Proposal for Offline Payment Solution — CBDC in Focus
Detailing a possible solution for CBDC implementation — one that checks near-all requirements to beneficially and profitably launch the CBDC. Here’s more. In this particular design, the offline mechanism apparently is the only way to enforce uninvaded, private transactions without the involvement of an intermediary having access to all the user’s payment information.
The challenges en route to the CBDC launch are numerous. They need to be met by the points in the progression of the launch. It is now common knowledge that the leading economies are immersed in the research that CBDC necessitates. Among the sheer number of aspects that need to be tackled in order to successfully and profitable implement the CBDC, the one that exposes the height of challenge is the offline availability and transaction of the currency.
Why Offline?
CBDC aims at an alternative digital currency that should partially replace the sovereign currency. Simply put an individual need not carry his physical wallet everywhere, his phone should suffice. Now, this is pretty much attainable as many payment processor apps provide this service. The glitch comes in places where the network connection fails. The absence of an offline provision for payment defeats the whole labor going into the development of CBDC.
Nations and payment processing service providers are now collaborating to overcome this obstacle to empowering an entire nation with the convenience of a digital currency.
Meanwhile, the digital Yuan, as it turns out, does not qualify as CBDC. The Central Bank of Japan had a head start with offline working, owing to their experience in operating during the Tsunami-times.
It is also to be noted that the two leading and rival payment processing service providers, now provide a platform for central banks to test CBDC. Apparently, CBDCs are now a foregone conclusion, so payments networks and technology companies are currently positioning themselves to land central banks as clients.
The Offline Solution
One of the proposed solutions uses trusted execution environments (TEE). These appear as partitioned areas in phones and computers where other applications shouldn’t be able to invade and are generally used by wallet applications.
The structure necessitates a payment network to use typical public key infrastructures (PKI), akin to SSL certificates used by websites to encrypt communications with web browsers.
To communicate, via phones they would harness technologies similar to Bluetooth or Near Field Communication (NFC).
A combination of TEE and encryption keys is targeted to ensure that the individual paying an amount of money does so, accurately when their phone is offline and can’t double or triple spend the money.
This solution mandates that although the recipient doesn’t need to have a TEE, so potentially wouldn’t need a phone. However, it necessitates the sender to have a more sophisticated device.
This solution plays about tokenized CBDC. Again at the same time, it assumes that the digital money is held in an account at a wallet provider. Also, to execute these offline payments, the user has to deposit money from the wallet provider ‘account’ into the secure device.
Finally
In this particular design, the offline mechanism apparently is the only way to enforce uninvaded, private transactions without the involvement of an intermediary having access to all the user’s payment information. Plausibly, the need to have an intermediary also removes one of the benefits of a tokenized payment.
The proposed solution acceptably addresses the major pain points on the road to establishing the CBDC. In time the actual solution shall be revealed which may or may not use this model as a base to function. There obviously remains room for innovation and the wait should be worthwhile.
