling future technological advancements, particularly in decentralized finance (DeFi) and non-fungible tokens (NFTs) through its Web3 applications and complex smart contracts.
Historian Yuval Noah Harari credits human imagination for driving the digital currency revolution, which has seen exponential growth in both the number and uses of these currencies. Matthew Siegel from VanEck noted the consistent backing of digital currencies by state-owned Chinese banks.
Despite Ethereum’s achievements, it faces challenges such as network insecurity and scalability issues, which are being addressed through solutions like the sharding technique in Eth2.0 and the Proof of Stake (PoS) mechanism. The report also underscores the significance of stablecoins in bridging the digital and real economy and the potential of central bank digital currencies to enhance payment system efficiency, reduce transaction costs, and promote financial inclusion if privacy, security, and regulatory issues are managed.