Imagine this — what if the divide between the conventional banking system and the cutting-edge world of blockchain vanished? It's not just a daydream; it's the transformation we're spearheading right now alongside the Norwegian Government.
Introduction
Picture a universe where your local bank and the decentralized finance world cross paths, allowing you to buy and sell stocks using a digital currency tied to the Norwegian Krone. This isn't make-believe — it's a reality we're actively shaping with the Norwegian Government, and we're delighted to shed some light on the details in this post.
The Obstacle in Adopting Blockchain
Getting blockchain to work hand-in-hand with the established financial system has been a tough nut to crack. But we're now seeing solutions that build a bridge between these two worlds, and our work with the Norwegian Central Bank's hackathon using BRØK exemplifies this.
BRØK: Pioneering Shareholder Management
The Norwegian Government has introduced BRØK. BRØK is a new platform developed by the Norwegian Government that uses blockchain technology to efficiently and securely manage and share shareholder information for unlisted companies. Note that BRØK is in experimental testing with synthetic data. This system is deployed on a technology called Arbitrum (imagine it as a fuel-efficient engine), which helps keep transaction costs low while increasing transaction speed. Read my previous blog post about BRØK for more info.
Bridging Digital Currency with Blockchain
We took a unique turn in our journey when we initiated a connection between the Norwegian digital currency and the BRØK platform. The mechanics behind this bridge are reasonably straightforward.
Users who wish to engage in a transaction send their Norwegian Krones (NOK) to a newly implemented bridge on the central bank's (CB) blockchain. These funds are then frozen or locked in place on this original blockchain.
Simultaneously, a new ERC20 token, effectively a mirror representation of the NOK, is issued on the Arbitrum chain. The amount issued here is identical to the amount frozen on the CB blockchain. This novel ERC20 token on Arbitrum is a carbon copy of the original Central Bank Digital Currency (CBDC), preserving its inherent features. This includes functionalities allowing anonymous transactions with stealth addresses, Know Your Customer (KYC) compliance, predefined maximum limits, and continuous compounding interest.
In essence, we've engineered a system where the digital Krone and the blockchain can interact fluidly, thereby allowing users to test the buying and selling of shares on Arbitrum using the digital Krone.
The source code of the CBDC is openly accessible, and we invite interested parties to delve into its architecture here: https://github.com/norges-bank/cbdc-sandbox-contracts
Conclusion
Our adventure with BRØK and the digital Krone on Arbitrum is not just a tale of tech progress — it's a blend of the old and new world of finance. It's like connecting two separate railway networks into one cohesive transport system, creating new routes and possibilities.
As we step into this exciting new landscape, we invite you to imagine the possibilities of this integration. How might it change the way we interact with money and investments?
Stay tuned for more updates on our journey, and thank you for coming along. Here's to a future where traditional banking and blockchain are not separate routes but lanes on the same financial highway.
This is the second post in a series that covers:
- How Norway Is Using Ethereum for Shareholder Management
- How we built the Norwegian CBDC with anonymous transactions with stealth addresses, Know Your Customer (KYC) compliance, max limits, and continuous compounding interest
- An overview of Ethereum’s scaling strategy and how the cap tables platform fits in, including the benefits of using the Arbitrum layer 2 solution, including faster speeds and lower transaction costs
- The current testing stage for the cap tables platform and what the future holds for its development and deployment.
The views and opinions expressed in this post are solely those of the author. They do not necessarily reflect the views or policies of BRØK or any other organizations we are affiliated with.
