From ancient times to the present, shells, chips, cash, deposits, e-wallets, etc. are all carriers or forms of expression of currency. These carriers and forms of expression are constantly changing in line with the times, just like the digital currency form derived from blockchain technology in today's digital economy era, and the Web3 payment ecosystem built on this basis.

The most important thing is to understand that the essential attributes of money (measure of value) and its core functions (medium of exchange) remain unchanged.

The birth of programmable payment, programmable currency and special currency is also aimed at further highlighting the essential attributes of currency, strengthening its core functions, improving the efficiency of currency operation, reducing operating costs, strictly controlling risks, and giving full play to the positive role of currency in promoting exchange transactions and economic and social development through digital currency and blockchain technology.

Therefore, this article aims to clarify the concepts of programmable payments, programmable currency and dedicated currency by sorting out and compiling the article JPM: Understanding Programmable Payments, Programmable Money and Purpose-Bound Money, and further promote the application and implementation of Web3 payments.

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As the world moves toward a more digital, technologically advanced future, the landscape of financial transactions is evolving rapidly. Continued technological advances, including the use of blockchain platforms and smart contracts, are making money and payments more “intelligent,” such as embedding the logic and conditions of payments into digital currencies. These concepts are revolutionizing the way we think about money and financial transactions, providing unique advantages and capabilities in the digital economy.

There are many ways to achieve programmability in digital currencies. A recent technical white paper on Purpose Bound Money (PBM) released by the Monetary Authority of Singapore (MAS) divides them into the following categories:

• Programmable Payments: Payments are automatically executed once a predefined set of conditions are met.

• Programmable Money: Embed rules within the store of value itself to define or limit its use.

• Purpose-Bound Money: At the protocol level, it specifies the usage conditions and transfer rules for the peer-to-peer circulation of the underlying digital currency.

Below are some examples of different business models for better understanding.

1. Programmable Payments

Most use cases for programmability fall into the category of programmable payments. A common example is a conditional payment, which is a payment that is executed when a condition is met. In the traditional world, a postdated check can be considered a conditional payment, where the check is valid on or after the value date and is valid for a predetermined period. The attached conditions are evaluated before the check is valid. In the digital world, programmable payments are often implemented through blockchain technology, where smart contracts automatically execute payments or actions when certain conditions are met.

A clear and immediate use case for programmable payments is automated financial management. Clear financial instructions can help treasurers achieve account target balances and clear funds that exceed target balances. Programmable payments can also implement more complex logic, evaluate multiple account balances in different currencies and foreign exchange rates, and then transfer funds in the best way. In conjunction with the real-time 24/7 payment capabilities of the JPM Coin System, treasurers will be able to use programmable payments to assist in financial management, moving from a cash forecasting model to an instant cash management model, which can be programmed to respond instantly to changing real-world conditions.

Conditional payments can also make transactions more secure without the expensive operational overhead associated with escrow arrangements. For example, the buyer can hold the funds and only release them to the seller once the goods have been received. There are a number of options for achieving this, such as at the point where the buyer confirms receipt of the goods, using data from a trusted third-party logistics provider, or even by using location-tracking Internet of Things (IoT) devices to indicate when goods have been delivered to a specific geographic location.

The same concept applies to digital financial assets. With digital financial assets, proof of delivery is presented digitally. Funds can only be retained and released after the digital asset is successfully delivered. This is a form of "cash for goods" settlement that minimizes settlement risk by synchronizing the transfer of funds and assets.

2. Programmable Money

Programmable money goes a step further and embeds the logic of rules directly into the store of value itself. These rules dictate the logic of how the currency is used, introducing a whole new level of control and security to the currency.

Unlike programmable payments, programmable money is self-contained, containing both programming logic and value storage. This means that when programmable money is transferred, it carries rules and logic.

The rigidity of limiting rules to value itself may limit the use cases of programmable money. These rules need to be limited to specific scenarios rather than general applications.

3. Purpose-Bound Money

A dedicated currency (PBM) provides the flexibility to customize rules according to specific use cases, while also ensuring that the rules are closely integrated with the underlying value. Technically, it can be seen as wrapping the rules around the value token, thereby creating a new transferable token that contains both the rules and the underlying value.

This provides both the flexibility of programmable payments, where different token containers can be built for different scenarios or use cases, and the certainty of programmable currency, where the rules are tied to the underlying store of value in this new transferable token.

PBMs are most useful when specific rules need to be applied in a unified and universally applicable scenario. Suppose a bank issues deposit tokens, which can be held by customers of other partner banks, thus enabling global circulation. In this case, we assume that there are 10 jurisdictions and 10 partner banks. Each jurisdiction has its own set of rules, such as currency controls and sanctions lists. Similarly, each partner bank has its own set of rules, such as different control mechanisms or even reward mechanisms.

These rules cannot be implemented through "programmable payments" because the flow of money is an inherent property of money, not a one-time condition. Although it is possible to implement it through "programmable money", it may not be practical from a governance and technical perspective. From a governance perspective, the original issuing bank needs to integrate 100 permutations (10 banks X 10 jurisdictions) of rules, implement all of them, and maintain and update them regularly. From a technical perspective, implementing these rules will incur high operational costs.

Through the PBM method, the original bank will first issue a deposit token A with basic general rules. When entering the cn specific jurisdiction, the additional rules of the specific jurisdiction will wrap the deposit token to form cnA, and when the cnA deposit token leaves the specific jurisdiction, it will be unwrapped and turned back into a deposit token A. Within the cn specific jurisdiction, all transfers are subject to the same rules and are carried out by cnA tokens consisting of the basic deposit token A and the cn specific jurisdiction rules.

Partner banks can further develop their own bank-specific rules for transferring money for customers in a specific jurisdiction, resulting in a token that complies with all the rules of the partner bank and the jurisdiction in which it is located.

The diagram below represents the movement of deposit tokens between different jurisdictions and the different jurisdiction-specific rules surrounding it.

IV. Conclusion

The concept of PBM changes the way we think about programmable rules and how they are implemented in practice. As digital currencies become more widely used, it creates new possibilities for how we can manage rules more effectively and provides ways to more effectively support different innovative use cases.

Programmable payments, programmable currencies, and specialized currencies are reshaping the traditional monetary system, providing greater flexibility, automation, and controllability for financial transactions. These concepts will drive innovation, efficiency, and security in the digital economy, drive us into a new era of finance, and change the way we have long viewed and used money.