Digital Fiat currency
Transacting familiar currencies on the blockchain presents unique challenges when compared to those associated with existing cryptocurrencies. One of the main challenges is how to ensure all versions of a currency trade at par with one another. This requires an entity or entities to provide backing of some kind.
The entity that provides this backing could be the central bank or in the private sector. The precise balance of responsibilities between the public and private sectors will be different depending on policy choices made in different countries. Supporting many different potential implementations will require technology flexible enough to accommodate this. Our goal is to create the technological tools needed to implement a digital fiat currency (DFC). We are using the Cryptokernel blockchain toolkit developed at the DCI to build the DFC prototypes.
We have engaged with a number of central banks in an effort to understand their considerations and address them in our research when possible. Central banks regularly undertake research papers with external academics in a particular field, this work is in that tradition and, as with all academic research, does not imply endorsement of any policy position. The central banks are: Bank of Canada, European Central Bank, Federal Reserve, Bank of Japan, De Nederlandsche Bank and Monetary Authority of Singapore.
Researchers and Collaborators
Robleh Ali is a Research Scientist, his main focus is on how fiat currencies can be issued digitally outside the existing banking system and the role of central banks in such a system. The overall aim of the work is fundamentally reforming the financial system by changing the way money is issued.
James started mining Bitcoin in 2013 and was captured by the prospect of a trustless, permissionless financial system. Since starting at the DCI two years ago, James has been working primarily on Cryptokernel; a distributed ledger development toolkit as well as Lightning Network related projects. James works on the Digital Fiat Currency project, aiming to use Cryptokernel to demonstrate a workable fiat currency design based on distributed ledger technology. James is also the lead developer of Vertcoin, which he has been lead developer of since late 2014.