A recent revelation by a blockchain developer has sparked controversy surrounding Brazil’s pilot central bank digital currency (CBDC).
The developer claims to have reverse-engineered the CBDC’s source code and discovered functions that would enable a central authority to freeze funds or reduce balances.
What are the code functions and potential use cases?
The code includes functions such as freezing and unfreezing accounts, adjusting balances, transferring currency between addresses, and creating or burning digital real from specific addresses.
These functions could be utilized by Brazil’s central bank for secured loans and financial operations based on decentralized finance (DeFi) protocols.
What are the concerns about transparency and financial freedom?
The lack of clarity surrounding the circumstances under which these functions can be executed and who holds the power to execute them raises concerns about transparency and public oversight.
Additionally, the ability to freeze funds or adjust balances raises questions about the level of control a central authority holds over individuals’ financial activities.
What are the potential benefits of a CBDC?
A digital currency would make tax tracking more accessible, allowing the public to inspect how tax funds are allocated and enabling transparency in governmental spending.
Additionally, on-chain transactions could enhance visibility into state purchases and contribute to transparency in parliamentary amendments.
What is the future of Brazil’s CBDC pilot?
The digital real pilot project reportedly runs on Hyperledger Besu, a privately operated Ethereum Virtual Machine (EVM)-compatible blockchain.
Unlike permissionless networks like Bitcoin or Ethereum, users would need the central bank’s approval to become a node, restricting decentralization.
The ongoing debate surrounding the CBDC’s code functions and their implications will likely shape the future development and implementation of Brazil’s digital real.