In brief
- Ripple has unveiled a pilot of a private ledger for Central Banks Digital Currencies.
- The new solution is focused on high throughput, scalability, and interoperability.
Blockchain payments-focused firm Ripple is piloting a new private ledger tailored specifically for Central Bank Digital Currencies (CBDCs), according to an announcement published yesterday.
A survey recently conducted by the Bank for International Settlements showed that over 80% of the world’s central banks are already looking into CBDCs. In its turn, Ripple aims to tap into this sector by offering “a secure, controlled and flexible solution” for issuing and managing CBDCs.
The company noted that while central banks can theoretically use some of the existing blockchains for their CBDC projects, most blockchains won’t be able to offer the kind of throughput required for the volume of transactions needed for a “successful retail CBDC.”
Additionally, most blockchains are public ledgers that are open to all users and updated by a wide array of validators—which is not ideal for CBDCs, Ripple argued.
“A Central Bank requires more transaction privacy and control over its currency than a public ledger can offer, so will most likely opt to create a CBDC on a private ledger that can also operate at the required scale,” the company explained.
Thus, Ripple plans to offer central banks its own version of a private CBDC-focused ledger that would not only provide high speeds and scalability but can also allow for interoperability with the existing global financial infrastructure as well as other digital assets.
The CBDC Private Ledger is based on the same blockchain technology as the XRP Ledger (XRPL), which was also designed primarily for payments.
“Moving money on the CBDC Private Ledger will be cost-effective, reliable and close to instantaneous. Transactions can also happen at volumes required by Central Banks. The CBDC Private Ledger will handle tens of thousands of transactions per second (TPS) initially with the potential to scale to hundreds of thousands TPSs over time,” Ripple added.
For this purpose, the consensus protocol that is used in both the XRPL and the CBDC ledger is “less expensive and 61,000 times more efficient than public blockchains that leverage proof-of-work,” the firm stated.
As Decrypt reported, the Federal Reserve Bank of New York’s recent research suggested that CBDCs have more potential for privacy than their private sector counterparts. Meanwhile, various CBDC pilots are already in full swing in countries such as Canada, South Korea, Brazil, Japan, Thailand, and many more.