South Africa’s central bank lauded for Ethereum payments blockchain
South Africa’s central bank has been recognised for the success of its Project Khokha, which uses an Ethereum blockchain platform to process interbank payments and settlements.
Khokha, designed and executed by the South African Reserve Bank (SARB), received the FinTech & RegTech Award for Best Distributed Ledger Initiative from global central banking forum Central Banking.
The test demonstrated that distributed ledger technology (DLT) can enable digital as opposed to analog transaction processing, offering significant improvements for global transactions.
Its success, commented Central Banking, demonstrates the need for regulators to address banks’ security and privacy concerns to improve global transaction processing. Regulators should work together to protect the financial system in ways that will not stifle innovation, it added.
Three month timescale
SARB designed and executed Project Khokha in under three months to test the proficiency, resilience, confidentiality, finality and scalability of a DLT solution for processing transactions under realistic conditions on a wholesale payment system.
The bank used JP Morgan Chase’sQuorum network with Istanbul Byzantine fault tolerance and Pedersen commitments and range proofs. Participating banks created their own nodes and were able to pledge, track and redeem the tokenised rand on the distributed ledger.
Project Khokha’s main goal was to successfully process the transactions while abiding by the Principles for Financial Market Infrastructures (PFMI) published by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO). The project also established measurable goals for performance, transaction time, security and privacy.
One goal was to scale from 70,000 to 200,000 daily transactions, based on real-time gross settlement needs for South African banks. Another was to process one day’s trading in two hours while coping with a one-day loss of processing.
The central bank established a goal of 95% of transactions validated in less than one second, and 99% of transactions validated under two seconds. While SARB retained visibility of all transactions, the participating banks could not view one another’s transactions.
The network managed the daily volume under two hours and provided settlement finality and complete transactional privacy. SARB maintained regulatory oversight of transactions processed under two seconds across a network of nodes that were geographically distributed.