Project Hamilton: How Can It Affect the Payment Processing Industry?
Payment processing has become a billion-dollar industry, valued at $39.57 billion in 2020 (Goswami et al., 2021), and, thus, a crucial part of every business operation, especially with a huge shift to online shopping. Having reliable high-risk merchant account processors in your corner, providing services that accommodate the latest trends in the payments industry, is so important.
As the industry continues to evolve, there are also plans to create a new central bank digital currency (CBDC), which is essentially a form of bank money to help boost the existing physical currency and the central bank reserve account balances.
The Massachusetts Institute of Technology Digital Currency Initiative (MIT DCI) and the Federal Reserve Bank of Boston (Boston Fed) have partnered to create Project Hamilton.
It is a research initiative that aims to explore the potentials of CBDC including the challenges and potentials involved in implementing it. Although it’s still in the first phase of studies, Project Hamilton could be the future of payment processing.
What We Know About Project Hamilton So Far
Design-wise, two types of core CBDC processors were created and the better design was tested to be capable of processing 1.7 million transactions per second. MIT Director Neha Narula explained: “Our second architecture processes transactions in parallel on multiple computers and does not rely on a single ordering server to prevent double spends. This results in superior scalability but does not materialize an ordered history for all transactions. This second architecture demonstrated throughput of 1.7 million transactions per second with 99% of transactions durably completing in under a second, and the majority of transactions completing in under half a second.”
Certain concepts from blockchain technology and cryptography could be useful in CBDC transactions by improving their speed, accuracy, and functionality.
It is also said that CBDC can offer functionality when the use of cash or bank accounts is not possible. Aside from blockchain technology, the use of a distributed ledger is also being considered by Project Hamilton, especially because it is run as a centralized unit under a central authority.
Narula further explained: “There are still many remaining challenges in determining whether or how to adopt a central bank payment system for the United States. What is clear is that open-source software provides an important way to collaborate, experiment, and implement. In addition to supporting collaboration, monetary systems benefit from transparency and verifiability, which open-source offers.”
So, what can we look forward to during Phase 2 of this research project?
“Research topics may include cryptographic designs for privacy and auditability, programmability and smart contracts, offline payments secure issuance and redemption, new use cases and access models, techniques for maintaining open access while protecting against denial of service attacks, and new tools for enacting policy.”
Narula also said that they hope to collaborate with other technical contributors to test new systems and explore different challenges that will hopefully improve this system.
The Future of Project Hamilton
As we wait for the future of Project Hamilton, we continue to see the importance of high-risk merchant account processors that have been pillars for both consumers and businesses in making online transactions easy and hassle-free. This new digital currency will eventually be adapted into current payment processing methods.
Citation
Goswami, A., Borasi, P., & Kumar, V. (2021, July). Payment Processing Solutions Market Size, Share & Forecast – 2030. Allied Market Research. https://www.alliedmarketresearch.com/payment-processing-solution-market#:%7E:text=The%20global%20payment%20processing%20solutions,products%20%26%20services%20in%20the%20market.
