The Federal Reserve Bank of Boston (Boston Fed) and the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT) have created a core processing engine for a hypothetical central bank digital currency (CBDC) and explored it in two architectures, as part of a collaborative effort known as Project Hamilton.
The white paper published last week (3 February) details findings from the initial research phase of the project, which is separate from the Federal Reserve’s evaluation of the pros and cons of a CBDC.
The research by the Boston Fed and MIT describes a “theoretical high-performance and resilient transaction processor for a CBDC that was developed using open-source research software, OpenCBDC”.
Their findings showed that the work produced one code base capable of handling 1.7 million transactions per second.
Meanwhile, the Boston Fed and MIT reported that the “vast majority” of transactions reached settlement finality in under two seconds within architectures that support “secure, resilient performance and offer the significant technological flexibility required to adjust to future policy direction”.
“It is critical to understand how emerging technologies could support a CBDC and what challenges remain,” said Boston Fed executive vice president and interim chief operating officer Jim Cunha.
“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.”
Project Hamilton is a multi-year collaboration between the Boston Fed and MIT’s Digital Currency Initiative that was announced in 2020, which focuses on technological experimentation and does not aim to create a usable CBDC for the US.
Neha Narula, director of the Digital Currency Initiative at MIT, said there are “many remaining challenges” in determining whether or how to adopt a central bank payment system for the US.
“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,” Narula added.
Dan Anthony, SVP and chief information officer, FedNow at the Federal Reserve Bank of Boston is speaking at Open Banking Expo’s Central Bank Digital Currencies virtual event on 10 March 2022 – click here to register.