A researcher at the Bank of England explored some of the design requirements for a central bank-issued digital currency earlier this week – regardless of whether it utilizes blockchain to operate.
Writing on the Bank Underground blog, Simon Scorer, who serves a manager for UK central bank’s digital currencies research team, set aside some of the legal and economic considerations involved (which have been raised by others at the Bank of England). Rather, he focused on the technology aspects, as well as the demands such a system would create.
As he wrote:
“Like current financial infrastructure, a widely used [central bank digital currency] would likely be considered critical national infrastructure.…It would need to be operational across the country, 24 hours a day, 365 days a year. This would require extraordinary levels of resilience.”
Notably, Scorer’s blog dives into the design requirements regardless of whether a blockchain ends up being used. Indeed, he proposed looking at both distributed ledger-based systems as well as those that use different kinds of tech.
According to Scorer, a central bank digital currency needs to be resilient against a range of problems and capable of running continuously.
“A minimum operational availability of 99.999% might not be unreasonable for the core settlement engine – equating to a downtime of approximately 5 minutes during a year,” he wrote.
Besides resilience, this new system would need to be protected from cyberattacks, robust enough to handle large volumes of transactions, able to process these transactions immediately – or as close to immediately as possible – and have adequate privacy protections.
The UK central bank has been examining potential uses of the tech, including for the use of an institutionally backed digital currency, since as early as 2015. In September of that year, the Bank of England’s chief economist said that blockchain could be used to underpin such a system.
Among the notable developments since that time was a possible plan to use blockchain within the central bank’s next-generation real-time gross settlement (RTGS) system. Ultimately, it opted to make that system compatible with distributed ledger tech rather than using it as its foundation.
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