The Bank of England and a group of computer scientists say they have created a centralized cryptocurrency intended to have the very opposite philosophical aspects of Bitcoin. The “proto-currency” known as RSCoin will be controlled entirely by state officials, but claims that it will also curb the problems with fractional reserve banking. Dr. George Danezis is designing the digital token at the University College London and believes many incumbents will be disrupted.
Dr. Danezis tells the TelegraphUK:
“Whoever reacts too slowly to these developments is going to take it on the chin.— They will lose their businesses Deep in the markets there are dark pools buying and selling shares, and entities that facilitate that foreign exchange. There are Visa, Master, and PayPal. These are the sorts of guys that we are going to disrupt.”
University College London: ‘Bitcoin is a Peter Pan System’
The project started last year when the Bank of England began researching the implications of cryptocurrencies and blockchain technology. At first, the central bank thought of Bitcoin as a threat but soon realized they could extract the technology and modify it in a centralized way. The university then took its findings to the System Security Symposium (NDSS) in San Diego. Dr. Danezis believes the pilot could be launched within 18 months.
Ben Broadbent, the Bank of England’s Deputy Governor, gave a speech at the London School of Economics explaining his position on blockchain technology. The Governor sees potential in digital ledgers but it’s more likely in his opinion that a centralized version will succeed. Broadbent feels a central bank-issued digital currency could allow many individuals access to a bank account and could even remove the need for commercial finance firms. Broadbent and other central bankers take issue with Bitcoin’s permissionless blockchain and also its scalability. The University College of London believes RSCoin will address this problem stating in their research paper:
“We present RSCoin, a cryptocurrency framework that decouples the generation of the monetary supply from the maintenance of the transaction ledger. Our design decisions were largely motivated by the desire to create a more scalable cryptocurrency, but were also inspired by the research agenda of the Bank of England.”
The University believes its RSCoin can be safer to use, faster, and will be less volatile with central banking. The researchers agree blockchain technology will still cut costs by eliminating the need for individual middlemen and also scale easily with its growing user base. They think that because RSCoin will be centralized it will ensure a trust factor between customers and banking officials. The currency will not be very much different than its digital fiat counterparts, but with blockchain technology, it will give a better sense of confidence to citizens. Dr. Danezis agrees that a centralized token would be a superior method in contrast to the current Bitcoin protocol. He believes the free market digital currency is a childish version of libertarian ideals and also has technical deficiencies. Dr. Danezis tells the Telegraph publication, “(Bitcoin) is a Peter Pan system, and it doesn’t really grow up.”
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