Project by Estonia to Guide Digital Currency Growth

Ritika Sharma
Ritika Kumari Sharma is an Economics Honors graduate from the University of Calcutta. She is completely into finance and believes that cryptocurrencies are the future. She is an enthusiast learner about the cryptocurrency and blockchain technology.
  • Guardtime Enterprise stated that the European Central Bank would appraise the project they are doing with Eesti Pank
  • Keyless Signature Infrastructure (KSI) mechanism provides proof that the system is operating without faults
  • Executive arm of the European Parliament proposed to make a digital identity system across every member state

Back in 2017, European Central Banks (ECB) president Mario Draghi, rejected Estonia’s suggestion to launch a national crypto token. Now with growing decentralized currency’s industry and due to global pandemic, the need for digital currency has increased. The experimental project of Estonia’s issue of the Central Bank’s Digital Currency (CBDC), is now publicly linked with European Central Bank (ECB).

As per Luukas Ilves, head of strategy and innovations at Guardtime Enterprise stated that the European Central Bank would appraise the project they are doing with Eesti Pank, Estonia’s central bank.

Necessary Scaling requirements

According to Mike Gault, CEO of Guardtime, to build such a system for a large ecosystem, taking micro-payments and internet of things (IoT), into consideration, could process a million of transactions per second. Mike also said that for this situation, the appropriate tech solution is to arrange necessary scaling requirements. So the scale could rule out the notion of multi-party validators to prove for the transaction being submitted to the ledger. However, they need these multi-party validators for censorship resistance, though yet the central bank and government isn’t interested in having censorship resistance.

Mike explained that the Keyless Signature Infrastructure (KSI) mechanism provides proof that the system is operating without faults. Using the system of hashes would be better than to slow down everything with Public Key Infrastructure (PKI). Additionally, Mike mentioned that as of current blockchain technology it would be fine to launch Central Bank’s Digital Currency (CBDC), which amounts to better processing of transactions and bringing tokenized assets, better than as banks work today, though for a retail CBDC they require a different approach.

COVID-19 pandemic increased the need for a digital financial system

After the breakout of COVID-19 the global pandemic, the need for a digital financial system has been increased, moreover if the government wants to disburse funds directly to citizens. And so Estonia’s e-government, made this easier for the Central Bank. As per Luukas, the real case is that Estonia’s current payments and banking landscape are too far from features like fraud and identity theft.

There are several ways that digital signatures and digital-identities issued by the government could be developed as to how to manage authorized transactions and wallets. Luukas also mentioned that they don’t have any scenario, but they can assure that the ecosystem will work cheaper, better, faster, and would be very secure.

Notably, it is observed that the executive arm of the European Parliament proposed to make a digital identity system across every member state.

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