SARB blockchain project successful
The South African Reserve Bank (SARB) has released its Project Khokha report showing that an internal experiment with distributed ledger technologies (DLTs), more commonly referred to as blockchain, was successful.
The report was one of the objectives of the Financial Technology Programme, set up in February, to strategically assess the emergence of new technologies in the industry, and to consider regulatory implications.
"Project Khokha is a proof of concept designed to simulate a 'real-world' trial of a DLT-based wholesale payment system. The project focused on providing participants practical experience on aspects of using DLT in a realistic test environment where different deployment models were utilised," SARB said in a statement.
"The results show the typical daily volume of the South African payments system could be processed in less than two hours with full confidentiality of transactions and settlement finality.
"Transactions were processed within two seconds, across a network of geographically distributed nodes, with distributed consensus providing the requisite resilience. The SARB was able to view the detail of all the transactions to allow for regulatory oversight."
The project was built on Quorum, using Istanbul Byzantine Fault Tolerance, Pedersen commitments and range proofs to deliver on the combination of scalability, resilience, confidentiality and finality.
"Central banks widely recognise the disruptive potential of and the probable risk from fintech. This prompted the SARB to initiate structures to monitor and gain insight for the development of appropriate policy frameworks and responses to changes emanating from fintech.
"The objectives of Project Khokha were thus to build on the initiatives previously undertaken by global peers and to gain further insights on DLT developments in a South African wholesale payments context. The project provided the opportunity to broaden the DLT skills base in the South African banking industry and also presented an opportunity to explore the type of collaborative innovation that is expected to become more common.
"This project has laid the foundations for future collaborative work, essential in the blockchain context, and has fulfilled its objective of providing useful insights to all participants," said SARB.
One of the objectives of Project Khokha was to provide a better understanding of how the current South African Multiple Option Settlement (SAMOS) system would integrate with a DLT system.
"The intention is not to consider changing the approach with the SAMOS replacement, but to provide input to that project," said SARB.
"The future direction will also be influenced by further development of the technology and by central banks and other regulators globally continuing to contribute to this field of knowledge. The SARB anticipates continuing work in this area and expects to continue contributing to the body of work in DLT-based systems."