Fed and MIT's CBDC research: Distributed Ledger tech has ‘downsides’
Theoretical research into a Central Bank Digital Currency (CBDC) in the U.S. has found that distributed ledger architecture has “downsides.”
The Federal Reserve Bank of Boston and the Digital Currency Initiative at the Massachusetts Institute of Technology published their findings of their initial research into a CBDC on Feb 3.
The research project, dubbed “Project Hamilton,” tested a “hypothetical general purpose CBDC” using two potential models.
The first one processed transactions through “ordering server” distributed ledger technology (DLT), which organized the validated transactions into blocks to create an ordered transaction history.
The researchers were able to use this architecture to complete over 99% of transactions in under two seconds and the majority of transactions in under 0.7 seconds.
However, the ordering server resulted in a number of issues due to being run under the control of a single actor, the researchers concluding that “a distributed ledger architecture has downsides. “
They added that despite using ideas from blockchain technology, a “distributed ledger operating under the jurisdiction of different actors was not needed.”
The second architecture processed transactions in parallel on multiple computers, rather than relying on a single ordering server to prevent double spends. The researchers wrote that although “this results in superior scalability,” it did not “materialize an ordered history for all transactions.”
It demonstrated throughput of 1.7 million transactions per second with 99% of transactions durably completing in under a second, and the majority of transactions completing in under half a second.
Related: Fed issues discussion paper on benefits and risks of a digital dollar
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