The Bank of Canada has prepared a report on the specifics of using the national bank’s digital currency (CBDC).
This report states that the introduction of a digital currency system that supports offline transactions on smartphones will provide users with a number of advantages, including increased stability, accessibility, inclusiveness, and privacy.
A periodically operating autonomous CBDC system will provide financial institution clients will provide an opportunity to transact for short periods of time. This system operates in conditions of unstable Internet access. The report says that in such cases, the actual transfer of funds occurs after the payer or recipient is disconnected from the Network.
An extended autonomous CBDC system could fix the situation with transactions in conditions of unstable Internet connection. This separate ecosystem, supported by dedicated devices with local storage of funds, can provide a longer period of financial operations. Devices with extended autonomous functionality make peer-to-peer payments without an Internet connection.
Settlements on funds are made at the end of the transaction. This algorithm guarantees that the payee is the sole owner of the funds at the end of the transaction. The participant of the process, who is the recipient of funds, can spend them in a subsequent operation without waiting for an update to be sent or received from a remote service.
The report also says that a system that supports autonomous financial transactions will require developers to solve security problems. In order to minimize the risks associated with the theft of money or its loss as a result of the complex specifics of the transfer process, special equipment with controls and an individual user identification number (PIN), password, or biometric authentication is required.
The authors of the report talk about the need for a balance between compliance with security requirements and user needs, which can be achieved by choosing the optimal limits on assets, transaction amounts, and battery life.
As we have reported earlier, Bank of Canada reveals three digital currency proposals.