Bitcoin Forum

With increasing mentions of CBDCs, maybe it is time to start looking at the actual technology and methods that CBs are looking at to implement them?

Is there already such a thread here on bitcointalk?

Are they looking to use some blockchain construct?

How will their networks be assembled?

What will the 'governance' and 'consensus' mechanisms work?  ::)

Aside from a lot of mentions of CBDCs in the finance media, none ever mention the actual implementation details  ;D

I would say that the 'Altcoin Discussion' section would be an appropriate place for that - please drop info/ opinions  ;)

I don't think it's going to be Blockchain or anything similar to cryptocurrency/stablecoin. I think they will build it outside that so that they can still control the currency in the internet. CBDC aim is to just replace coins or banknotes or at least make an option to use money digitally.

I suspect it's going to be some sort of closed System/Network... or private System/Network with lots of Centralization, requires big Permission/Trust, not Censorship Resistant, not very Transparent/Open, not Privacy-friendly/Anonymity-friendly, not very Immutable, no clear/easy-to-understand rules,
not easy for most users to participate in consensus/governance, etc...

This is an interesting question I think, because there has never been (to my knowledge) any mention of how exactly the implementation will be done.

To put this into perspective: The legacy banking systems are completely obsolete and inadequate patchworks of IT systems going back to the 70's 80's of the last century.

If they really want to create a digital currency, they can't avoid using a really completely new technology, because strictly speaking, the current fiats already are CBDCs, just with obsolete tech.
That may not neccessarily mean blockchain, but these days it seems hard to think of another tech platform that may possibly be used for such a thing.

I find it very curious that there is this seeming absence of any info on this - if anyone comes over any links re. details about this- please post them here,

lol, ok here is a bit for starters, now that is quite a load of fine print to read  :D

https://www.federalreserve.gov/econres/notes/feds-notes/central-bank-digital-currency-a-literature-review-20201109.htm (https://www.federalreserve.gov/econres/notes/feds-notes/central-bank-digital-currency-a-literature-review-20201109.htm)

My belief is that there is no digital currency that can thrive without bockchain technology. What the government will do is to develop digital currencies that are like equivalent or similar to their fiats but it will be stablecoin.

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As to whether they will adopt PoW or POS consus, i may not know what they will implement in this regards but one thing is sure it is going to be highly regulated.

It will work like the fixed exchange rate, which will make them to eliminate volatality of such digital currency.

What i also think is this ; can a digital currency exist without blockchain technology?

[moderator's note: consecutive posts merged]

It's governed by a central bank its surely a centralized currency but it will be good if the CBDCs are going to be using blockchain because it's traceable and documented by its ledger itself. Having a blockchain will help the country's transparency in its financial system.

The question however is that would they really make the ledge public. Its likely not.

Central banks would most likely not adopt PoW or PoS consensus. That is useless in a fiat digital currency implementation. There is no volatility either because that is fiat pegged. The value and everything else are that of a fiat currency. If you know how the fiat system works today, it's everything that will work in a central bank digital currencies. The only difference is that it is made digital. It might also not built on a blockchain. If it is, then it is certainly a centralized blockchain.

Its just the digital fiat running on their own blockchain and not much change in terms of the usage because its same like how we are using our online banking system but with closed/centralized blockchain which is going to be under the control of the government and central bank authority of respective country.

You are right with the section, this discussion belongs here.

Haven't seen a thread related to a CBDC. I don't expect them to come in the forum and create an Ann thread for questions and stuffs. I think they'll use private blockchain and it's not that public at all.

Take this article and try to look for some answers for your other questions.

https://www.bitira.com/central-bank-digital-currency-cbdc/

Good read, Thanks!

It looks to me like they are all fiddling in their cellars on different implementations.
As someone else mentioned above, PoW and PoS really don't make any sense at all for CBDCs, which is what I also think, and which I find really interesting.

We all know that ofc anyone can run NXT on their own laptop at home and have a blockchain with one or two nodes,
and that the circle of nodes can simply remain closed to anyone not on the whitelist, but the PoS part would then simply be a non-functional decoration.

Looks silly somehow...  :D - Using elaborate game theory for a system where it is totally non-applicable.. well does not only look silly but somehow reeks of unsound engineering, with potential points of failure already baked in.

Ripple or Iota or Byteball or some other 'exotic' (non- PoS/PoW) platform could also be a used, but probably they would form some alliance and launch their own implementation.
Oth I have a hard time imagining Ethereum or a clone of it because that is too easy to hack considering the dozens of successful attacks that have happened already, and ETH would give them the PoS/PoW headache ...

If a central bank creates a cryptocurrency which has unlimited coin supply, there will be no difference from today's monetary system and reserve paper money. So it's a pure centralized system.
But if they create a coin that limited supply like bitcoin, then we'd talk about partial or "semi" centralization. This coin would neutralize monetary policies and has an aspect of freedom.
We'll see what's going to happen in near future.

I don't care how they will be constructed, all I know is all CBDC will represent or will be pegged to Fiat value of every countries so it's useless since it will be stable like stable coins, there won't be profits to be made here

Remember that Central Bank Digital Currencies (CBDC) is a government back token, meaning it's centralised and the blockchain will be private. Second, yes it will have a advantage but it is very similar to fiat as well only difference is that it will be cashless transaction, so meaning tax will be levied for every individual that will used it specially if you are going to transact to the government. Third, traceability, you can be track and monitor like a credit card because they will know when you used your CBDC.

I belive that it will be a centralized in form. This because central banks do works on fiat currencies and if it will be pattern on crypto with volatile value then it could be difficult to assess the value of the economy. Crypto that is being provided or created by central banks should be a stable value in which it could be traded to decentralized crypto like bitcoin and other altcoins.

When I looked up in google it said that they gonna use blockchain and it's centralized which means totally in control by the government some sort of modified blockchain (wonder why this is still called blockchain at this point) but it's most definitely gonna be yet another stablecoin but released by the government themselves.
I dont expect much from it tho because it does not repersent the real cryptocurrency at all. It's just another stablecoin but a lot more centralized than it ever was.

Yes, the cryptocurrency that central banks issue will be like a different version of fiat currency.
The two things I'm pretty sure about central bank-issued currencies is that it's not decentralized and investors won't like it.

No one is against control, but public asset/system/network has to run publicly and not privately. A public system has to be decentralized, transparent, open, with accountability, be immutable (my post on immutablity below👇), adhere to just national laws/principles, respect people's privacy, etc..
I believe it should illegal/immoral for public system, network or assets to be run privately  like many are run today. This is can encourage corruption, lawlessness, no checks and balances etc. Even private companies that serve the public should be considered Public companies founded and managed by individuals or group of people but subjected to Just national laws/principles like those listed above 👆


*Immutablity does not prevent you from changing something of "historic value"
https://bitcointalk.org/index.php?topic=5270395.msg55037915#msg55037915

And...
* Understanding Decentralization.
https://bitcointalk.org/index.php?topic=5249300.msg54453340#msg54453340

I think that national digital currencies will not compete with the existing cash and non-cash currencies. They should act as a different form of national currency, which will also function on a par with cash. But at the same time, the government will gain more control over its citizens.

Certainly the currency that the central bank issues will be a centralized currency and it will be an alternative to that country's cash.
For such reasons I do not think the currencies issued by central banks will not compete with cryptocurrencies.

Yeah. If this is possible, they may still be using a centralized technology system to create their currency. They certainly also have to think about other things like the stability of the currency and won't let it get out of hand

The control must be 100% for the benefit of the institution and the computational power must be fully monitored. However, we know that this can saturate or hinder the accession process, knowing that the population is looking for alternative decentralized means of payment or means of earnings. I believe that these governments should think about creating centralized projects in full time because the current appreciation shows the rebelliousness of the market.

It will be centralized and that is the only thing we need to know about them, there is really no reason to switch from crypto that we know (coins like bitcoin, ethereum and many more) and move into something so centralized.

Central bank digital currencies will only be used to move people away from crypto currencies and into the governments hands, they will say they are digital as well and they are high tech as well and they will slowly make it more and more difficult to trade or own bitcoin and they will make it more and more supported to own cbdc so that you would think it is more profitable for you to hold cbdc and when there is enough people switching, they will just make it completely illegal to have crypto and just make it fully cbdc if they can achieve.

The main feature of blockchain technology is decentralization which goes further to bring about transparency and trust, and a solid decentralized platform empowers users to own and manage their assets and private keys, so with this little idea on blockchain, I do not think Central Banks will go to such extent of using blockchain for any reason because it will remove their power over their citizens from them.  However, they will create it in such a way that it will favour them and always keep them in charge hence safe to say, there won't be any sort of transparency and so on.
Nevertheless, the only good side of this is, with them creating their own digital currencies will kind of create an awareness and will make their citizens to be aware of the crypto space in general, know about its potential, about its decentralization and so on, thereby making them to get involved.

The model will be in line with the current cyptocurrency we have but functions might differ. The ideal of dumping hard and massive uptrend movement(high volatility) would be settled out because the central authorities won't want to be experiencing such.

Some of us are against control and of course if it is a CBDC you expect the state to be in control, but in a transparent way as you say. Like blockchain,,, it should have a block explorer,,, and a naming of all the controllers (or nodes), so people know who is validating and who is managing channels.

But not all CBDCs will choose blockchain and even those who did like Venezuela did not make an accountable system and printed tokens anyway.

I think euro CBDC will be the closest to adhere, but then, so many people have interest and benefits to lose with accountability

You're welcome.

Well, to see a CBDC that will have a consensus algo of PoW will make everyone interested on it. That's like mining money easily through computers and everyone would love to invest on it even if it's going to cost a lot of money but if the return and produced money is for real and can be spent in real world.

And for it as PoS, that's the same as PoW for the investors perspective but sadly, it's not with those algos.

I think the concept of 'consensus' is the central issue here. Consensus among whom?
Participants of the network ofc, but if it is permissioned the whole game theory aspect goes down the drain.

So there will be a bunch of permissioned members of the club (state run financial authorities  :D ) that 'run' the network and pretend to implement the Bitcoin kind of game theory, but in reality it will be just that: Lame pretense because all they really want is a cryptographically secured distributed ledger.

As Andreas keeps saying: They might as well just run a database for that.

And if they run it on a closed circle of permissioned participants, we all know how many attack surfaces that exposes to the outside world  ;D

Knowing the blockchain technology used by cryptocurrencies is decentralized, This makes the Central Bank build a digital currency
in a different method, more centralized way. So they will build a digital currency that is controllable and not transparent, because
Central Banks always want to have the power to control their citizens. Therefore, until now there has been no detailed explanation
regarding the implementation to be carried out by the Central Bank.

Yes you are right.  The digitized currencies of the central banks of the states will actually represent the same currencies of the states, only in digitized form.  The digitized currencies will apparently differ from their pre-existing non-cash payments only in that this digitized currency will be on the blockchain.  I think the emergence of the Chinese digital yuan will bring clarity.  Using the example of its functioning, we will already be guided by how the digitized currencies of the central banks of states will work in practice.

Especially from a country like China where public freedom is still hard to obtain, that country is trying to exercise control over everything, including crypto for its citizens.

But what is feared is the control of a country like China and several countries that have full control of their citizens, isn't it said that China's central bank is one of them that will soon adopt it.

It's inevitable, but I don't think that they will adopt a structure that is even remotely similar to decentralised cryptocurrencies.

Ultimately the government and the central bank's aim is to retain a greater degree of control over money supply, and to potentially implement more creative ways of managing the cash market through principles of MMT.

Perhaps blockchain technology will be used, but there will likely be a much greater emphasis on the centralised power of government to alter/change transactions. So not necessarily immutable I'd say.

CBDCs are a really important issue, i see this issue requiring crypto approval from some of the world's leading economies such as the US and China. These countries will have a voice for this market, i think if big countries accept this market, CBDCs will really be a new trend in the industry.

Central Bank Digital Currencies are other shady and trash centralized currencies from governments. If you want to discover facts about Central Bank Digital Currencies, the topic of Ratimov can help you to start. [GUIDE] All About Central Bank Digital Currency (CBDC) (https://bitcointalk.org/index.php?topic=5288713.msg55575529#msg55575529).

wow! that is really in-depth survey! I think it is important to stay up to date with the details of how this is progressing!

CBDCs of western world will have opaque ledger like Monero. CBDCs in China or Japan or Korea could have transparent edger like in Bitcoin. It will take years to develop and implement them.  By that time they might realize that no one will want centralised coins.

The digitized stablecoins of the central banks of the states will be in demand and popularity among the population.  The population of any country will trust their government and the state.  These will be the same state currencies, only in digital form.  Therefore, they cannot be compared to cryptocurrency.  Digitized currencies should have better functional characteristics than non-cash forms of payment, since they will combine both the advantages of conventional currencies and cryptocurrencies.  However, when they appear, then we will discuss them in more detail.

If they actually make cryptocurrency, it will still be on blockchain kinds of platform, the difference is that it won't be decentralized. It will be very centralized where Central Banks control most (or even all) of the nodes, and most of the coin. Take Ripple for example before their separation with XRP, and even now they own approximately 90% of the total supply of XRP. I think more or less, that's how CB works when or if they actually issue a crypto.

It seems to me that the whole game theoretic concept underlying blockchains is completely not applicable to permissioned and centralized concepts,
and I think that this will expose a lot of attack surfaces.

Consequently, we can expect some spectaclular failures if CBDCs are not well constructed.


Maybe that is why there is a lot of discrete research activity, but not much detail being published.

The other thread someone linked above has a good list, but they all seem very inconclusive...

Hyperledger and R3 Corda seem to be popular in CB research deps by the way, so looking at these could be interesting.

Well, I believe one of the best way to manage public funds/assets is by managing them on system that is transparent, decentralized, immutable, safe, etc. Centralization only encourages lack of true transparency, lawlessness, secrecy, unauthorized changing/deletion/modification of public data, censorship, etc 
Most of us can't even see what is going on in our Central Banks which are supposed to be public (like Bitcoin network), nor do we have any say/power to affect them yet we are not that bothered?  I choose decentralization, transparency, immutablity and other good principles of Bitcoin over the closed/private Central Banks.

The point of state central bank stablecoins is not to create a stablecoin that looks like a cryptocurrency.  The government wants to replace non-cash payments with its national currency with the same ones, but using blockchain technology.  Therefore, their stablecoin will definitely be tightly centralized with unlimited stablecoin issuance.  Due to the coronavirus pandemic, some of the cash will be replaced by the national stablecoin.  The Chinese digitalized yuan will be launching soon, and we will take a closer look at such stablecoins in practice.