The Bank of England has said central banks are looking at ways to implement “hybrid systems” involving distributed ledger technology of the type currently used to record bitcoin transactions.
It is interesting to get an insight into the thought processes of the governors of international banking in this regard. Would a combination of a distributed ledger with some sort of trusted third party overseeing remain a decentralised system?
Naturally, the preferred option for central banks would be to stay in charge of the nuts and bolts of the flow of money of all stripes through the financial system.
Central banks are the governors in terms of regulation and have a mission to ensure financial stability throughout the system. They are alive to potential scale of disruption visited upon them by money over IP and are even looking at use cases whereby they might issue cryptocurrencies.
The Bank of England said: “There is more than one way in which a distributed ledger system can work, and remuneration would have to be designed in such a way as to incentivise honest participation in the system without leading to socially inefficient over-investment in transaction verification.
“Further research would also be required to devise a system which could utilise distributed ledger technology without compromising a central bank’s ability to control its currency and secure the system against systemic attack.”
Paradox almost into play
As alluded to above, any ledger system that’s both centralised and decentralised at the same time is a hybrid verging on a paradox.
The blockchain that time stamps bitcoin transactions into existence is immutable by virtue of the fact that it garners more computing power as a network than any concerted effort to tamper with the chain, which is continually updated.
Some central bank research seemed to invoke a shift away from the intended decentralisation of the
Originally appeared at: https://uk.news.yahoo.com/bank-england-central-banks-looking-hybrid-systems-using-160300169.html