In collaboration with a team at the Federal Reserve Bank of Boston, MIT experts have begun designing and testing technical research through which further examination of a Central Bank Digital Currency (CBDC) can be performed in the US.
The effort, known as Project Hamilton, is in an exploratory phase, and the research is not intended as a pilot or for public deployment. Instead, the researchers have explored two different approaches that could be used to process transactions, and thus could indicate the technical feasibility of a potential CBDC model. In a process involving significant design flexibility, the MIT group tested factors such as the volume and speed of transactions, and the resilience of the systems in general, among other requirements for a viable digital currency.
“The core of what we built is a high-speed transaction processor for a centralized digital currency, to demonstrate the throughput, latency, and resilience of a system that could support a payment economy at the scale of the United States,” says Neha Narula, director of MIT’s Digital Currency Initiative and a research scientist at the MIT Media Lab, who led the effort with the Boston Fed, in a statement. “It is important to note that this project is not a comment on whether or not the US should issue a CBDC — but work like this is vital to help determine the answer to that question. This project serves as a platform for creating and comparing more viable designs, and provides a place to experiment and collaborate on more advanced digital currency functionality.”
The researchers developed two complete sets of computing source code, or “codebases,” for the software systems. One codebase was capable of handling 1.7 million transactions per second, with 99% of those transactions finishing in less than a second — well above the basic benchmark of 100,000 transactions per second they sought to achieve. The other codebase was able to process about 170,000 transactions per second. That level of throughput would help finalize every transaction at a central bank, while enabling the growth of other machine-to-machine transactions — both of which would be vital to a potential CBDC.
Those findings have been released in a paper titled, “A High Performance Payment Processing System Designed for Central Bank Digital Currencies,” released by MIT and the Federal Reserve Bank of Boston. The Project Hamilton software, called OpenCBDC, has been released under an MIT open-source license as well. It is one piece of work among others being done on CBDC issues in the Federal Reserve system.
Narula said in a statement: “The policy conversation around central bank digital currency is still in its infancy…There are many research questions left to answer that we haven’t gotten to yet, such as the roles of intermediaries, how to promote access securely, and how to design for those who might not have smartphones or consistent internet access.”