A blockchain developer claiming to have reverse-engineered the source code of Brazil’s central bank’s pilot virtual currency (CBDC) discovered purposes in the code that would allow a central authority to freeze the budget or reduce balances.
However, he has since argued that there may be conditions under which such purposes are beneficial.
On July 6, the source code of the actual Brazilian virtual pilot project was published on the GitHub portal of the Central Bank of Brazil. At the time, he explained that the pilot is designed to be used only in a test environment and that the “architecture presented” could be subject to additional changes.
Pedro Magalhães, a blockchain developer and founder of generation consulting firm Iora Labs, claimed later that same day that he was able to “reverse engineer” the Central Bank of Brazil’s virtual reality open source code, revealing the purposes of the code.
Functions included freezing and unfreezing accounts, expanding and reducing balances, moving money from one address to another, and creating or burning virtual reals from a quick address.
6/ These resources can be executed through any entity that receives the corresponding authorizations from the controlling entity of the new formula, that is, the Central Bank.
Magalhães told Cointelegraph that Brazil’s central bank “probably” those purposes for secured lending and other monetary operations based on decentralized financial protocols (DeFi).
The problem, Magalhães explained, is that the code lacks precision about the cases in which tokens can be frozen and, more importantly, who has the strength to execute them:
These facets deserve to be publicly exposed in wise contracts and discussed with the population, which has not yet been done,” he added.
Many on the cryptocurrency network have expressed their opinion that a CBDC has the power to infringe on their monetary freedom and invade their privacy.
11/ One of the purposes of publishing the pilot, as written in the so-called “Integration Kit” of the project, is to obtain comments, leaving the whole issue of documentation to evolution or change. And that’s precisely what developer Pedro Magalhães did: he provided feedback.
In a July 10 article, Magalhães said that while Brazilians’ considerations about a CBDC are understandable, it would possibly offer some benefits.
He explained that taxes would be easier to track, allowing the public to know the resources to which the fiscal budget is allocated, in addition to consulting purchases made through the state online and expanding transparency in parliamentary amendments.
Related: Visa, Microsoft and others join Brazilian pilot CBDC
In July 2022, Fabio Araujo, an economist at Brazil’s central bank, explained that virtual truth has the potential to prevent bank runs and seeks to provide merchants with a safer and more reliable environment to innovate.
The true virtual engine would run on Hyperledger Besu, a blockchain compatible with the Ethereum virtual machine (EVM) itself.
Because it’s not permissionless like the main Bitcoin or Ethereum networks, users will want central bank approval for a node, Magalhães said July 7.
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