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Algorand and Hedera Tested by Riks Bank for CBDC Solutions
- A research paper titled “Potential Climate Impact of Retail CBDC Models” tests Algorand and Hedera as a representation of the e-Krona model and its decentralized design.
- At the time of writing, 130 countries, representing 98% of global GDP, have considered implementing a CBDC.
Swedish bank Riks Bank has reportedly tested Algorand and Hedera for retail solutions for e-Krona project. In a report titled “Potential Climate Impact of Retail CBDC Models,” Riks Bank explored several aspects of the project, stating that it is designed as a token using blockchain technology.
According to relationshipThe Sweden e-Krona is designed with three distinct designs, namely: a highly centralized design, a semi-centralized design and a decentralized design.
To access the potential electricity utilization of e-Krona’s semi-centralized and decentralized conceptual projects, Ivy was used to represent the model. As a private permissionless network, Hedera has a gatekeeping strategy applied to a network of a limited number of top actors.
Access to the network is restricted to these actors, thus reducing the risk of external attacks. Each actor (except the main host, i.e. the Riksbank) will only need to run and maintain systems that relate to its own interfaces and services to consumers, as the Riksbank hosts the main system. Hedera is also a high tps system. The Hedera protocol currently has 21 validators with a concurrent throughput of 48 tps and the postulated maximum sustainable throughput of the system is 10000 tps. Platt et al., (2021) estimated the electricity consumption per transaction of the Hedera protocol in the range of 0.00002 – 0.00004 kWh/transaction.
Algorand’s role in the e-Krona project
For AlgorandRiks Bank used it to represent the decentralized design. Algorand operates as a permissioned network where the participating actors are authorized as financial institutions and classified accordingly. This implies that each actor would have to manage and host a larger system. The resilience of the model would be improved to some extent by the decentralized nature of the model.
This will be done by having multiple copies available. In addition to this, Algorand is a high TPS system. Specifically, it has 1126 validators coupled with a concurrent throughput of 9.85 TPS and a maximum postulated sustainable system throughput of 1000 TPS.
The range for electricity consumption per transaction for the contemporary Algorand consensus throughput is between 0.00017 and 0.00534 kWh/transaction (Platt et al., 2021). The Algorand electricity per transaction estimate by Gallersdörfer et al. (2022) of 0.0027 kWh/transaction, falls within the range presented in Platt et. al. (2021). The overall electricity consumption per transaction also depends on the number of nodes connected to the respective network.
Currently, about 130 countries representing 98% of global GDP are exploring CBDC, of which 64 are in the advanced stage. So far, 11 countries have launched CBDC. China’s large pilot project has also reached about 260 million people. Interestingly, blockchain platforms such as Hedera, Algorand, etc. have been used as the underlying technology for this operation.
At press time, Algorand (ALGO) was trading at $0.134 after rising 1.4% over the past 24 hours. Hedera (HBAR) was also trading at $0.067 after falling 0.20%.
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