The digital currency Bitcoin was designed to be independent of any government—a feature that also limits its mainstream appeal. Now researchers have invented a Bitcoin-like system that could make digital cash more practical by allowing a central bank such as the Federal Reserve to control it.
The system, RSCoin, was designed by researchers Sarah Meiklejohn and George Danezis at University College London, at the suggestion of the U.K.’s central bank, the Bank of England. The bank began researching the idea of issuing digital currency early last year. Ben Broadbent, the bank’s deputy governor, said this month that it could make retail payments more efficient and the financial system as a whole more resilient. Software that can instantly move digital cash from place to place should be able to make many transactions, both large and small, faster and less costly.
Like Bitcoin, RSCoin uses cryptography to create a kind of digital cash that’s resistant to counterfeiting. And in both systems, transactions are verified in a process that adds them to a digital ledger recording all movements of the currency.