How to create a central bank digital currency (CBDC) on the XinFin network (XDC)?


Short for Central Bank Digital Currency, CBDCs are digital or electronic representations of national fiat currencies. Leveraging distributed ledger technologies such as blockchain, CBDCs allow central banks to increase payment efficiency while dramatically reducing transaction costs.

Although similar to cryptocurrencies such as bitcoin or ether, CBDCs have substantial distinctions. While the former is usually unregulated, CBDCs operate under the governance of a country’s central financial authority. In addition, CBDCs are mostly stablecoins, backed by valuable physical assets, such as gold or other foreign currencies; this eliminates the volatility crisis that ordinary cryptocurrencies face.

By combining these factors, CBDCs are more secure, efficient, transparent and lower cost versions of money deposited into your bank account. In 2020, the central bank of China launched an experiment with the digital yuan in Suzhou, Chengdu and Xiong’an. According to its governor, Li Bo, the ‘tests have shown that the digital yuan issuance and distribution mechanism, or e-CNY, is compatible with the existing financial system and helps to minimize the impact on the banking sector.

In the process, the Reserve Bank of India also expressed its intention to explore the CBDCs; as well as the Bank of England, the Bank of Canada, and the central banks of Uruguay, Thailand, Venezuela, Sweden, and Singapore, among others. In this context, let’s discuss how central banks can create robust CBDCs on the XinFin Digital Contract (XDC) network.

Counterfeiting mitigation and other benefits of using blockchain for CBDC

Before zooming in on the steps of creating CBDCs on XinFin, it is worth considering the general importance of blockchain technology in this regard. Counterfeits, on the one hand, are among the greatest threats to the sanctity of decrees on paper; Legacy digital currencies are also prone to hacks and scams. Blockchain’s immutability alleviates these problems, but it brings more.


Lack of transparency is a persistent problem for traditional finance. Ironically, central banks have often been at the center of transparency fears and controversies. Old centralized banking systems cannot meet current transparency standards; decentralized blockchain-based frameworks can. By implementing distributed consensus mechanisms, it is now possible to build trustless and verifiable financial systems.

However, when central banks have to process highly sensitive data, which is the case most of the time, absolute transparency may not be appropriate. In these cases, certain data must necessarily remain private, for the benefit of individual customers. XinFin’s public-private hybrid blockchain can solve this dilemma smoothly; sensitive data can be treated in private while retaining its public verifiability.

Safety and durability

Blockchain platforms leverage improved homomorphic cryptography to ensure the highest level of transaction security. Rather than centralized servers, assets and data are stored on a global network of computers (nodes). This eliminates the risk of hacking and breach, unlike existing financial systems. In addition, blockchains allow a deterministic purpose for transactions; once finalized, a transaction cannot be reversed.

Distributed ledgers implement decentralized consensus mechanisms to secure their networks while allowing tamper-proof validation of transactional blocks. Two of the commonly used consensus mechanisms are Proof-of-Work (PoW) and Proof-of-Stake (PoS). XinFin, however, has taken a step forward in the security of the distributed consensus; XinFin Delegated Proof-of-Stake (XDPoS) is an evolved form for ordinary PoS.

Besides the security enhancements, the XDPoS mechanism makes XinFin environmentally sustainable. By facilitating extremely low power consumption and carbon footprint, XDPoS elevates XDC, XinFin’s native token, to a reputable class of green coins. In addition, in general, the use of blockchains allows central banks to minimize paper consumption.

Cost and speed optimization

In legacy financing, the majority of transaction costs are incurred in two ways; one, construction and maintenance of infrastructure; two, remunerate the various intermediaries involved in the process. The adoption of blockchain technology guarantees substantial cost reductions on both sides.

In XinFin, for example, financial processes are entirely non-intermediated and automated by algorithms; this minimizes supplier costs that central banks traditionally incur. Distributed consensus also reduces validation costs. In addition, the transaction fee on XinFin is only $ 0.000001, which is virtually non-existent.

Also in terms of speed, blockchains significantly improve the performance of central banks, especially for cross-border transactions. Traditionally, such transactions require a week or more for settlement. XinFin, on the contrary, settles them in 2 seconds, while processing more than 2000 transactions per second. Above all, speed is not a compromise for precision or efficiency; Algorithmic automation eliminates human error.

Creation of CBDC with XinFin XDC Network

After discussing the overall benefits of using blockchains for CBDCs, and more importantly why central banks might prefer to use XinFin, now let’s take a look at the creation process. As such, depending on the asset backing them, CBDCs can be of four broad types: fiduciary guarantees, crypto guarantees, commodity guarantees, and unsecured.

While collateralised CBDCs typically have 1: 1 support, non-collateralised CBDCs have leverage Seigniorage action systems. But for each of these types, the process of creating CBDCs on XinFin is generally similar and extremely straightforward. It only takes a few minutes, and the steps are as follows:

  • Step 1: Visit the My contract website, to start creating your stablecoin, either on the XinFin mainnet or on the XinFin Apothem network.
  • 2nd step: Log in to the portal, either with XinPay or with your private key.
  • Step 3: Enter your stablecoin details, such as name, symbol, supply, etc.
  • Step 4: Examine the details carefully; errors can result in loss of funds and also loss of credibility among potential users.
  • Step 5: Click on the “Issue Token” button and you’re done, your CBDC is ready to be used; confirm the program using XinFinScan.

Farewell words

The world is digitizing rapidly and finance must keep pace. Demand for consistent, robust and efficient services is now expected from government entities as well, and not just from private service providers. Among other things, central banks around the world are realizing this need of the hour; CBDCs, for them, are a way forward, which also allows for greater financial inclusion in all social and economic strata.

As a business-ready network, XinFin is uniquely positioned to support the digital transformation of existing banking systems. The network is fast, secure and efficient; it is also economically and environmentally sustainable to a remarkable degree. In their journey to CBDCs, XinFin assists central banks with a network that strikes the right balance between confidentiality and verifiability of sensitive financial data. Finally, it is therefore no exaggeration to claim that this is the time to build the future; the future is CBDC.


About Chris McCarter

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