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The Federal Reserve Bank of Boston has published a white paper following its initial technological research into a central bank digital currency (CBDC).
Known as Project Hamilton, the research is being carried out by the Boston Fed in collaboration with the Massachusetts Institute of Technology (MIT), and explores the use of existing and new technologies to build and test a hypothetical CBDC platform.
“This collaboration between MIT and our technologists has created a scalable CBDC research model that allows us to learn more about these technologies and the choices that should be considered when designing a CBDC," said Boston Fed executive vice president and interim chief operating officer Jim Cunha.
The paper details findings from the first research phase, in which researchers built and tested platforms based on cryptography, distributed systems, and blockchain technology concepts.
It closed with the creation of a core processing engine for a hypothetical general-purpose CBDC, explored in two architectures.
The team also developed a code called OpenCBDC for a high-performance transaction processor that is capable of handling 1.7m transactions per second (tps).
The vast majority of transactions reached settlement finality in under two seconds, which the paper says were carried out within architectures that support secure and resilient performance.
To put this in perspective, late last year, blockchain firm SETL made news with its announcement it was able to process 1m transactions per second in tests.
Most traditional payments systems typically max-out at significantly less than this, although their limits are based on expected demand. For example, instant payments networks can typically process up to 5,000 to 10,000 tps, while it has been claimed that card network Visa can process as much as 24,000 tps.
According to the Boston Fed, the solutions developed in Project Hamilton offer significant technological flexibility that enables it to adjust the system to future policy direction.
The OpenCBDC software has been made available on software development platform GitHub for contributions.
"There are still many remaining challenges in determining whether or how to adopt a central bank payment system for the United States," said Neha Narula, director of the Digital Currency Initiative at MIT.
"What is clear is that open-source software provides an important way to collaborate, experiment, and implement. In addition to supporting collaboration, monetary systems benefit from transparency and verifiability, which open-source offers."
Going forward, the second phase of the research will explore alternative technical designs to improve the privacy, resiliency, and functionality of the technology outlined in the first phase.
The MIT and the Boston Fed’s joint research is separate from the Federal Reserve's recently published policy paper, which evaluates the pros and cons of a CBDC.
