cbdc - 31.03.2020

Tezos Ukraine’s Update on CBDC Development

A central bank digital currency changes the traditional market. In this article, we discuss CBDC development.

Tezos Ukraine CBDC Development: How New Technology Changes Traditional Market

With the invention of blockchain technology, the financial sector for the first time in history became capable of reducing a variety of different overheads, allowing fast and cheap money transfers. But legacy technology that currently serves the world is incapable of implementing the blockchain quick because of the risks that may be unbearable from a financial standpoint.

The lack of knowledge stops the technology from fast adoption, and the only thing that matters here is the deep expertise and professionalism that governments eagerly need. Many experts across the world offer their solutions, but only a limited number of companies and teams are ready to implement a completely working solution. The problem existed, until now.

How Everything Has Started

The idea of national digital currencies hangs in the air in Ukraine since the early 2010s, and during a few years it took different shapes and forms, tailoring the realisation to different technologies, platforms and services. Eventually, in 2015 Serghei Vasylchuk founded a company called Attic Lab as part of a commercial bank’s initiative whose main goal was to create an electronic currency based on blockchain. Bank has realized that the market is already prepared for a new monetary instrument called CBDC, and the only missing thing was the right technology, legal compliance and top-industry implementation.
Experience in the banking industry has allowed Attic Lab team to develop a working solution in just 1 year, and once it was developed the National Bank of Ukraine became interested in this product as well. But unfortunately unstable political situation has pushed all banks away from consideration of new financial instruments, and the implementation of CBDC was postponed for years.

CBDC Evolvement

During the CBDC development phase the cryptocurrency market was evolving too, but at the same time, it was taking a different path. The hype around cryptocurrencies has pushed the industry into a financial bubble, and many projects were successfully funded through ICOs. Companies have promised to resolve such traditional banking problems as costly financial operations, slow transaction processing, system errors and much more through the implementation of the blockchain technology, that many of them tweaked in accordance with problems that they wanted to solve.

Plans looked great on paper, but in reality, 92%(Satis LLC ICO Study) of the ICO projects didn’t make it through, leaving investors with unfulfilled commitments. Almost anyone lost a large sum of money during that period, but in the end, only the strongest projects have survived and those companies who have released stablecoins that were pegged one-to-one against US dollar and other fiat currencies. Stablecoins became a breakthrough in the cryptocurrency market because they were capable of retaining their original value while having a possibility to get transferred quickly and cheaply over the distributed ledger. And there’s always a chance that the next financial bubble and corresponding financial losses on the market will become a triggering mechanism for users to consider the CBDC usage instead of existing digital currencies.

Stablecoins appearance has laid a strong foundation for further CBDC development, and if we are looking from the perspective of traditional markets we can get into a quite interesting situation. Unfortunately, the traditional market has many middlemen such as brokers and other companies that are involved in the chain of money transfer. With CBDC implementation, banks will be capable of delivering value right to the customer, avoiding unnecessary third-party iterations. For banks, it means saving a huge amount of money, and for customers, it means faster and less expensive money transfers.

Banks’ Problems Solved Without Overheads

During the last few years the blockchain industry has released many open-source tools and created a big number of exchanges, wallets, and other services, that play a role of the infrastructure. It means that any bank can tap into this field, releasing a cryptocurrency in the form of CBDC, that will be implemented not only on the level of one jurisdiction or the country in the retail but will be publicly available for transfers and trading on the aforementioned services globally. The classical Ukrainian Digital Hryvnia can be easily moved on the blockchain, where the NBU will retain full control over the monetary emission, and that’s the complete cycle of a CBDC usage.

Central Bank Digital Currency is much safer than traditional money and it’s completely transparent. Furthermore, there no need to invest billions of dollars in the development of new infrastructure in the form of exchanges, wallets, credit cards and other tools or services that are used by customers in their daily financial operations, so banks can get it almost without financial investment. And the CBDC itself will make traditional services shift to a new paradigm, which is much more effective in terms of saving time and money when making money transfers.

Tezos Blockchain As The Main Solution

At the moment we are at the right time and under the right circumstances to implement the CBDC, because the experience that the Attic Lab was able to acquire in the course of the last 3 years fits well into the current situation. The company has gained deep expertise in cybersecurity and blockchain space, and it can be considered as one of the most specialized tech-companies that can build the infrastructure for Ukrainian National CBDC.

This infrastructure can be easily built on the basis of the Tezos technology, which was created in the first place with an idea to have formal verification of smart-contracts which essentially has the same objectives and principles as banking transactions and databases. The National Ukrainian CBDC will have the atomic swap functionality which is embedded into the Tezos technology and allows to make transfers instantly across different currencies and assets. Moreover, Tezos technology as itself will be tailored to banks’ private ledger needs and other requests that have very narrow specifics. Integration and adaptation of CBDC will cost almost nothing compared to traditional changes in banking infrastructures because Tezos technology has solid community support across many continents.

It can be definitely said, that Ukraine will greatly benefit from the implementation of CBDC at all levels of economy, starting from retail ending with the banking sector itself. And while many countries are interfering with their process of CBDC implementation, Ukraine can become one of the most advanced countries in the financial sector across the world.
It can be definitely said, that Ukraine will greatly benefit from the implementation of CBDC at all levels of economy, starting from retail ending with the banking sector itself. And while many countries are interfering with their process of CBDC implementation, Ukraine can become one of the most advanced countries in the financial sector across the world.

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