The Bank of England is gearing up to get into the world of cryptocurrencies. It seems that their New Year’s Resolution is to get into the crypto world, stay relevant and keep up with the quick pace of technological change.
The highest form of bankers in the country have, recently, publicly stated that they are planning their launch of a state-backed, centralized cryptocurrency. This state-backed digital asset is said to be named, RSCoin and will be blockchain based, the same technology that is utilized by the pioneer digital currency and the other altcoins that have come into the market over the years.
This is not surprising as many countries have mentioned the idea of looking into the concept of creating their state-backed currency. Heavy economic hitters like the National Bank of China has announced in the first quarter of 2016, that they would be planning to digitally mint and circulate their state-backed cryptocurrency as well.
Recent other players that are researching this concept is Israel, with their digital shekel, Russia, with their crypto-ruble, Venezuela who is already in the process of launching their digital Petro, an event that is said to happen very soon. Several other countries are becoming closer to issuing their cryptocurrency as well.
Many of these countries have yet to outline how their digital issuances will vary from their current system and what the meaningful differences would be between them and their people.
Fiat to Crypto
It looks as if the RSCoin has been in development for some time. The University College of London (UCL) has been collaborating with the Central Bank of England since the announcement in February 2016. The statement in 2016 noted that RSCoin would be a cryptocurrency focused on central bankers.
The researchers involved and those who seem to be initiating the project is Sarah Meiklejohn and George Danezis, members of the student body of the University. Their reasoning behind the creation of the coin was the fact they had created a protocol that was better than Bitcoin. They specifically wanted to tackle the weakness that was present in Bitcoin: the small amount of transactions that could processed at any given time. They mentioned that the number of transactions that could be processed were not up to par with companies like Visa who can clear more than 6,500 transactions per second.
The white paper of the researchers shows that they want to bring centralized control back into the picture with the creation of their RSCoin.
“Abstract—Current cryptocurrencies, starting with Bitcoin, build a decentralized blockchain-based transaction ledger, maintained through proofs-of-work that also serve to generate a monetary supply. Such decentralization has benefits, such as independence from national political control, but also significant limitations in terms of computational costs and scalability. We introduce RSCoin, a cryptocurrency framework in which central banks maintain complete control over the monetary supply, but rely on a distributed set of authorities, or mintettes, to prevent double-spending. While monetary policy is centralized, RSCoin still provides strong transparency and auditability guarantees. We demonstrate, both theoretically and experimentally, the benefits of a modest degree of centralization, such as the elimination of wasteful hashing and a scalable system for avoiding double spending attacks.”
Further, they demonstrate the usefulness of a cryptocurrency like the RSCoin:
“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.”
Of course in this setting, the Bank of England would be the one who would be the controller of all aspects of the blockchain.