The European Central Bank (ECB) has published a summary of the results of the Euro Central Bank Digital Currency (CBDC) prototype exercise. Exercises investigated offline use of a simulated digital euro and four other cases of interoperability with existing payment systems.
Project was part of the second phase of the Eurosystem’s preparations for the potential pilot launch of the digital euro in the autumn of this year. The exercise took place from July 2022 to February 2023.
The Eurosystem developed a centralized settlement system for the exercise called N€XT, which used the Unspent Transactions (UTXO) data model. Five customer interface prototypes representing different use cases were provided by private companies. The court also had wallets for safekeeping.
The UXTO model preserved customer privacy by using one-time UTXO addresses that did not reveal the wallets that hold them. The user experience was identical for wallets in custody and without a wallet.
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Offline Transactions Use Case was more problematic. Seeking to gain “a more detailed understanding of how a combination of hardware and software protocol could prevent double spending and ensure settlement finality and non-repudiation,” the report concluded:
“Questions remain as to whether existing technology is capable of providing a secure, production-ready offline solution in the short to medium term (five to seven years).
Nevertheless, the exercise showed that “online and offline digital prototypes of the euro can be interoperable, even if they are based on different data models and technical designs”.
Simultaneously with the summary of the ECB exercise published “Report on the results of market research” on the digital euro. It also found that an offline “solution meeting the Eurosystem’s requirements would be new and could create uncertainty as to when the offline solution might be ready”.
I am honored @EU Commission President Ursula @vonderleyen with us here in Frankfurt as we commemorate the ECB’s first quarter century.
Let’s continue working together for a united and peaceful Europe. pic.twitter.com/6smP7soWxX— Christine Lagarde (@Lagarde) May 24, 2023
Survey respondents preferred proximity communication, Bluetooth or quick response (QR) codes for offline transactions. The market research looked at highly 12 technical aspects of the potential introduction of the digital euro, such as proxy lookups and dedicated cash account management.
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