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Highlights
- It is not yet known whether China’s pilot CBDC, e-CNY, uses blockchain (private or public) or not
- Australia’s recently launched CBDC whitepaper talks about the permissioned blockchain of the Ethereum platform
- The final design and technology of any CBDC, including that of Australia’s, is a matter of speculation
A central bank digital currency (CBDC) has yet to have a proper definition. The only clear aspect is that it could be the digital form of the already existing fiat currency of the respective country. Australia’s fiat currency -- the Australian Dollar (AUD) -- could have eAUD as its CBDC counterpart. Most countries, including the United States, the biggest economy in the world, have no clear deadline for the launch of their respective CBDCs.
Many cryptocurrency enthusiasts ask whether these CBDCs would also use the same underlying blockchain technology? In China, the pilot of its CBDC e-CNY is ongoing in multiple cities. However, it is yet to be known if the digital yuan is based on blockchain or not. There is some definite indication that the Reserve Bank of Australia’s (RBA) CBDC whitepaper provides.
Australia’s CBDC and blockchain
The whitepaper was issued by the Australian central bank in September 2022. This 15-page document, which is largely only about the pilot phase of the country’s proposed CBDC, mentions terms like blockchain and Ethereum. Interestingly, it is clearly stated that the eAUD would use Ethereum’s Quorum platform, which is a permissioned chain. Quorum is essentially a blockchain, but not exactly like Ethereum’s mainnet.
The mainnet, which has the popular ETH crypto as the native token, is a public and permissionless blockchain with no user participation restriction. Private chains are different because they restrict access to the ledger so that the authority and control over the network do not become excessively decentralised. RBA’s whitepaper states that eAUD would use Ethereum’s private chain, but it is also suggested that the final eAUD may or may not be based on blockchain.
Permissioned and permissionless chains
Cryptocurrencies like Bitcoin (BTC) and ETH, which have lost value this year, have an underlying permissionless platform, also called a distributed ledger. Here, any user can participate in the network, and there is no concept of a single authority having control. However, enterprise-level blockchains, for example, the platform developed by IBM, are usually permissioned. This enables only a predetermined number of parties to exercise control.
Data provided by CoinMarketCap.com
Bottom line
The design of any CBDC, be it that of China or Australia, is only a subject of speculation. But the RBA’s whitepaper says that the pilot eAUD would use Ethereum’s permissioned blockchain. Still, there is no comparison between public blockchain-based cryptocurrencies and any private blockchain-based CBDC because the latter comes with the central bank’s backing.
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