Why would a central bank be messing around with a blockchain? Not for creating a cryptocurrency, that’s for sure. As I have written at exhausting length before, it makes absolutely no sense for a central bank to create a cryptocurrency. However, that is an entirely different topic as to whether a central bank might want to create a “blockchain” (i.e., some for of shared ledge) in order to manage transactions in a central bank digital currency (CBDC, as as I call it, e£). This is restated in the latest Bank of England blog.
"I explain that it may not be necessary to use DLT for a CBDC, but I also consider some of the reasons why it could still be desirable."
Central Bank Digital Currency: DLT, or not DLT? That is the question | Bank Underground
The precisely echoes my thoughts on the same topic. It makes sense to have a BritPESA rather than a BritCoin, but it make well make sense to implement BritPESA using a shared ledger rather than a central database as M-PESA does. And one of the obvious reasons why is that if there is a central database, then it can go down. As M-PESA has done.
Let use another example to make the point. Suppose an airline reservation system contains a million reservations. Suppose each reservation is as big as a megabyte. That’s a terabyte of data, or about $10 worth of storage in a rack somewhere. Now, suppose that instead of a central reservation system, each entity that interfaces to the airline (e.g., travel agents) has a complete copy of that data and when a reservation is made or changed, it propagates across all of these copies. Now there’s no central system for some wally to unplug. If one of the travel agent’s gateways goes down… so what.
RTGS
However, as I explain in my book “Before Babylon, Beyond Bitcoin”, there are other reasons why both banks and central banks want to put digital currency on a shared ledger rather than run everything through a central system as they do now. When I gave a talk about this a couple of years ago, I fixed on resilience, flexibility and innovation as more important than trustlessness in this context.
This is precisely what the Monetary Authority of Singapore (MAS) decided to do. They have created a permissioned shared ledger (implemented on an Ethereum blockchain) to connect
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