European Central Bank is exploring blockchain and MPC technology

Zoltan Vardai10 hours agoEuropean Central Bank is exploring blockchain and MPC technologyThe central bank has been experimenting with multiparty computation, which could support the entire European economy in the future.1364 Total views14 Total sharesListen to article 0:00InterviewOwn this piece of crypto historyCollect this article as NFTJoin us on social networksCentral banks worldwide are increasingly exploring blockchain technology adoption, with the European Central Bank (ECB) being the latest example.

The ECB recently completed a blockchain experiment for its central bank digital currency (CBDC) with Zama, according to the firm"s chief academic officer, Nigel Smart.

He said during a panel discussion at FHE Summit 2024:“We did one with the European Central Bank on liquidity matching. […] And a number of applications on CBDCs have been actually to remove the central bank out of the equation and replace it with a blockchain.”

Liquidity matching refers to the process of banks ensuring that their financial inflows and assets are aligned with their outflows and liabilities, to avoid the risk of not having enough funds to meet financial obligations.

Related:North Carolina’s CBDC ban bill vetoed by governorBlockchain-based liquidity matching: The most pressing concern

However, liquidity matching remains a challenge for multiple parties transacting on the same blockchain network, according to Zama’s Smart. He explained:“Then the issue is if you have multiple entities on the blockchain and it"s all encrypted stuff, how do you do liquidity matching? That’s a really big issue.”

Smart, who is also a prominent cryptographer, is building fully homomorphic encryption (FHE) solutions for blockchain and artificial intelligence at Zama.

FHE-based encryption enables computations to be performed on encrypted data without decrypting it.

Zama secured a $73 million Series A funding round at the beginning of March to further develop the firm"s FHE stack and offer developers more tools to build data privacy solutions. Source: Zama

Related:Crypto needs to remove friction for the next billion users: CoinbaseMultiparty computation can support the entire Finnish economy

Multiparty computation (MPC) — which enables multiple parties to share data for computing without revealing the actual data — can theoretically support the entire Finnish economy.

Zama’s Smart revealed that the MPC-based experiment with the ECB proved successful, but supporting the entire European economy will still take time. He said:“We did an experiment with the European Central Bank where we essentially ran the Finnish economy through an MPC engine, and we could keep track. We could actually keep up with Finland, which is good, but not on the European scale yet.”

He added that the financial sector is increasingly exploring MPC technology, which could bring more use cases to large financial institutions.

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