Towards a Two-Tier Hierarchical Infrastructure: An Offline Payment System for Central Bank Digital Currencies

Abstract

Digital payments traditionally rely on online communications with several intermediaries such as banks, payment networks, and payment processors in order to authorize and process payment transactions. While these communication networks are designed to be highly available with continuous uptime, there may be times when an end-user experiences little or no access to network connectivity.The growing interest in digital forms of payments has led central banks around the world to explore the possibility of issuing a new type of central-bank money, known as central bank digital currency (CBDC). To facilitate the secure issuance and transfer of CBDC, we envision a CBDC design under a two-tier hierarchical trust infrastructure, which is implemented using public-key cryptography with the central bank as the root certi cate authority for generating digital signatures, and other nancial institutions as intermediate certi cate authorities. One important design feature for CBDC that can be developed under this hierarchical trust infrastructure is an "o ine" capability to create secure pointto-point o ine payments through the use of authorized hardware. An o ine capability for CBDC as digital cash can create a resilient payment system for consumers and businesses to transact in any situation.In this paper, we propose an o ine payment system (OPS) protocol for CBDC that allows a user to make digital payments to another user while both users are temporarily o ine and unable to connect to payment intermediaries (or even the Internet). OPS can be used to instantly complete a transaction involving any form of digital currency over a point-to-point channel without communicating with any payment intermediary, achieving virtually unbounded throughput and real-time transaction latency. One needs to ensure funds cannot be double-spent during o ine payments as no trusted intermediary is present in the payment loop to protect against replay of payment transactions. Our OPS protocol prevents double-spending by relying on digital signatures generated by trusted execution environments (TEEs) which are already available on most computer devices, including smartphones and tablets. While a TEE brings the primary point of trust to an o ine device, an OPS system requires several cryptographic protocols to enable the secure exchange of funds between multiple TEE-enabled devices, and hence a reliable nancial ecosystem that can securely support CBDC at scale.

The offline cash puzzle solved by a local blockchain

“…This mechanism can be replayed several times, leading to several clones of the same coin in different wallets. The solution given by Christodorescu et al [12], which is also employed in this article, mitigates this issue by using counters that are automatically incremented in each transfer. In addition to the counters, the current design is comprised of a two-stage approval architecture that strengthens security.…”

TinyMLOps: Operational Challenges for Widespread Edge AI Adoption

“…The application then needs to keep track of how many requests the user has executed and will deny access if this exceeds the number of requests the user has paid for. Doing this in a secure offline way on untrusted hardware is however not trivial [30] and would be a very useful feature for a TinyMLOps solution.…”

Digital Divide: Empirical Study of CIUS 2020

“…to assess the digital divide in Canada and what effects this divide could have on the use of financial services, digital currencies, and digital payments. Moreover, this paper contributes to the debate on the future digitalization of money in Canada by providing data-based arguments for (or against) policy options such as introducing the CBDC (Christodorescu et al, 2020;Maniff, 2020).…”

“…Despite the slower than expected uptake of cryptocurrencies, countries worldwide have noticed increasing interest in these currencies and decreasing use of physical cash. These events have led many countries to start researching and, in some cases, implementing CBDC systems (Christodorescu et al, 2020). A CBDC system can be implemented in several ways.…”

“…This is one of the reasons why research in Canada on internet access and usage is essential. Christodorescu et al (2020) suggest that a "two-tier hierarchical trust infrastructure" with the country's central bank being the main authority and other financial institutions being the intermediary certificate authority would potentially allow for an offline capability of a CBDC, thereby making offline payments possible. However, this would still require the individual to have access to the internet at some point.…”