Iran is the latest to join the stablecoins trend with its plans to launch a rial-backed crypto according to Al Jazeera.
Details are to be revealed on Tuesday, they say, at the Electronic Banking and Payment Systems conference which for this year has the blockchain revolution as a theme.
“Iran’s cryptocurrency is expected to be rolled out in phases, first as a rial-backed digital token, to facilitate payments between Iranian banks and other Iranian institutions active in the crypto space, and later possibly as an instrument for the Iranian public to pay for local goods and services,” they say.
The token is to run on a private blockchain with little detail available on what technology it is based on, whether ethereum, hyperledger, or something else.
It is somewhat interesting, however, that they plan to allow crypto institutions, like presumably exchanges, to access crypto rial.
How that would work exactly isn’t very clear, but you’d think they could connect to the central bank node through some sort of light wallet and thus allow for its exchange.
The same could perhaps be done by foreign exchanges, like Russian, Chinese or even European. While US exchanges would probably have to abide by American sanctions on Iran.
For others, this system could perhaps allow them to bypass SWIFT and banks all together except for Iranian banks which will probably have to carry out the minting or the tokenization process.
Considering the potential ramifications of a hack, the choice of a private blockchain does appear interesting especially considering Iran’s enemies would probably be looking for any code based weaknesses.
Since this would be high politics and their power games, some spy induced bug somewhere is probably to be expected.
The effect of that could be the minting of trillions out of thin air or the bringing down of the system which would have the shared code as vulnerability.
Even if such code was running on – realistically here perhaps 30-50 banking/exchanges nodes – they would all be running the very same code. Thus if there’s any vulnerability, they’d be sharing it.
This is in fact one of the main reason why the open source movement gained so much traction. Although there have been serious bugs there too, the idea is that the more eyes are looking at something, then the less likely a vulnerability.
While in a private setting for a money blockchain the very few experts who can actually analyze the code may miss something or may willingly include a bug without others noticing.
Not to say that public blockchains haven’t had bugs, but although governments necessarily want to maintain control they do also seriously have to consider the tradeoffs in regards to security.
Our tech is neutral by design, so we can replace Iran here with America or whoever else, some enterprise private blockchain. The same point would apply because you’re dealing with money and everyone wants to get it if they can.
On the other hand, a private blockchain would have the benefit of being private. As in the code isn’t necessarily out there, so a potential hacker would first have to find it.
Where power games are concerned, however, it perhaps wouldn’t be too hard. Thus Iran has to explain to itself why they making this tradeoff.
They could have instead put up a smart contract on ethereum like everyone else. Then an adversary would have to take down eth which they can’t in a direct manner, and more importantly they probably wouldn’t want to.
They wouldn’t want to because there’s a lot more running on eth than some Rial stable coin which private enterprise can itself tokenize.
Moreover any “conspiracy” to take down eth would have at least someone who loves eth and thus would probably leak the plans and thus effectively sabotage the conspiracy.
It is in part perhaps why we don’t have such a thing as a private internet where it concerns worldwide communications as a stablecoin would because its whole point is to bypass SWIFT.
We instead have a global internet where no particular actor has an interest in bringing the whole thing down even if they could, which they can’t.
At best they might slow down the rate of innovation in a public blockchain, but its highly resilient design has now been proven.
Two final points. They may be going private perhaps because they think eth can’t handle the capacity, but a crypto-real is unlikely to be so popular considering plenty of dollar tokens run on top of eth just fine.
And second, a private blockchain might in some instances make sense say in a supply chain design or where security isn’t so pivotal where you have to consider state level attacks. Where it comes to money, however, it isn’t clear whether a private blockchain would ever do except as an experiment or a trial with small amounts.
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