DLT

dlt

Tajikistan and CBDCs

“Digitization of the national economy, support for business, attraction of national capital to economic sectors, adoption of a new tax code in a new edition with the participation of the private sector, cancellation of the taxes for the farmers, strengthening the role of women in society, increasing attention to youth generation among the projects intended for the following year.” President

Fantom & e-Government

The big news for Tajikistan is that Fantom agreed to provide blockchain services to create an e-Government with a view to CBDCs.

The President addressed this matter and clearly digitization is a top priority.

Tajikistan has a large income from remittances and the benefits of CBDCs would be keenly felt as already described for Somalia and others.

The currency is pegged to the Russian Ruble. 

 

BIS and CBDC – June 2021

Broadening Narrow Money

The paper considers monetary policy around CBDCs. 

… we consider a CBDC that is universally accessible, interest bearing, and freely convertible to other forms of central bank money and to commercial bank deposits.

One conclusion the paper draws is that policy interest rates would be felt in the real economy quicker because users directly interact with the central bank.

The paper also considers the well voiced issue about disintermediation. Also under a direct relationship the document considers that QE would be weakened.

 

“More practical design choices relate to the technology used to power a CBDC, in particular whether a CBDC should use distributed ledger technology … the technology is still considered to be too immature to power a critical national payment system”

 

Stablecoins & CBDCs

Monetary Policy & Stablecoins

Director Mu made it clear in his statement that banning cryptocurrency was critical to protect Chinese Monetary Policy.

Central banks control monetary policy by controlling what currency is created and how central bank lending is done.

Stablecoins pose a real and genuine threat to that independence.

Stablecoins are private coins and they are not controlled by central banks. But the value of these coins is pegged to fiat money. 

This means actual currency supply is no longer controlled by the central banks. This loss of control has fuelled the race to bring into finance the CBDC.

 

 

 

 

“We live in an increasingly digitalised world where the way we make payments and use money is changing rapidly. The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues that central banks, governments, and society as a whole, need to carefully consider and address.”  Governor BoE   

 

Bitt and CBDCs

“In 2019, the Eastern Caribbean Central Bank (ECCB) and the Barbados-based fintech company, Bitt Inc., signed a contract to conduct a blockchain-issued central bank digital currency (CBDC) pilot within the Eastern Caribbean Currency Union (ECCU).” Bitt

CBDC Specialists

Bitt specialises in payment systems with a focus on CBDCs.

They were closely involved in the evolution of DCash implemented via the ECCB. 

Bitt advocates the implementation of blockchain and DLTs. Marla Dukharan is the chief economist at Bitt who is also involved in the Caribean Settlement Network

The ECCB launched a pilot called DXCD reported by the BIS; Bitt was also involved in that pilot – a forerunner to DCash. 

Bitt has over 80 employees listed at Linkedin. 

 

 

 

 

Gossip Protocol

“Gossip is a peer-to-peer communication protocol in which nodes periodically exchange state information about themselves and about other nodes they know about. The gossip process runs every second and exchanges state messages with up to three other nodes in the cluster. The nodes exchange information about themselves and about the other nodes that they have gossiped about, so all nodes quickly learn about all other nodes in the cluster. A gossip message has a version associated with it, so that during a gossip exchange, older information is overwritten with the most current state for a particular node.” Cassandra

Gossip Protocol

A blockchain is made of network nodes and they have to communicate somehow. The Gossip Protocol is widely used for this purpose. It communicates block and transaction level information to peers. It is an example of a p2p network protocol.

The Gossip Protocol itself is used more widely than in just blockchain networks. It dates back to 1987, and later in 2004 when Demer wrote about it.

The Gossip Protocol also is used in many types of systems, and the gossip protocol is used in NOSQL KV stores such as Dynamo and Cassandra.

Gossip protocols are eventually consistent using an epidemiological protocol. The analogy is to how epidemics spread via nearest neighbours; information is broadcast in the same fashion by networks using gossip.

The messages under gossip are sent to gossip partners and hence a probablistic outcome is determined. 

Demer had also proposed a distance based protocol under gossip. 

Ethereum and Bitcoin use the gossip protocol.

 

 

Hedera Hashgraph

 

Hedera Hashgraph

 

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Purchase

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Purchase

 

 

 

Distributed Ledger Technology

Ts

Distributed Ledger Technology

At the heart of any financial system is the ledger. This is used fundamentally in bookkeeping. 

A ledger is maintained usually by an authority. In a private company that is the accounts department led by the Financial Director (FD) or a Chief Financial Officer (CFO).

For banking, ledgers are still used but the context is different. Banks will use ledgers to create assets (loans) and that is how new money enters the economy – one way.

What created the excitement in Fintech was the concept that the ledgers could be distributed. This involves data being repeated in ledgers held in different computer systems.

This distributed structure allowed multiple parties to access and control their own ledgers. When these ledgers are compared this then creates a consensus.

 

 

Examples of DLTs are –

The Hedera Hashgraph uses DAG technology; as does Conflux and IOTA.

DLTs remove the need for a a single authority (trusted party) and hence this enables a far cheaper and high grow network of ledgers.

The famous blockchain technology is an example of a DLT which has some additional features.