Crafting a stable and secure protocol capable of facilitating the transaction throughput of an entire economy represents a paramount challenge for policymakers worldwide. The convergence of technology and monetary policy necessitates meticulous planning, robust infrastructure, and a keen understanding of economic dynamics and cybersecurity imperatives.
One of the key technologies at the forefront of this transaction revolution is the concept of a Central Bank Digital Currency (CBDC). CBDCs typically leverage emerging technologies like blockchain-based tokens to digitise a nation’s fiat currency – such as the British Pound or US Dollar. Unlike privately issued digital currencies, CBDCs are regulated and supervised by official monetary authorities – typically a central bank.
The problem with CBDCs and legacy banking
While central banks around the world are actively studying the possibility of introducing CBDCs, they face several criticisms. These include:
- Sluggish settlement times;
- Potential risks of unknown policy implications and financial instability;
- Competition with privately issued stablecoins;
- Balancing privacy and traceability in digital currency transactions.
‘While questions or challenges remain concerning the specific design of a potential digital pound, it is encouraging to see British authorities acknowledging the need to balance the protection of privacy through privacy safeguards with the necessity to tackle money laundering and terrorist financing,’ said Sebastian Ploetzeneder, Senior Strategy Manager at nChain.
Likewise, in pursuit of a potential digital currency, it is essential to tailor a CBDC system towards national needs, for example, to protect citizen data, increase cross-border payment efficiency, reduce corporate fraud and corruption, or attract foreign direct investment.
‘Whether the Bank of England is looking to implement a digital pound in the form of wholesale CBDC, retail CBDC or a form of privately issued digital money, it is important that the Bank of England take into account the drivers for change from all participants across the current payment ecosystem, including the goals they are looking to achieve, before deciding which digital payment solution is the most relevant for the UK,’ said Simit Naik, Director of Commercial & Strategy at nChain.
The BSV blockchain and Teranode is a perfect fit
The BSV blockchain is well-suited for CBDCs due to its secure nature and efficiency. It offers a transparent and secure ledger, enabling faster transactions and reducing the risk of fraud.
Additionally, the BSV blockchain’s transparency can enhance resilience in the financial system, while programmable features allow for innovative functionalities such as conditional payments and automated compliance.
Recent advancements in blockchain infrastructure, such as the testing of Teranode on the BSV blockchain, showcase the scalability and efficiency of the technology.
In January, the BSV Association R&D team announced groundbreaking features for Teranode that will significantly boost network efficiency and speed, pushing BSV’s capabilities to 1 million transactions per second in the not-too-distant future.
Such technological leaps will enable mass transactions on blockchain-based infrastructure, supporting data processing on an unprecedented scale, at a fraction of traditional costs, while laying the foundation for a more secure financial ecosystem.
Teranode solves vertical scaling challenges on the BSV blockchain by serving high-volume transaction nodes for enterprise and government use. Whether contracting with nodes or running their own, these clients drive the Teranode initiative.
Teranode was recently extended and sustained testing on a Proof of Concept implementation began at the end of February, with a full node release later in 2024. This is a significant upgrade for the BSV blockchain node software, and it is a ground-up rewrite of the BSV Blockchain architecture, designed to scale horizontally and provide new microservices for developers, applications, and users.
Protocol custodian BSV Association revealed a more service-oriented approach to the network’s work. The new features include ‘modularized’ functions such as transaction and block validation, plus block assembly into services that run only when required.
The Teranode upgrade is critical for the BSV blockchain’s unbounded scaling potential and will deliver faster, more secure and cheaper transactions for all.
The specialisation of nodes and functions
‘The BSV blockchain, with Teranode at its core, will serve as the foundational infrastructure for a global system of multiple specialised overlay networks. We expect specialised nodes to complement the core services provided by miners operating Teranode, ‘ said Siggi Oskarsson, Director of Teranode at the BSV Association.
‘Dedicated overlay networks operated by enterprise infrastructure providers will communicate with the network core. End-user applications will leverage SPV (Simplified Payment Verification) to interact within the Overlay Network.’
‘Teranode represents a breakthrough in the BSV Blockchain ecosystem, introducing the concept of unbounded-specialisation of nodes and functions. It enables specialized nodes, even at overlay levels like “bank nodes,” while ensuring edge-to-edge connectivity with SPV wallets. Teranode is pivotal in BSV’s evolution, empowering innovative blockchain applications.’
