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US ‘test’ CBDC hits record transaction speed

US ‘test’ CBDC hits record transaction speed

US ‘test’ CBDC hits record transaction speed
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By CNBCTV18.com Feb 17, 2022 4:11:10 PM IST (Updated)

Transaction speed or transaction per second (TPS) is an important factor for evaluating a blockchain network's performance and technical prowess. The test was carried out by the Federal Reserve Bank of Boston, in partnership with The Massachusetts Institute of Technology's (MIT) Digital Currency Initiative.

The United States’ Central Bank Digital Currency (CBDC) project has made significant progress. In one of two recently conducted pilot tests, the digital dollar achieved a record speed of 1.7 million transactions per second (TPS), way faster than the best cryptocurrency networks.

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Transaction speed or transaction per second (TPS) is an important factor for evaluating a blockchain network's performance and technical prowess. The test was carried out by the Federal Reserve Bank of Boston, in partnership with The Massachusetts Institute of Technology's (MIT) Digital Currency Initiative.
So far, Solana, a public blockchain platform, has the fastest transaction speed of 50,000 TPS among mainstream coins, followed by Algorand with speed of 1,000 TPS, per a Zycrypto report. The two most prominent blockchains globally, Ethereum and Bitcoin, have a surprisingly low transaction rate of 34 and 10 TPS, respectively.
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The CBDC project is still in its early stages and has been codenamed 'Project Hamilton'. It is being developed in a way where it would be able to withstand transaction downtimes caused by server breakdowns and other issues. The primary goal of 'Project Hamilton' is to tackle technological and regulatory problems that are plaguing the budding global CBDC sector.
A CBDC is the digital form of a country's fiat currency. It is linked with a country's fiat currency to avoid volatility and the regulatory burden of digital assets like cryptocurrencies.
The United States is taking a precise approach while designing the CBDC as it will be serving over 20 percent of the world's population, acting as a reserve currency and value of exchange. As a reserve currency, it needs to fulfil various financial functions – it will be in international transactions, international investments, and all aspects of the global economy.
Many countries are developing CBDCs and plan to integrate them into their financial systems. The need for CBDCs has arisen due to the growth of the digital asset sector, which is highly unregulated. Instead of offering a decentralised system, CBDCs are supposed to run on secure central servers and will require less independent block validation before confirmation. Also, due to the lack of a consensus mechanism, CBDCs will not hurt the environment. This is unlike blockchain networks that employ the PoW consensus mechanism, which is known for its substantial carbon footprint.
The Global Race for CBDC
Countries like Nigeria and the Bahamas have already implemented a CBDC in their financial systems, while countries like Sweden, Saudi Arabia, Singapore, and South Africa are in the initial stages of implementation. India’s Reserve Bank is also working on a digital Rupee and is expected to roll it out by the end next financial year.
A battle for CBDC dominance is being waged between the world's two biggest economies, China and the US. Beijing is also in its pilot stage for implementing its CBDC. But they have already onboarded around 120 million people, giving them the edge in the race for now.
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