Secure and Efficient Implementation of Electronic Money

Abstract

During the last years, central banks have discussed possible use of central bank digital currencies (CBDC) – electronic cash. Besides the financial and economic factors also the security and scalability of technical implementation of CBDC have been studied. Blockchain technology provides high level of security independent of the technical infrastructure and enables central banks to outsource most of the CBDC operations to the private sector while still having full control over the total amount of CBDC in circulation. Scalability of blockchain solutions depends on the possibility of decomposing (sharding) the blockchain. Electronic money and payments can be represented and organized in several ways, including accounts, bills/coins, and also unspent transaction outputs (UTXOs). We show how the representation of money and payments influences the existence of secure and decomposable blockchain implementations of electronic money. We show that the bill money scheme can be securely and efficiently implemented as sharded blockchains.