Many central banks are now exploring the use of CBDCs to address long-standing challenges such as financial inclusion, payments efficiency and payment system operational and cyber resilience. The technology also has the potential to enable the implementation of Smart Contracts on a widescale basis – a development which would contribute significantly to diversity and innovation in the payment market.
However, although Smart Contracts are already proving useful in many applications, they will not prove a practical option for central banks until a single Smart Contract can be recognised by, and executed on, different DLTs. To address this issue, Quant has introduced the concept of the Treaty Contract: a fast, simple mechanism for facilitating the cooperation between Smart Contracts and transactions on different DLTs using Quant’s Overledger Network. For central banks, a Treaty Contract is, in effect, a ‘glue’ which ensures that Smart Contracts – each using different CBDCs – can all interoperate and work seamless together.
By enabling cooperation between Smart Contracts and different DLTs, Treaty Contracts are ideal for extending business processes across multiple internal DLTs, or for interoperating with external DLTs, in order to unlock the true business value from a multi-chain strategy. And the use of Quant Treaty Contracts offers many benefits to central banks, beyond the interoperability of Smart Contracts. By connecting CBDC DLTs, for example, atomic swaps can be used to perform simultaneous payment and transfer of ownership of digital assets, thus reducing the cost and risk of high value transactions, enable cross-border transactions and providing higher levels of real-time oversight.