FED Experiments New Digital Currency But Its “Not A Blockchain”; Here’s Why

Boston FED and MIT collaborated on a digital dollar experiment that resulted in a functional and fault-tolerant central bank digital currency (CBDC) architecture capable of handling 1.7 million transactions per second, with 99 percent completed within one second. It is also not based on a blockchain.

The preliminary research findings were undertaken as a cooperation between the Boston Fed and the Massachusetts Institute of Technology was published in a paper last Thursday (MIT). The report, dubbed ‘Project Hamilton,’ proposes a hypothetical high-performance and robust transaction processor for a CBDC created using open-source research software known as ‘OpenCBDC.’

According to an MIT news statement issued on Thursday (Feb. 3), the digital currency testing required users to “interact with a centrally run transaction processor, utilizing digital wallets with individual, cryptographic signatures that enable the flow of funds.”

The Bottleneck In The Blockchain

The researchers discovered, to their surprise, that the blockchain technology that underpins cryptocurrencies is a subpar platform that creates delays since it demands a comprehensive record of transactions in the order they were completed.

“There were some huge bottlenecks” in the blockchain-based digital ledger. It produced 170,000 TPS, much over the objective of 100,000 TPS. While most transactions were completed in less than 0.7 seconds, the non-blockchain version took two seconds to meet the 99 percent completion criteria.

The more effective method “processes transactions in parallel on numerous computers and does not rely on a single ordering server to prevent double spends,” according to the project’s executive summary. “This results in improved scalability but does not actualize an ordered history for all transactions,” according to the paper. According to the report, the system looked to be able to “grow linearly with the addition of extra servers.”