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Blockchain application for central bank digital currencies (cbdc)
Thai chamber of commerce university (utcc) school of engineering, bangkok, thailand
Related data
A central bank digital currency (cbdc) is a computerized version of a currency whose unit of account is equivalent to the native currency. Blockchain or distributed ledger technology (dlt) can be used to implement cbdc to conduct and settle peer-to-peer transactions. With the advent of private money such as cryptocurrencies and stablecoins and the growing use of digital payments to reduce the global spread of the pandemic, cbdc has become an active area of research among central banks around the world. Many central banks have started personal cbdc projects by developing dlt (poc) proofs of concept to replicate wholesale options and expanding their own experiments to other use cases such as delivery versus charge (dvp) and cross-border money transfers. Many large economies, like the us, have projects looking at cbdc. The people's bank of china (pboc), china's central bank, has already begun pilot testing of its digital retail currency. This paper discusses blockchain applications for cbdc, introducing cbdc projects by central banks. In addition, this paper analyzes issues, identifies problems, and discusses future work in such a rapidly evolving field.
This section is divided into several subsections. The first subsection highlights the digital transformation of currency from converting things to a physical token, and then to digital data in the ledger and digital token today. The second subsection describes the organization and contribution of this article.
The digital transformation of currency
Before the invention of “currency,” people exchanged goods and services directly. With the operation of the barter system. For example, a farmer might want to trade a bowl of rice for kilos of meat. However, this arrangement takes time and suffers from at least three significant problems. First, the parties must meet each other to make a deal. In addition, they must agree on a unit, for example, how many cups of rice will be for his kilograms of the third meat after the exchange is completed. People are not able to store prices for products for a long time, because most of the goods sold using this method are perishable. Slowly overduringthroughduringthroughduringthroughduringthroughduringthroughduringthrough duringduringduringduringduringduringduringduringduringduringduringduringduringduring duringduringduringduringduringduring centuries developed a currency using tradable goods, including salt or weapons as a medium of exchange, unit of account and reward saving. However, those items of trade that were used as currency were similar, but not identical in any unit. People solve this problem by minting metallic money, which already has an intrinsic value and is standardized in each coinage unit. The first official currency was lydian coins, made from electrum, a naturally occurring mixture of silver and gold. The coins were stamped with images that acted as denominations. The use of state-issued metal coins continued until today.
Due to the lighter weight of others, which is easily transportable, the chinese yuan dynasty was one of the first to switch from coins to paper. Money.However, in a number of european countries, metal coins were still used as the only currency until the sixteenth century. This is due in such a way that european acquisitions of new colonies provided new sources of precious metals and allowed countries to continue to mint more coins. However, bank depositors and borrowers appeared instead of metal coins, paper bills. People are able at any time to take these notes to the bank to be exchanged for their face value in metallic—usually silver or gold—coins. This paper money could also be used to buy goods and services, such as today's currency. However, it was issued in earphones by banks and individual institutions, not by governments. In order to raise the credibility of such banknotes, many governments issued this paper currency, having assets such as gold to discover the value of each banknote issued, so that it was easy to print only a small number of banknotes. This means that it provides more stability to a previously fiat currency.
Mobile payments and virtual currency are two innovative forms of currency in the twenty-first century. Humans have the ability to use their portable electronic equipment, including smartphones or devices, to make payments for their products or services and send money to friends or loved ones. In 2009, bitcoin was released, a new form of currency that will become a virtual currency. Virtual currencies are devoid of physical coinage, but laid out in digital format. It operates using a decentralized system, apart from fiat currency, a centralized and controlled government-issued currency.
Cbdc is a digital version of a national currency with a unit of account equivalent to its national currency. The holder of this cbdc has a direct claim to the central bank account. With the advent of private money, including cryptocurrencies and stablecoins, and the growing use of digital payments to reduce the global spread of the pandemic, cbdc has become an active research area for a huge number of central financial institutions around the world. According to the bank for international settlements (bis) [1], more than a quarter of pussies are currently developing or launching specific pilot projects. To one] bis updates earlier surveys in which central banks requested participation in the cbdc. This shows that more than three thirds of central banks are likely to issue retail cbdcs in the short to medium term. Many are looking into the cbdc ecosystem, which involves private sector collaboration and interaction with existing payment institutions.
Organization and participation
This document is organized as follows: (along with a highlight our contribution.)
Section 2 presents a work that carries blockchain or distributed ledger technology (dlt), stablecoins and facebook libra or diem, which are central to our cbdc research.
Section 3 discusses the wholesale and retail projects of central bank Digital Asset Privacy cryptocurrencies (cbdc) around the world.
Section 4 analyzes the technical resource and clearance challenges for cbdc.
Section 5 presents tasks for cbdc.
Section 6 discusses future hacks and may become a derivation.
Related works
Blockchain or distributed ledger technology (dlt)
Dlt is a set of technologies or protocols that practice distributed participants to collectively and securely maintain a decentralized digital ledger without a single central authority . . Bitcoin, invented in 2008 and released in 2009 by an unknown individual and friends of individuals named satoshi nakamoto [2] is the most popular application of dlt. Another example is ethereum [3], whose hallmark is programmability. Developers use ethereum as a platform for creating many innovative cryptocurrencies or applications called decentralized applications (or “dapps”). Based on bitcoin or ethereum, many cryptocurrencies have been organized, which are scientifically called "altcoins". Private" or "allowed" dlt requesting that nodes in sinks be allowed to join appears as an initiative of such disadvantages. Consequently, many central banks choose our dlt platform to implement their cbdcs. Corda [4] is a "private" open source dlt marketplace that guarantees strict confidentiality for accounting and contract management between mutually distrustful parties.Corda is unique among blockchain platforms that introduce the concept of a “notary”, which puts a seal on any transaction in order to avoid double spending. Hyperledger fabric [5] is another "permitted" dlt-based for creating applications or modular engineering solutions. Quorum [6] is an ethereum-based dlt that combines the innovations of the public ethereum community with improvements to support enterprise needs. Hyperledger iroha [7] is tailored to be easily and safely included in projects that require dlt, with an enhanced fail-safe consensus algorithm called yac [8]. Hyperledger besu [9] is an ethereum enterprise client for public and private permissioned networks. Hyperledger besu includes several consensus algorithms and complex permission schemes specifically designed for use among the consortium. Elements [10] is a free-source, sidechain-enabled blockchain resource that provides access to community-developed features such as confidential transactions and issued assets. Interledger [11] is an open ledger based payment transfer protocol that provides interoperability for all value transfer systems. Bitt [12] is a firm that has experience in digital currency and has a solution for leading banks to develop and implement digital currency for a central bank on the topic of blockchain technology or dlt.
Stablecoins
Stablecoins are cryptocurrencies dedicated to minimizing price volatility relative to some “stable” asset or basket of assets. This is a huge issue for the exploitation of cryptocurrencies as payment instruments. A stablecoin may be tied to competitive assets like fiat banknotes or commodities (assets-backed), crypto-currency (crypto-backed) or not tied to anything, but has a requirement stabilization mechanism (algorithmic).
Facebook libra or diem
In june of this year, libra officially published its whitepaper [13]. Following the announcement, many regulators, central bankers and politicians heavily criticized and opposed the program, resulting in several members leaving the associations. The main concerns are the threat to the monetary sovereignty of countries, financial restraint and systemic financial incidents, consumer protection, the possibility of abusing a dominant position in the intricacies of small businesses, privacy violations flickering as a result of facebook's dubious reputation in the light of the previous scandal, and the lack of precise compliance undermining global regulations. Efforts, especially in money laundering. Through the libra 2.0 plan [14], libra hopes to address the issues of regulators and opposition groups.
In libra, libra is the trustee as the "de facto central bank." Therefore, it is not decentralized unlike bitcoin, using a "public" or "unpermitted" blockchain and relying on cryptocurrency mining, libra only processed transactions by libra's association components over a permissioned blockchain.Libra will first move to a "non-permissioned" proof-of-stake system for several decades, but this idea was later abandoned.Caliber, now renamed nuvi, is a digital wallet for libra. "Nuvi" will be a standalone app on messenger and whatsapp. The association also changed its name from "libra" to "diem" in december 2020 to turn out to be a new beginning for the discovery of a single-currency stablecoin in 2021, which has never been raised, because in 2022 it sold the assets of the diem group to silvergate [15].
A blockchain application for central banks
Due to the breakthrough potential of blockchain or distributed list (dlt) technologies, many central banks are interested in adapting this technology for widespread use case [16] uses a systematic cartographic approach to this area of research, is an in-depth assessment of the maturity of experiments and types of researchers, and finds that most of the research use cases for leading financial institutions are issued by the central bank. Digital currency (cbdc, regulatory compliance, payment clearing and settlement systems (pcs). [17] analyzes the conditions for issuing cbdc, makes a literature review on cbdc schemes based on the blockchain and provides advice on issuing cbdc from the blockchain.
Central bank digital currency (cbdc)
Cbdc is a computerized version of a currency with a unit of account equivalent to its national currency.Cdbc can be classified as either retail or wholesale.Retail cbdcs are produced for single use , so, for payments between individuals or between individuals.For the most efficient interbank payments, wholesale cbdcs are issued only by financial institutions and clearing houses. With the advent of private online currencies such as bitcoin [2], ethereum [3], diem or libra [13], cbdc is often supposed to be sold using blockchain or dlt. However, cbdc can be sold with a centralized architecture. Here the setting is discussed with cbdc and are treated as wholesale, never retail cbdc, as defined by us 11 and 22.
Table 1
Wholesale cbdc projects
Table 2
Cbdc retail projects
Bakong
More complex - one mobile payment and banking app than retail cbdc
Rationale for cbdc
In a society where cash use is declining and private cryptocurrencies are ubiquitous across countries, and today controlled by a few large corporations, for example, in china or sweden, cbdc will help bring many citizens who use private money back to exploiting public money in the financial system. Cbdc can also make the national financial system more resilient.
Because the penetration of wirth technologies such as the smartphone across the globe is more important than a checking account, cbdc is able to offer financial inclusion to non-banks who have access to smartphones. Among other things, cbdc helps users access current digital payment tools at significantly less or no cost without payment systems.
Using cbdc will help banks or fintech companies experiment with dlt in their programmable money functions . By encouraging competition and innovation in the financial sector. Bettors use cbdc's programmable money features to enter the payments market and offer options that reduce the need for smaller institutions to make their payments through larger banks. Using advanced digital features, including smart contracts and programmable money, innovators can use the package as a foundations for new innovative banking services or platforms.
A domestically issued cbdc will help reduce or prevent the adoption of private currency. . Central banks can retain sovereignty over monetary policy. Cbdc can be used to enhance the transmission of monetary policy. Some scholars also testify that a cbdc that pays interest will increase the economy's response to changes in the discount rate. Cbdc that pays negative interest charges could violate the "zero lower bound" constraint, making it costly to hold fiat money during a protracted crisis. And cons. Cbdc that can be mitigated by appropriate cbdc design. Troubles and problems are covered in sec. 4.
Wholesale cbdc
It provides overviews of wholesale cbdc projects around the world, similar to the summaries in table 11.
The jasper project
The main goal of project jasper [18], launched in march 2016, is to understand how dlt has the ability to change payouts in canada. The project was and remains a joint project of payments canada, its financial institutions, the bank of canada and other market players. The project is composed of three phases: phase i: the resource enables the central bank to issue a digital receipt of the deposited fund [19], phase ii: new dlt platform [20], phase iii: securities settlement using distributed ledger technology [21]. Project jasper focused on clearing and settling large interbank cash payments using a distributed list in steps i and ii. However, during iii, integrated payments and stocks with bonds (delivery versus payment, dvp) were studied.
The ubin project: singapore central bank digital money with distributed ledger technology
The ubin [22] project is the result of a partnership between the monetary authority of singapore (mas) and the industry to better understand the potential benefits of blockchain and dlt through practical experimentation by developing easier-to-operate and efficient alternative money transfer and value settlement systems. Papers based on cbdc. The project consists of five phases: phase i: tokenization of sgd [23], phase ii: rethinking rtgs [24] and source codes [25], phase iii: delivery versus payment (dvp) [26] to generate tokenized assets. Settlements on many blockchain platforms. Phase iv: cross-border regular payments versus payments (pvp) [27] produced the report “cross-border interbank payments and settlements: new opportunities for digital transformation” [28] and phase v: ensuring broad ecosystem collaboration [28]. 29], developed by mas together with j.P.Morgan and temasek, which allows you to make regular payments in various currencies on the same network, and also seamlessly connect and operate with other blockchain networks. The network also supports use cases such as clearing and dvp settlement for securities trading assets, settlement on private exchanges, escrow payments, escrow for trading, and payment obligations for trade finance [30]. Phase v also addresses the commercial viability and importance of the dlt payment network beyond technical experimentation.
Project stella
In december 2016, project stella was a collaborative research project of the european central bank (ecb) and the bank of japan (boj). Such a rating is made up of three stages, and reports. Published in september 2017, phase 1 [31] is devoted to the analysis of processing large payments using dlt. Published in the early spring of this year, phase 2 [32] explored the supply of documents of value against payment (dvp) among a distributed ledger. Indicated last june, phase 3 [33], dlt-related technologies have the potential to improve cross-border payments, especially in terms of security. Like all cbdc research projects, the analysis and verification results of project stella are not intended to reconstruct or supplement existing mechanisms. The scope of the project does not contain legal and regulatory aspects. [34]
The khokha project
At the beginning of this year, the south african reserve bank (sarb) officially initiated the khokha project [35]. Many partners participated in the designated project: a consortium of banks, consensys as a technical partner and pricewaterhousecoopers inc. (Pwc) as a support partner. Khokha is a zulu word meaning "to pay". Project khokha is an enterprise ethereum solution for boosting transaction volume and network resilience while maintaining privacy requirements for real-time gross settlement. Planning for the sarb fintech project began at the end of 17 and will run for 14 weeks from january to april this year.
Project inthanon
The the bank of thailand (bot) partnered with eight commercial banks to initiate the inthanon project. The key objective of the project is to explore the potential of dlt to support the efficiency of financial market infrastructure. The inthanon project is