Norges Bank (the central bank of Norway), is working on a pilot program for a central bank digital currency (CBDC) which utilizes an Ethereum layer-2 protocol called Nahmii.

Nahmii is an Ethereum scaling solution that aims to scale any decentralized app on Ethereum to a global scale, including decentralized finance (DeFi), fintech solutions, NFTs, and supply chain management applications.

According to Nahmii, its greatest breakthrough is called “state pools,” which combine the instant finality of state channels with the pooled security of side chains and rollups.

In a blog post, Nahmii said,

“Following a competitive tender process, Nahmii AS will now build a sandbox environment for Norges Bank as part of their CBDC experimental testing strategy. Norges Bank will use this platform as part of a wider investigation into CBDCs.

Norges Bank will in the experimental testing consider many available technologies including so-called layer-2 blockchain protocols. Nahmii AS are experts in this space, having built multiple scaling solutions for Ethereum already.”

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Nahmii says the sandbox trial is expected to include all major Norwegian banks, which will also benefit from Nahmii AS’s technical expertise.

In a statement, Norges Bank said that Nahmii is responsible for creating a prototype mechanism that will facilitate the issuance, distribution, and destruction of the bank’s CBDC.

“We are planning further development projects based on the same technology,” the bank said. “The technology will be particularly relevant for collaboration with alliance partners (including banks) and as a basis for a sandbox. The plan is for the prototype infrastructure to be made available as open source code – hopefully during the summer of 2022. This will facilitate alliance partners and the public to participate more broadly in the testing.”

Norway, which is believed to be the most cashless society in the world, announced last month that it would be undergoing CBDC trials, which are expected to go on for another two years, though no hard timeline is in place.

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Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.