The National Bank of Ukraine (NBU) has joined the multitude of world’s central banks deliberating on developing their own digital currency with the intention of building an e-currency christened E-hryvnia. But, the fear of threatening the country’s fiat currency and financial stability have been major concerns.
Nevertheless, NBU, in the Analytical report on the E-hryvnia pilot project, claimed that it would be using the distributed ledger technology, precisely a private version of the Stellar protocol to observe and study the benefit of developing the digital currency as well as carry out the Pilot Project.
While NBU intends building a digital currency that offers simplicity, speed, scalability and optimum security among others, it noticed that Stellar protocol has the ability to offer such criteria, hence the reason for choosing the network.
The system’s application software of the platform upon which the currency would be built is to be based on the SDK Stellar network with Stellar Core Horizon API, the report stated.
However, NBU noted that it would discard some important features of DLT that negates developing suitable financial information systems for its country. NBU pinpointed decentralization of transaction validation function as a feature that goes against the principle that give NBU alone the right to issue e-hryvnia.
NBU in the report averred that DLT major benefits is that it eliminates a single center of trust, giving anyone the ability to check any transaction. This, NBU says, cannot be used alongside the centralized e-hryvnia issuance model. However, DLT can be used for issuing and circulating e-hryvnia.
Using private version of the Stellar blockchain protocol which meets the requirement of the national bank may be unlikely due to the inability of the platform to upgrade to the basic Stellar blockchain protocol.
The private version, as said by NBU, lacks new features introduced to basic blockchain protocol and it is unable to eliminate some of the errors and vulnerabilities of the Stellar blockchain protocol.
“Moreover, the private version of the blockchain protocol makes the system highly dependent on the company developing a certain protocol version, which creates competitive advantages for such company for the whole period of the Platform’s operation,” NBU said.
NBU concludes that it would rather develop the national-scale system like the public versions of modern powerful blockchain protocols.