The MIT Digital Currency Initiative (DCI) is helping the Federal Reserve Bank of Boston build a digital currency with the goal of scaling it for consumption. The director of the DCI, Neha Narula, said Cointelegraph:
“We are trying to build a high-throughput, low-latency transaction system that consumers can use and that has the security and resiliency required for a local currency.”
The multi-year collaboration between the two organizations is still at a very early stage and not much information is being released to the public. However, the focus is not on creating a newer version of the digital interbank ledger. but something that consumers can use. It is difficult to estimate the transaction performance required for such a technology. Given that the US population is around 330 million and the dollar is the most widely used currency in the world (some nations have even officially adopted it), that number should be quite high.
Narula said DCI’s job is to develop a technology that will be released under the MIT license. The project is expected to take two to three years, and the final say on whether it will ultimately be used to spend a digital dollar rests with lawmakers and policy makers. Apparently, One of the fundamental questions of the project is to determine the level of privacy and anonymity that should be given to potential users:
“In our sophomore year, we will explore more deeply what tradeoffs we can make to achieve privacy or anonymity while we continue to obey the law.”
Researchers have examined existing technologies and have not identified any that are suitable for their task. The DCI’s mandate from the Fed is to develop a new technology from scratch:
“We don’t think any of the existing platforms we’ve seen were specifically designed for a CBDC use case. And we’re not sure if they can meet the requirements of a CBDC use case. Existing platforms may be capable, but our mission is to start from scratch and design what we think is a CBDC-based design. “
In this point, Narula didn’t want to reveal whether or not the backbone of this new technology would be blockchain. She said, “We will create a design based on best practices in distributed and cryptographic systems in general.”
DCI examined Facebook’s scales and although its technology is interesting, Narula doesn’t think central banks are ready to use technology developed by a private sector company and over which they do not have full control.
According to Narula, although the DCI employs cryptographers, it could seek outside help in the future. Narula said that all research and code generated by DCI throughout the project will be available to the public in the future.
We don’t know if this is the only U.S. government-led digital currency project focused on developing this technology. In this case, the US appears to be lagging far behind China in the race for digital currencies. Therefore, it is unlikely that the government will be able to adjust anything derived from this project before 2024 or 2025 at the earliest.