U.S. Government and MIT start developing a Digital Dollar

Massachusetts Institute of Technology (MIT) researchers and the Federal Reserve are cooperating on a central bank digital currency (CBDC) project called Project Hamilton.

U.S. Government and MIT start developing a Digital Dollar

Massachusetts Institute of Technology (MIT) researchers and the Federal Reserve are cooperating on a central bank digital currency (CBDC) project called Project Hamilton.

Federal Reserve officials claim that the digital dollar tested as part of Project Hamilton can process 1,700,000 transactions per second.

The whitepaper outlines the following:

Creating a transaction processor that meets the robust speed, throughput, and fault tolerance requirements of a large retail payment system was our primary objective.

The secondary purpose of the platform is to allow collaboration, data collection, comparison with multiple architectures, and further research in the future. To this end, we are making all of our research software publicly available under the MIT license.

The goal of phase 1 of the project was to implement two different digital dollar architectures that address the problems associated with CBDCs related to performance, resilience, and flexibility.

Essentially, we want to decouple transaction validation from execution, which means that we can use a data structure that requires the core transaction processor to store very little data. The system can also scale independently as parts scale independently.

A second idea is to develop a secure transaction format and protocol that allows for future functionality, such as self-custodianship.

Last but not least, we designed two architectures that follow the third idea, which enables efficient execution of these transactions. Our speed and throughput requirements were met by both architectures.

The phase 1 whitepaper of the project highlights key insights into the design of the digital dollar:

As a result, CBDC designers must consider new issues when implementing a robust system, including performance, functionality, and privacy trade-offs.

Now that Phase 1 is complete, the report disclosed Project Hamilton will move on to Phase 2, which involved exploring alternative technical designs from a wide range of research topics:

The team will also tackle topics such as programmability and smart contracts, offline payments, secure issuance and redemption, new use cases and access models, in addition to cryptographic designs techniques for maintaining open access while preventing denial of service attacks, and new tools for enacting policy.