An Auditable, Privacy-Preserving, Transparent Unspent Transaction Output Model for Blockchain-Based Central Bank Digital Currency

Abstract

Auditability, privacy, transparency, and resiliency are four essential properties of a central bank digital currency (CBDC) system. However, it is difficult to satisfy these properties at once. This issue has become a crucial challenge to ongoing CBDC projects worldwide. In this article, we propose a novel unspent transaction output (UTXO) model, which offers auditable, privacy-preserving, transparent CBDC payments in a consortium blockchain network. The proposed model adopts a high-speed, non-interactive zero-knowledge proof scheme named zero-knowledge Lightweight Transparent ARgument of Knowledge (zk-LTARK) scheme to verify the ownership of UTXOs. The scheme provides low-latency proof generation and verification while maintaining 128-bit security with a smaller proof size. It also provides memory-efficient, privacy-preserving multi-party computation and multi-signature protocols. By using zk-LTARKs, users do not require numerous private-public key pairs to preserve privacy, which reduces risks in key management. Decentralized identifiers are used to authenticate users without interacting with any centralized server and avoid a single point of failure. The model was implemented in a customized consortium blockchain network with the proof-of-authority consensus algorithm.