Central Bank Digital Currencies - how will they be constructed?

[l8orre]

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 

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

[DoubleAweSeven]

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.

[Ucy]

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...

[l8orre]

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,

[l8orre]

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

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

[Wenbing]

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.

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.

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 

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

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]

[enhu]

They certainly will not want to just let go without their control, that control must exist because they also definitely avoid the inflation that can occur without full control. Since their function as central bank they will definitely have it in their hands

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.

[Hallmader]

snip

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?

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.

[jrrsparkles]

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.

[livingfree]

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/

[l8orre]

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...   - 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 ...

[TyfrTR]

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.

[jessyj48]

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

[cryptomaniac_xxx]

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.

[manfredmann]

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.

[Psynthax]

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.

[xZork]

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.

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.

[Ucy]

They certainly will not want to just let go without their control, that control must exist because they also definitely avoid the inflation that can occur without full control. Since their function as central bank they will definitely have it in their hands

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

[tvplus006]

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 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.

[MCDev]

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.

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.