Introduction:
First of all, I want to clarify that this article exclusively reflects my personal opinion and does not represent the views of CERC. Let’s dive into the Real Digital Pilot project and understand its merits and areas for improvement.
What Is Real Digital?
The company I work for, CERC, is part of one of the consortia approved by the BCB (Central Bank of Brazil) to participate in this pilot project. Also part of the consortium are Sinquia, Mastercard, Mercado Bitcoin, and Banco Genial. I have been acting as the technical lead for CERC and will share my initial impressions with you.
The Digital Real Pilot is an initiative by the BCB to create a digital representation of the Brazilian real using blockchain technology (Hyperledger Besu). This “cryptocurrency” is referred to as Digital Real or DREX.
Now, you might be asking yourself: Is the BCB trying to replicate something as volatile as Bitcoin? Short answer: No.
As the name itself suggests, it’s a pilot project. There are no certainties about the final implementation for the general public, but we can already have an idea. For example, 1 Paper Real will have the same value as 1 DREX, or digital real.
Controversy:
You may have already come across news claiming that the source code of the Digital Real has functions that allow the BCB to freeze funds. Read more here. And yes, it’s true! If you wish, you can verify it directly on the project’s Github.
However, don’t panic! There are good reasons for this feature.
My opinion, based on the data and explanations provided by the BCB so far, is that although the introduction of a cryptocurrency by a central bank is innovative, the BCB is taking a cautious approach—something vital both for the success of the project and for financial stability in Brazil.
How Does It Work?
Unlike most cryptocurrencies, where transfers happen in a single step, the process in Digital Real is more complex. Here is an example of how it works:
- User “U1” from bank “B1” wants to transfer Digital Real to user “U2” from bank “B2.”
- “B1” subtracts the amount from “U1’s” wallet.
- “B1” destroys the digital real tokens.
- “B1” transfers CBDC to bank “B2.”
- “B2” creates (or “mints”) the Digital Real.
- “B2” credits the amount to “U2’s” account.
And what is CBDC? It stands for Central Bank Digital Currency. Essentially, it is a cryptocurrency representation of the reserve money that financial institutions hold at the Central Bank.
The above process is similar to what occurs when a transaction is made via PIX.
Future Perspective:
Those passionate about blockchain and DeFi may be disappointed with this initial approach. However, it’s essential to understand that this is just the beginning. I see great potential in this project and believe that, over time, it will bring numerous benefits to the population.
If you were expecting to see a fully decentralized system coming from the CENTRAL Bank… well, the name says a lot, doesn’t it?
Conclusion:
Reflecting on the Digital Real Pilot, the innovative leap that the Central Bank of Brazil is attempting to make is undeniable. The careful approach adopted in this pilot project reveals a deep sense of responsibility towards the country’s financial stability and public trust.
As with any innovative project, there are always areas for improvement and adjustments, but what stands out is the transformative potential of this initiative. It has the power to shape the future of Brazil’s financial system, bringing new possibilities and benefits for Brazilians.
I invite everyone to closely follow this project and to participate in this debate. After all, the future of our monetary system is at stake, and it’s crucial that all of us, as a society, are well-informed and engaged in the discussion.
Oh, I almost forgot! And about what I’m not liking in the pilot? The name, DREX. It sounds like a character from Guardians of the Galaxy. I love the movie, but the name seems a bit out of context. Maybe I’ll get used to it over time…