Blockchain has created a new technology for a different type of internet and backup system. Blockchain was developed for the digital currency, Bitcoin, but Brazil's Central Bank is doing more and different research and development for blockchain.

In an interview about plans for blockchain technology, the central bank's blockchain team said that they are working with the R3' Corda ledger platform. They ceased development at one time because the Corda technology felt to simple; too immature.

Now the Corda system has proven that it can transform a business ecosystem using a financial grade ledger operating in privacy, but in an open, global network.

Corda 1.0 was launched in October, and the blockchain team is ready to test the newest version. The goal is to use Corda 1.0 to back Brazil's financial infrastructure.

The Central Bank of Brazil is not relying on only one system. They are moving towards a proofs-of-concept or PoCs on at least four different platforms. The platforms being studied are trailing ethereum, JPMorgn's Quorum and Hyperledger Fabric.

Evidence is coming from a pilot project to demonstate that a design is feasible, or using a PoCs to prove that blockchains can be used as a backup. The Cental bank's Brazilian Payment System needs modernization as well as a system to align the organization with global central banks using blockchain technology.

Aristides Andrade Cavalane Neto has said to CoinDesk, "We are a central bank, and we enjoy a lot of stability. But you have to think change. You have to think in a different business model. So, for us, that's the most difficult part of this kind of work when we're talking about innovation."

Instant blockchain

The blockchain team at the Central Bank has studied a number of use cases. They considered allowing foreign trade in local currencies with identity management system. Jose Deodoro de Olivera Filho, the teams analyst, has said that the blockchain team has selected RTGS or Real-time gross settlement as the system to study and innovate.

Other systems reconcile large-value debits periodically, or when necessary. RTGS allows banks to settle these debits immediately. These types of transactions are somewhat infrequent, however. The Central Bank of Brazil is studying RTGS as a potential blockchain system for backup and security.

The Central Bank of Brazil records 314,000 transactions per day. That is approximately 839 billion Brazilian reals, or $255 billion using today's exchange rate.

De Oliveria discussed the situation with CoinDesk and stressed the decison to study the RTGS use case. De Oliveria further mentioned that the central bank's system has been aiding other commercial banking organizations in reconciling their accounts for 15 years. However, the bank itself does not have a backup system. Their blockchain team is researching and studying blockchain systems that could be used for backup.

There are still two huge obstacles in deciding on a blockchain system. De Oliveira, acknowledges each of the platforms has its own disadvantages and advantages. De Oliveria feels he still has two main obstacles to jump over.

Obstacle number one, can the Brazil's central bank demonstrate that executing a blockchain system is more cost affective than using a system that is more traditional. Obstacle number two, the bank is also tryng to answer all the questions about privacy and security when using a shared and multi-distributed ledger.

"If you want privacy you can't have the other features, and if you want the other features, you can't have privacy. So, that's what we're trying to solve right now," De Oliveira said.

Privacy vs Security?

Even though RTGS is now the primary project of the blockchain team's work, the bank is also testing an information exchange that is blockchain based.

Know Your Citizen, which is similiar to the regulator-mandated know-your-customer compliance, is powered by Microsoft's Azure cloud Quorum. Quaorum also uses Trufflea ethereum development framwork to interact with smart contracts.

De Oliveria said that "everything is kid of a secret now, but more information about what Central Bank of Brazil is doing should be out in a couple of months.

This is the only area in the blockchain reseach and development program that is a secret. The Central Bank is very open to other areas where it is developing blockchain technologies.

Ripple hosted a Central Bank Summit in New York City a short time ago, and Brazil's Central Bank introduced its blockchain work to the International Monetary Fund. The bank also had an presence at Blockchain Summit 2017 in Sao Paulo, Brazil.

Hong Kong, Japan, Canada, and European central banks are generally in attendance at these summits. Cavalcante Neto said of the summits, "It's very useful, this kind of meeting, to understand the different perspectives from different central banks about the technology."