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I could see CBDCs using blockchain solely because someone utterly non-technical, at some higher level in the bureaucracy, insisted that they make a blockchain-b

I could see CBDCs using blockchain solely because someone utterly non-technical, at some higher level in the bureaucracy, insisted that they make a blockchain-based cryptocurrency “so as to not get left behind” or “because we need to compete with Bitcoin”. Clearly neither of those two rationales make any sense whatsoever - and they might even seem like a downright ridiculous suggestion to some readers of this response. If that’s you, then welcome to wild and whacky world of public spending.

surfsvammel 6y ago
That’s not me. I but can see how a DLT could work very well as means of a currency. We could have the commercial banks, and others if necessary, run nodes. They could verify payments on “accounts”, or addresses, (if we want to keep the old meaning of bank account, that’s fine, then we could instead call these addresses) which are held by the commercial banks. These addresses could be non-anonymous such that requirement for know-your-customer still reside with the commercial banks (the central banks really don’t want to have to get anyway near KYC requirements). Each such “account”/address could be linked to addresses of currency at the CB, which at that point was anonymous. The CB could then have full control of the issuance of currency, control interest directly on the currency itself, everything being anonymous to the CB.
- imtringued 6y ago
  The question is, why would banks run nodes? How do they get money to pay for the datacenters?
  - surfsvammel 6y ago
    Well. Same as they do today. Lend money, borrow money (savings), finance ventures and mortgages, services.
- headmelted 6y ago
  But why do that though? If the currency is going to be centrally issued then what reason is there to use a DLT given all of the drawbacks it would introduce? DLTs aren’t a solution to a technical problem, they’re a technical solution to a trust problem that comes with some pretty hefty implementation baggage and performance constraints. If you have to trust a single issuer anyway (as would be the case with a CBDC) then the core reason for using a DLT doesn’t exist.
imtringued 6y ago
A private blockchain is just a blockchain where miners have to be authorized by a central authority i.e. the central bank. Since each miner is linked to a publicly known institution, attacks on the blockchain could be punished with jail time and revocation of the authorization. Proof of work is just a very advanced anti spam protection system. In decentralized systems people can create as many accounts as they want. You need to make sure that they can't. I'm just saying this is how it could work. It's not obvious whether its a good or bad idea.

surfsvammel 6y ago

That’s not me. I but can see how a DLT could work very well as means of a currency. We could have the commercial banks, and others if necessary, run nodes. They could verify payments on “accounts”, or addresses, (if we want to keep the old meaning of bank account, that’s fine, then we could instead call these addresses) which are held by the commercial banks. These addresses could be non-anonymous such that requirement for know-your-customer still reside with the commercial banks (the central banks really don’t want to have to get anyway near KYC requirements). Each such “account”/address could be linked to addresses of currency at the CB, which at that point was anonymous. The CB could then have full control of the issuance of currency, control interest directly on the currency itself, everything being anonymous to the CB.

imtringued 6y ago
The question is, why would banks run nodes? How do they get money to pay for the datacenters?
- surfsvammel 6y ago
  Well. Same as they do today. Lend money, borrow money (savings), finance ventures and mortgages, services.
headmelted 6y ago
But why do that though? If the currency is going to be centrally issued then what reason is there to use a DLT given all of the drawbacks it would introduce? DLTs aren’t a solution to a technical problem, they’re a technical solution to a trust problem that comes with some pretty hefty implementation baggage and performance constraints. If you have to trust a single issuer anyway (as would be the case with a CBDC) then the core reason for using a DLT doesn’t exist.

imtringued 6y ago

A private blockchain is just a blockchain where miners have to be authorized by a central authority i.e. the central bank. Since each miner is linked to a publicly known institution, attacks on the blockchain could be punished with jail time and revocation of the authorization. Proof of work is just a very advanced anti spam protection system. In decentralized systems people can create as many accounts as they want. You need to make sure that they can't. I'm just saying this is how it could work. It's not obvious whether its a good or bad idea.