We present a scalable architecture for electronic retail payments via central bank digital currency and offer a solution to the perceived conflict between robust regulatory oversight and consumer affordances such as privacy and control. Our architecture combines existing work in payment systems and digital currency with a new approach to digital asset design for managing unforgeable, stateful, and oblivious assets without relying on either a central authority or a monolithic consensus system. Regulated financial institutions have a role in every transaction, and the consumer affordances are achieved through the use of non-custodial wallets that unlink the sender from the recipient in the transaction channel. This approach is fully compatible with the existing two-tiered banking system and can complement and extend the roles of existing money services businesses and asset custodians.
Citation
G Goodell, D Toliver, and H Nakib. "A Scalable Architecture for Electronic Payments." In: S Matsuo et al., Financial Cryptography and Data Security. FC 2022 International Workshops. FC 2022. Lecture Notes in Computer Science, volume 13412, Springer, Cham, July 2023.
Nations around the world are conducting research into the design of central bank digital currency (CBDC), a new, digital form of money that would be issued by central banks alongside cash and central bank reserves. Retail CBDC would be used by individuals and businesses as form of money suitable for routine commerce. An important motivating factor in the development of retail CBDC is the decline of the popularity of central bank money for retail purchases and the increasing use of digital money created by the private sector for such purposes. The debate about how retail CBDC would be designed and implemented has led to many proposals, which have sparked considerable debate about business models, regulatory frameworks, and the socio-technical role of money in general. Here, we present a critical analysis of the existing proposals. We examine their motivations and themes, as well as their underlying assumptions. We also offer a reflection of the opportunity that retail CBDC represents and suggest a way forward in furtherance of the public interest.
Citation
G Goodell, H Nakib, and T Aste. "Retail Central Bank Digital Currency: Motivations, Opportunities, and Mistakes." Working paper, March 2021.
In recent years, electronic retail payment mechanisms, especially e-commerce and card payments at the point of sale, have increasingly replaced cash in many developed countries. As a result, societies are losing a critical public retail payment option, and retail consumers are losing important rights associated with using cash. To address this concern, we propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately, including both internet purchases and point-of-sale purchases that are required to be cashless. Our proposal introduces a government-backed, privately-operated digital currency infrastructure to ensure that every transaction is registered by a bank or money services business, and it relies upon non-custodial wallets backed by privacy-enhancing technology such as blind signatures or zero-knowledge proofs to ensure that transaction counterparties are not revealed. Our approach to digital currency can also facilitate more efficient and transparent clearing, settlement, and management of systemic risk. We argue that our system can restore and preserve the salient features of cash, including privacy, owner-custodianship, fungibility, and accessibility, while also preserving fractional reserve banking and the existing two-tiered banking system. We also show that it is possible to introduce regulation of digital currency transactions involving non-custodial wallets that unconditionally protect the privacy of end-users.
Citation
G Goodell, H Nakib, and P Tasca. "A Digital Currency Architecture for Privacy and Owner-Custodianship." Future Internet 2021, 13(5), May 2021.
Cryptocurrencies offer an alternative to traditional methods of electronic value exchange, promising anonymous, cash-like electronic transfers, but in practice they fall short for several key reasons. We consider the false choice between total surveillance, as represented by banking as currently implemented by institutions, and impenetrable lawlessness, as represented by privacy-enhancing cryptocurrencies as currently deployed. We identify a range of alternatives between those two extremes, and we consider two potential compromise approaches that offer both the auditability required for regulators and the anonymity required for users.
Citation
Goodell G and Aste T "Can Cryptocurrencies Preserve Privacy and Comply With Regulations?" Frontiers in Blockchain 2(4), May 2019.
Digital currency is a novel form of money that could be issued and regulated by central banks or other actors, offering benefits such as programmability, security, and privacy. However, the design of a digital currency system presents numerous technical and social challenges. This article presents the design and prototype of a non-custodial wallet, a device that enables users to store and spend digital currency in various contexts. To address the challenges of designing a digital currency system, we conducted a series of workshops with internal and external stakeholders, using methods such as storytelling, metaphors, and provotypes to communicate digital currency concepts, elicit user feedback and critique, and incorporate normative values into the technical design. We derived basic guidelines for designing digital currency systems that balance technical and social aspects, and reflect user needs and values. Our work contributes to the digital currency discourse by demonstrating a practical example of how digital currency could be used in everyday life and by highlighting the importance of a user-centred approach.
Citation
R Bowler, G Goodell, J Revans, G Bizama, and C Speed. "A non-custodial wallet for digital currency: design challenges and opportunities." Working paper, October 2023.
As global governments intensify efforts to operationalize retail central bank digital currencies (CBDCs), the imperative for architectures that preserve user privacy has never been more pronounced. This paper advances an existing retail CBDC framework developed at University College London. Utilizing the capabilities of the Comet research framework, our proposed design allows users to retain direct custody of their assets without the need for intermediary service providers, all while preserving transactional anonymity. The study unveils a novel technique to expedite the retrieval of Proof of Provenance, significantly accelerating the verification of transaction legitimacy through the refinement of Merkle Trie structures. In parallel, we introduce a streamlined Digital Ledger designed to offer fast, immutable, and decentralized transaction validation within a permissioned ecosystem. The ultimate objective of this research is to benchmark the performance of the legacy system formulated by the original Comet research team against the newly devised system elucidated in this paper. Our endeavour is to establish a foundational design for a scalable national infrastructure proficient in seamlessly processing thousands of transactions in real-time, without compromising consumer privacy or data integrity.
Citation
W Macpherson and G Goodell. "Benchmarking the performance of a self-custody, non-ledger-based, obliviously managed digital payment system." Working paper, April 2024.