With the crypto sector continuing to witness an immense amount of innovation in recent years, one breakthrough that has caught the attention of governments as well as digital asset enthusiasts worldwide is Central Bank Digital Currencies (CBDCs).
As things stand, approximately 134 countries — representing approx. 98% of the global economy — are exploring this digital medium. Furthermore, a recent survey by the Bank for International Settlements (BIS) revealed that a whopping 94% of central banks globally are actively using or researching the implementation of CBDCs.
Most recently, COTI, a confidential computing platform, emerged as the only blockchain-based initiative to reach the final stage in the Bank of Israel’s Digital Shekel Challenge.
The challenge was modeled on the BIS’s “Rosalind” initiative, inviting entities across domains like fintech, banking, academia, and technology to develop applications using a digital shekel API layer.
The teams were encouraged to design solutions capable of addressing the unique needs of Israel’s diverse payment landscape — especially ones that were capable of facilitating secure, cross-border transactions seamlessly.
A look at what COTI’s solution has to offer
The growing interest in CBDCs has revealed a shift toward a more digitized financial ecosystem. However, even though the blockchain’s transparency has been one of its key selling points, it has also raised significant privacy concerns.
This is primarily due to the fact that the linking of CBDC transactions to real-world identities stands to create an unparalleled record of an individual’s financial history — a dystopian prospect that has drawn the ire of lawmakers across the globe, especially in the United States (by the representatives of its House Financial Services Committee).
This is where COTI’s offering shines, providing clients with advanced features to store and exchange CBDCs securely. At the heart of their solution is a novel implementation of ‘garbled circuits,’ a cryptographic technique designed to obscure sensitive transaction details such as amounts, token types, and wallet addresses.
More importantly, COTI’s privacy layer has been designed to be lightweight and scalable, capable of running on any device, even mobile phones. This level of accessibility differentiates COTI from other alternative privacy solutions, which tend to involve significant computational overhead or centralized trust assumptions.
Practicality is key
To demonstrate the real-world potential of its privacy-oriented CBDC platform, COTI recently developed and launched a decentralized marketplace for event tickets. Within the platform, buyers and sellers were allowed to transact in their local currencies while using the Digital Shekel as the mediating currency.
Moreover, thanks to the use of smart contracts, the need for intermediaries was completely eliminated, which in turn reduced fees and settlement times substantially. Lastly, the platform’s innovative use of Hash Time-Locked Contracts (HTLC) enhanced the platform’s security, ensuring that all parties’ interests are protected throughout the transaction process.
Lastly, it bears mentioning that every time a ticket was sold via the platform, the buyer’s funds were securely locked in a smart contract until the sale conditions were met, at which point the exchange was executed automatically and privately.
COTI’s presence at the ‘Digital Shekel Challenge’ was impactful
COTI’s decentralized marketplace was considered a standout entry in the Digital Shekel Challenge. Alongside teams from industry giants like PayPal and Fireblocks, COTI emerged as the only blockchain initiative to reach the final stage of the competition.
The judging panel was particularly impressed by COTI’s ability to bridge the gap permeating traditional finance (trad-fi) and the decentralized, privacy-focused world of Web3 — primarily via the application of its confidential computing technology to CBDC implementation, thereby demonstrating a transparency and privacy-driven path for central banks worldwide.
Privacy is the primary driving force for CBDC innovation
As more countries continue to explore the immense social, technological and financial prospects put forth by CBDCs, COTI’s offering stands to act as the ideal blueprint for how privacy can be seamlessly integrated into these digital currency systems.
In a recent interview, the company’s CEO, Shahaf Bar-Geffen, emphasized that privacy is not just a “good idea” but a fundamental necessity for the widespread adoption of Web3 technologies.
In this context, it bears mentioning that COTI’s vision extends beyond CBDCs, especially since the company’s privacy-first approach unlocks a host of potential use cases, from decentralized finance (DeFi) and real-world asset management to AI and identity solutions.
Therefore, as the global financial landscape continues to evolve, COTI’s pioneering work in the Digital Shekel Challenge serves as a potent reminder that privacy is not just a buzzword anymore but a critical enabler of a digital future where CBDCs can coexist with conventional payment and transaction channels.