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Researchers Propose Blockchain for Central Banks But Bank of England Not Involved

| Published on March 15, 2016 at 17:58 BST
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Two London researchers have proposed a new kind of cryptocurrency for central banks, one that puts command of the network in control of a central authority while retaining a transparent, distributed ledger.

First presented at the Network & Distributed System Security (NDSS) Symposium in San Diego, the RSCoin concept was developed by George Danezis and Sarah Meiklejohn of University College London.

In their introductory white paper, Danezis and Meiklejohn argue that the bitcoin network suffers from a scalability problem tied to its computationally intensive mining process, by which energy is expended to secure a reliable ledger of transactions.

Under the proposed RSCoin framework, this responsiblity would be handled by a network of known validators called "mintettes".

The authors state:

"RSCoin's radical shift from traditional cryptocurrencies is to centralize the monetary supply. Every unit of a particular currency is created by a particular central bank, making cryptocurrencies based on RSCoin significantly more palatable to governments. Despite this centralization, RSCoin still provides the benefit over existing (non-crypto) currencies of a transparent transaction ledger, a distributed system for maintaining it, and a globally visible monetary supply."

"This makes monetary policy transparent, allows direct access to payments and value transfers, supports pseudonymity, and benefits from innovative uses of blockchains and digital money," the authors continue.

Danezis and Meiklejohn told CoinDesk that the project has been conducted independently of the Bank of England, which has recently floated the idea of issuing its own digital currency based, at least in part, on bitcoin.

"I'd like to make it clear right away ... that the work was absolutely not funded by the bank," Meiklejohn said, adding that it did not speak to the bank prior to embarking on the effort.

It was inspired, they say, by the central bank's digital currency research agenda.

Centralized coin

Among the major differences between RSCoin and bitcoin, according to the white paper, is the exact purpose of the network validators, or mintettes.

The authors state that rather than a relying on a system of potentially anonymous miners contributing hashing power to solve the next transaction block, mintettes are authorized to bundle and transmit transactions by the central network authority.

"Briefly, mintettes collect transactions from users and collate them into blocks, much as is done with traditional cryptocurrencies," the authors explain. "These mintettes differ from traditional cryptocurrency miners, however, in a crucial way: rather than performing some computationally difficult task, each mintette is simply authorized by the central bank to collect transactions."

Danezis framed the project as one that is in progress, stating that "there are no plans to operate RSCoin".

“The current implementation is incomplete, and mostly geared towards the performance evaluation for the scientific paper,” he told CoinDesk. "We have no plans to build a complete monetary system, and neither does anyone else as far as we know."

The full RSCoin white paper can be found below:

RSCoin

Image via Shutterstock

Bank of EnglandRSCoinUK

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