A Centralized Version of Bitcoin Developed for the Bank of England
Researchers from the University College of London have developed a digital currency system resembling Bitcoin on the request from the Bank of England, the country’s central bank.
Dubbed RSCoin, the system is based on distributed ledger technology and allows for fast and convenient transfer of digital values. However, as opposed to Bitcoin, RSCoin is centralized, which enables central banks and other regulators to maintain full control over the currency.
According to MIT Technology Review, the currency was developed by Sarah Meikeljohn and George Danezis, both from the University College of London.
Dissimilarities from Bitcoin
Similar to Bitcoin, RSCoin employs cryptography to create digital money resistant to counterfeiting, verifies transactions on a blockchain, and records all transactions of the currency therein.
However, while bitcoin’s operations are maintained by numerous computers around the world, and it lacks a unified control center, RSCoin’s ledger is controlled by the central bank. The system allows for unlimited issuance of digital tokens. According to the developers, it will enable regulators to assume required corrective measures like currency stimulation system introduced by U.S. Federal Reserve and other regulators in the wake of 2008 crisis.
Central banks will also have an option of selecting partner companies to process new transactions and record them in the central ledger.
“It would make sense for large commercial banks to play that role. RSCoin’s centralized design means it can handle very large numbers of transactions, unlike Bitcoin,” Meikeljohn said.
According to the publication, RSCoin has been already tested on 30 different computers within Amazon’s cloud platform. Sarah Meikeljohn adds that developers are discussing more profound research of the system’s applications with the Bank of England.
The parties are also interested in using RSCoin to help banks and other financial institutions move their traditional assets and automatize particular kinds of transactions like futures contracts.
The Bank of England first stated it was interested in creating its own digital currency back in February 2015.
Notably, Benjamin R. Broadbent, Deputy Governor for Monetary Policy at the Bank of England, stated that central banks using cryptocurrency may potentially impair commercial banks. He suggested this move might reduce their ability to provide customer loans.
This January, the People’s Bank of China has also announced its plans to create its own digital currency. Some additional details for the Chinese project were revealed a bit later. The bank’s chairman Zhou Xiaochuan stressed that digital currencies are a necessary element for tech-oriented societies.