Cypherium: CBDC Innovation
One of Cypherium’s most recent and exciting new project developments has been the implementation of our Digital Currency Interoperability Framework (DCIF). The Cypherium DCIF is a novel approach to the challenges hurdling the adoption of Central Bank Digital Currencies (CBDCs).
A Central Bank Digital Currency is fiat digital money, which provides a brand-new mechanism for holding and exchanging assets backed by Central Banks. Generally speaking, Central Bank Digital Currencies have the following five design goals:
- Distributed Payments System;
- Financial Inclusivity;
- Efficient Cross-Border Payments;
- Digitized Management of Monetary Policy; and
- Innovative Framework.
In short, any attempt at digitizing public money will have to follow the existing functionalities of national currencies that are not yet mandated by private-sector digital ledger technologies. A fully functional CBDCs will have to interact with a wide range of private sector industries, national economic systems, and the crypto industries. Cypherium’s Digital Currency Interoperability Framework enables these necessary connections.
In coming to understand exactly what specifications were needed for such a framework, the Cypherium team has been in contact with a number of central banks leading the digital currency charge. Cypherium is in direct talks with the Banque de France, De Nederlandsche Bank, and the European Central Bank regarding these issues through their common membership of and joint participation in the Digital Monetary Institute of the Official Monetary and Financial Institutions Forum (OMFIF), a think tank that brings together economic officials, policymakers and leading financial technologists.
The Bank of France, in particular, has emerged as a leader among European central banks in its willingness to experiment with Central Bank Digital Currency Models. At the end of March, the BoF announced an experimentation process towards the implementation of wholesale CBDCs. The experiment has three primary objectives: to discover conventional use cases of publicly issued money in the private sector, to determine the best aspects of our current system that must be maintained, and to analyze potential effects of this program on financial and political stability.
Cypherium has developed its Digital Currency Interoperability Framework (DCIF) to meet these goals in a way that is compatible with the Euro’s current TARGET2 system. It is a novel approach that consists of six major bodies: the Central Bank, CypherLink (a notary mechanism based on the InterLedger protocol), Cypherium Connect (a third-party plug-in module for banking systems), Cypherium Validator (a verification machine), a mediation institution, and finally the users. This structure maintains the autonomy and integrity of the Central Banks by allowing them not to carry directly their users, issue or distribute CBDC units, nor supervise the transfer of CBDCs. This critically protects the banks, and in turn, the national economies they support.
Cypherium is capable of processing upwards of 10,000 transactions per second and delivering significant business benefits, including cheaper, more lightweight deployment, enhanced security, improved traceability, increased efficiency and speed of transactions, as well as reduced costs. With Cypherium, banking institutions will have access to a distributed ledger technology that can scale, while also delivering the numerous privacy and security benefits of enterprise-grade blockchain technology. The DCIF allows banks to leverage this infrastructure while at the same time connecting to other public and private wholesale monetary institutions, including other central banks, international private banks, and public cryptocurrencies.
CBDCs will usher in a new era of digitization, one that radically eliminates the inefficiencies and barriers to entry that make our world so iniquitous and difficult to navigate. However, for these technologies to fulfill this great promise, they’ll need to operate in a more coordinated way that we have seen in our current paper fiat systems. Cypherium’s Digital Currency Interoperability Framework is a step toward the realization of this new era.