A blockchain developer claims to have reverse-engineered the source code of Brazil’s pilot central bank digital currency (CBDC) and discovered functions that would allow a central authority to freeze funds or reduce balances. The developer argues that these functions could have potential benefits. The source code of Brazil’s Real Digital pilot project was posted on GitHub on July 6, and it was explained at the time that the project is intended for use only in a test environment and that the architecture may undergo additional changes.

Pedro Magalhães, the developer who reverse-engineered the code, found functions in the code that include the ability to freeze and unfreeze accounts, increase and decrease balances, move digital currency from one address to another, and create or burn currency from a specific address. Magalhães believes that the central bank will likely maintain these functions for purposes such as secured loan functions and other financial operations on decentralized finance protocols. However, he points out that the code lacks specificity about the circumstances under which the tokens can be frozen and who holds the power to execute these functions.

The concerns raised by the cryptocurrency community about CBDCs potentially infringing on financial freedom and privacy have been echoed in this case. Many argue that these aspects should be openly discussed and exposed in smart contracts, and that they have not been done so far.

Despite the concerns, Magalhães mentioned that a CBDC could offer benefits such as traceable taxes, public inspection of resource allocations, inspecting state purchases on-chain, and strengthening transparency in parliamentary amendments.

The Digital Real pilot project is reportedly running on Hyperledger Besu, a privately operated Ethereum Virtual Machine (EVM)-compatible blockchain, meaning users will need approval from the central bank to become a node.

Summary:

A blockchain developer claims to have found functions in the source code of Brazil’s CBDC pilot that would allow a central authority to freeze funds or reduce balances. While the developer argues that these functions may have benefits, concerns have been raised about the lack of specificity and transparency surrounding the execution of these functions. The Digital Real pilot project is running on Hyperledger Besu, and users will require the central bank’s approval to become a node.

FAQs:

What is the Digital Real pilot project?

The Digital Real pilot project is Brazil’s pilot central bank digital currency (CBDC) initiative. It is meant to be used in a test environment to explore the potential of a digital version of the country’s currency.

What functions did the blockchain developer find in the CBDC code?

The developer found functions that would allow a central authority to freeze and unfreeze accounts, increase and decrease balances, move digital currency between addresses, and create or burn currency from specific addresses.

What concerns have been raised about the CBDC pilot?

There are concerns about the lack of specificity in the code regarding the circumstances under which funds can be frozen and who has the power to execute these functions. Some also worry about the potential infringement on financial freedom and privacy that a CBDC could bring.

What are the potential benefits of a CBDC?

Potential benefits of a CBDC include traceable taxes, public inspection of resource allocations, transparency in state purchases made on-chain, and strengthening transparency in parliamentary amendments.

What blockchain is the Digital Real pilot running on?

The Digital Real pilot project is running on Hyperledger Besu, a privately operated Ethereum Virtual Machine (EVM)-compatible blockchain.