The National Science Foundation of the United States has awarded blockchain startup KRNC US$ 225,000 to develop a digital dollar on a blockchain. The granting of the resources comes at a time when U.S. regulators are discussing the creation of a crypto version of the dollar.
The KRNC is a protocol that would be able to assign a scarce digital currency to the dollar. The idea is that the digital currency is distributed to users proportionally to the amount they already have. Thus, anyone who owns dollars can interact with decentralized applications without having to buy cryptocurrencies like bitcoin or ether.
KRNC’s proposal was reviewed by a panel of external industry experts and evaluated for its merit and commercial potential. According to Coindesk, Anna Brady-Estevez, the National Science Foundation’s program manager for funding, said the agency has no mandates for specific end uses for any of its small business funding.
“We focus on projects where there is significant technical work to be done with the potential to generate competitive advantage and impact commercially”, Estevez said.
According to Estevez, the project showed potential in developing a new technology that improves the security of financial transactions. “Our funding of this protocol should not be construed as an endorsement of any initiative to upgrade the U.S. dollar or make it more like bitcoin or any other cryptocurrency”, Estevez said.
According to KRNC CEO and chief scientist Clint Ehrlich, the protocol is based on Proof of Balance. “The bitcoin, which is based on the Proof of Work principle, is a waste”, Ehrlich said. “This requires people to waste money and computing power, solving meaningless problems”.
How the digital dollar protocol would work
Users who wish to purchase digital gold can deposit fiduciary money in banks during the allocation period and receive the cryptocurrency in return. Once the currency is assigned to a person, they can buy goods and services or exchange gold in the same way as bitcoin. Users can also choose to spend or trade digital gold separately from their fiduciary money or use it as a weighted dollar.
“They get the fiat dollar and the gold so that if there is a change in the price of any of them, they are protected from the risk of this volatility”, Ehrlich said.