For a couple of years now we have been talking with increasing insistence of CBDC, i.e. Central Bank Digital Currency, digital coins issued by central banks, which therefore retain their centralized mining (i.e. control their issue), but which, for many other aspects, are comparable to various cryptocurrencies such as Bitcoin, Ethereum etc. The Japanese Central Bank (BoJ) has recently published an interesting paper in which it analyzes in depth the pros and cons of this solution also because it carefully considers a problem that has so far blocked their introduction: offline transactions.
If a well-designed virtual currency is resilient to external attacks and intrinsically safe, and even privacy problems can be limited through a free and unidentified management of portfolios up to a certain value, an essential problem remains: how to operate in the case of collapse of the technological infrastructure of the web? Verification of transactions must take place via internet connection, if this step is missing it becomes impossible to carry out transactions. This factor is particularly critical in a country where natural cataclysms are frequent and often remarkably devastating, such as the 2011 Tsunami.
The analyzed solution is interesting and we could define it as "Media Technology". Instead of relying on paper wallets, paper wallets, which are difficult to verify, he prefers to rely on the use of smartphones to encode direct transactions between people (peer to peer) called DigiTally, in which the technological tool is used to create a code that, communicated to the counterpart also orally, allows it to record the transaction and store it internally. In this way, transactions between individual users become possible even in the event of interruption of the internet service, but sooner or later it will be necessary to access a connection to "Download" if individual transactions and have them certified by the overall network. Because, however, the tool analyzed by the BoJ as a whole is a tool based on the public / private key system common to blockchain currencies.
What is important, even if little analyzed, of any CBDC is the possibility of carrying out monetary or fiscal policy operations immediately. Considering the current COVID-19 crisis, if the Bank of Italy had had a CBDC available, at the request of the Government, it could have instantly sent the population the economic contributions necessary to overcome the lockdown. In addition, credit and money would be instantly controllable by the central bank. It remains clear that the BoJ's study, which is deepened on very practical aspects, seems to really open the doors to a solution of this kind.
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cripto-la-boj-esplora-la-criptovaluta-di-stato-un-interessante-paper-sui-pro-e-contro-della-cbdc/ on Sun, 05 Jul 2020 08:10:44 +0000.