Fábio Araujo is an economist and engineer at the Central Bank of Brazil, where he serves as the coordinator of the Drex project.
Drex is an ambitious hybrid wholesale/retail CBDC and tokenization platform that, if it proves successful, will be the infrastructure for a tokenized economy in Brazil.
In this interview, Araujo provides a comprehensive overview of the project and its ambitions, while giving an update on the 2024 roadmap ahead.
Key points in this conversation:
Drex consists of a Hyperledger Besu-based permissioned blockchain network used by participants in the national financial system. This network is Ethereum Virtual Machine compatible and will be interoperabe with existing DeFi protocols built on other EVM-based public blockchains. Participants will require authorization from the central bank
Two types of currencies will exist in the Drex system - a wholesale CBDC used for transactions between authorized entities, and tokenized reals issued by banks and financial institutions to retail customers
The network will support tokenization of real-world assets like government bonds, commodities, and receivables to increase access and efficiency. For example, tokenizing government bonds on Drex could make them more accessible to average Brazilians to hold in their savings accounts. These tests are underway as part of the ongoing Drex pilot.
The critical challenge Drex faces right now is finding a privacy solution that protects transaction data and participant identities at scale. This is needed to comply with stringent Brazilian data protection laws. The bank has been experimenting with several zero-knowledge proof-based solutions, but has not been able to find the right match as of yet
Araujo explains that Drex seeks to make tokenized finance transparent and accessible to everyday Brazilians, like existing solutions for digital payments and crypto trading. The goal is greater inclusion and democratization of financial services for Brazilian citizens.
By enabling composability of decentralized financial services, Drex would separate product creation from consumer-facing roles - allowing more specialization and competition within the financial system. Artificial intelligence, for example, could then help provide customized products to consumers.
The Central Bank plans to work on maturing privacy solutions and use cases over the next year before opening up Drex for public testing.
With Brazil having recently launched the hugely successful PIX instant payments platform, Drex represents the next step in its journey to leveraging technology to expand financial access.
👀 In my opinion, if the BCB this can execute Drex successfully, it immediately becomes among the most interesting blockchain projects in the world — one that will likely be emulated by many other countries.
I really enjoyed this conversation with Fabio and I hope you do as well. You can connect with him on Linkedin.
Have a great weekend everyone,