Practical tests involving the South African Reserve Bank, ABSA, Standard Bank, Nedbank,
FirstRand, Investec, Capitec and Discovery Bank, driven by technical partner ConsenSys, to
determine how the Rand can be tokenised and how a national payments system can be
better utilised by using blockchain technology has recently been concluded.
The findings were released to the public by the Reserve Bank.
Project Khokha, isiZulu for “pay”, was the Reserve Bank’s first venture into using distributed
ledger technology (DLT) to allow for payments between banking partners to be made.
According to Francois Groepe, Deputy Governor of the Reserve Bank it was a way for them
to “contribute to the global initiatives which assess the application and use cases of DLT.”
This project was launched as part of the Bank’s fintech programme late last year. This trial
began in early 2018 and provided a solution to the realtime gross settlement of funds. A
realtime gross settlement being a system that transfers and clears the funds between banks
on a one to one basis, and not in a bulk transfer.
A private permissioned Ethereum blockchain called Quorum was used to tokenise the Rand
and using these tokens transfers were then made between banks in real time using
blockchain.
“This was a very practical test of our enterprise Ethereum solution for tokenising
FIAT money and enabling payments,” says ConsenSys project lead Peter Munnings.
The overall goal of this experiment was to create a distributed ledger between participating
banks for a domestic payment system backed by central bank deposits.
This would allow participating banks to pledge, redeem and track balances on the distributed ledger without a
centralised central bank system needing to be involved, all while adhering to the
performance, confidentiality, and differing hardware systems requirements of the various
banks.
The key success metrics of the project were transaction performance, network performance,
and confidentiality. Using the current stress load level of 70 000 transactions over a 2-hour
period as a target, the ledger was able to reach the transaction number in 1 hour and 15
minutes.
The time needed to create a new block, or Block Propagation Time, was used as a marker
for network performance. 95% of new blocks were created within 1 second and 99% of new
blocks were created in under 2 seconds; this shows that the project was able to handle and
create new blocks within an acceptable time frame.
Confidentiality is a crucial component if this technology is going to be adopted going forward.
The project was able to deliver confidential information such as the private data of the
payment sender and receiver with the full view required by the SARB to perform its oversight
function without any loss of performance and also without needing a centralised system to
do so. The project met or exceeded all of the performance metrics set out, which proves that
“it can deliver both the required performance and levels of confidentially over a diverse
hardware network,” adds Munnings.
He adds that, for ConsenSys, this is another successful project with a regulatory body and is a further
feather in the cap for Quorum using various hardware. The project further shows the
investment that ConsenSys is making in South Africa and indeed Southern Africa. The
project pushed the boundaries in terms of confidentiality and performance in a regulated
environment, and this will be of much interest to the Enterprise Ethereum Alliance.
“This was a significant step forward for blockchain based
payment systems,” Mullins says.
Blockchain technology is constantly evolving which makes technology
decisions difficult, however, DLT needs to be further explored as there are many different
implications outside of just the technology.
While the project may be over, the team working on Project Khokha are now transitioning
across to Adhara. Adhara is a brand-new venture from ConsenSys, which aims to use the
teachings from Project Khokha and combine them with international payments, liquidity and
funding management to create an array of solutions called the Adhara Suite. At this stage
Adhara is finalising agreements with strategic partners to enable full production of the suite.