The Federal Reserve Bank of Boston with The Massachusetts Institute of Technology Digital Currency Initiative recently completed a transaction speed pilot test run of the upcoming digital dollar under a record transaction time of 1.7 million per second.
For context, Solana, which has been dubbed the fastest mainstream altcoin, completes close to 50,000 per second. Algorand rounds up its per-second transaction at 1000. Ethereum completes up to 34 per second, and Bitcoin manages approximately 7 to 10 transactions per second.
The digital dollar project, codenamed “Project Hamilton,” will be set up to withstand transaction downtime because of server breakdown and is aimed at tackling all regulatory and technological hurdles around the young but fast-growing global CBDC sector.
CBDCs are digital currencies tied to a fiat value and mostly regulated by a central body. With the US digital dollar, the Fed is hoping to “design a core transaction processor that meets the robust speed, throughput, and fault tolerance requirements of a large retail payment system” as well as “create a flexible platform for collaboration, data gathering, comparison with multiple architectures, and other future research.”
For a CBDC looking to serve over 20% of the world’s population both as a reserve currency and a value for exchange, the US has opted for a careful approach towards its development, leveraging on OpenSource technology to boost collaboration and transparency and avoid costly mistakes.
Centralized cryptocurrencies have always had an edge over decentralized exchanges, as they are secured by a central server and involve less independent block validation before confirmation. Proof-of-work and proof-of-stake are two of the most common transaction validation methods used by most decentralized exchanges.
China v. US CBDC Wars
While nine countries, including Nigeria, and the Bahamas have launched their CBDC, and 14 others including Sweden, Saudi Arabia, Singapore, and South Africa are in their pilot stages, the proper battle for global CBDC dominance seems to lie between the US and China. Beijing, now in its pilot phase, has already recorded close to $8.3 billion worth of transactions over the last six months, onboarding over 120 million users, representing approximately 12% of its total population.
Since President Xi Jinping’s total clampdown on private digital cryptocurrencies, the US has resumed its position as the world’s crypto development capital, but the struggle to bring its ecosystem to a legally defined order has slowed down significant progress.