Implement CBDC with Bitcoin smart contracts? | Hacker News Reader

Implement CBDC with Bitcoin smart contracts?

6 pointsrussnes9 comments

Would it be feasible to implement central bank digital currencies using one of the smart contract layers being built on Bitcoin?

I just read about Joe Biden's executive order (which may be a statement somewhat exaggerated) on Bitcoin[1] which mentions USA CBDC, and I've seen talks about CBDC from other nations, but I'm not sure if they realize how difficult it would be to get this production ready.

I'm wondering if the most realistic solution would end up being implementing it using Bitcoin smart contracts, which most prominent platforms at this point is to my knowledge RGB and then Taro*. Any thoughts on this?

* Taro might catch up fast since it is backed by Lightning Labs

[1] https://bitcoinmagazine.com/culture/president-bidens-executive-order-on-bitcoin

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A CBDC does not need decentralization, and can be implemented using a side-chain similar to Liquid (without the federation). Of course, you probably don't want to leave control of the sidechain in the hands of one person or party, else they could rob an entire nation and disappear, so a multi-sig like Liquid should be used, with each elected official having a key to sign.

The CBDC idea is terrible anyway. The only people who want this are authoritarians who want to control how people spend, control the money supply and enrich themselves. There is no benefit to regular citizens in having a CBDC over what they can do with either bitcoin already, or can do with cash.

A nation should just stick with part cash, part electronic money, but should back its currency with bitcoin and gold, and stop pissing away its value with constant credit expansion. If there's any purpose in a CBDC, it should be that the citizens of a nation can audit the central bank. I can guarantee this is not what politicians have in mind when they talk about CBDCs.

> A CBDC does not need decentralization, and can be implemented using a side-chain similar to Liquid (without the federation). Of course, you probably don't want to leave control of the sidechain in the hands of one person or party, else they could rob an entire nation and disappear, so a multi-sig like Liquid should be used, with each elected official having a key to sign.

I agree that they don't need decentralization, but I'm wondering if the proposed protocols are the superior choice regardless, because of their effectiveness and ready for production-ness. The control over the smart contracts themselves may still be centralized while the platform they operate on are not.

> The CBDC idea is terrible anyway. The only people who want this are authoritarians who want to control how people spend, control the money supply and enrich themselves. There is no benefit to regular citizens in having a CBDC over what they can do with either bitcoin already, or can do with cash.

In my experience many citizens like using their nation's currency, and don't mind that the government has some control.

> A nation should just stick with part cash, part electronic money, but should back its currency with bitcoin and gold, and stop pissing away its value with constant credit expansion. If there's any purpose in a CBDC, it should be that the citizens of a nation can audit the central bank. I can guarantee this is not what politicians have in mind when they talk about CBDCs.

Is there a reason why the electronic money in this case couldn't be CBDCs?

> I agree that they don't need decentralization, but I'm wondering if the proposed protocols are the superior choice regardless, because of their effectiveness and ready for production-ness. The control over the smart contracts themselves may still be centralized while the platform they operate on are not.

With a sidechain, it's possible to run LN directly on top of it. The BOLT specs are not tied to the bitcoin chain and you can run a multi-chain lightning implementation. It should also be possible to perform atomic swaps between a main-chain lightning and a side-chain lightning too, which would cut fees.

> Is there a reason why the electronic money in this case couldn't be CBDCs?

The CBDC gives the ruling party too much power over citizens. It could, for instance, cut off your ability to spend your money if you don't vote for them. Banana republics are not just things of old - they're becoming the norm again.

The ability of citizens to peacefully protest, potentially by withholding their money from government, is essential to the long-term viability of a democracy. A government which has full control over its citizens finances will not remain a democratic one for long.

Yes, but the current trend is to use stable coins instead, and there's a lot of competition in the space for the best transport layer.

It's expected to require stable coins to be minted by organizations with bank license only in the future to have a better oversight on the backing and higher control by the US government.

I believe that Taro has an edge over RGB because the developers from Lightning Labs are more trusted the understand the current implementation tradeoffs, and also Taro is a simpler protocol that plays great with Bitcoin, and I also believe that sending/storing USD over lightning network will be important in the near future.

One important thing that is missing is Pickhart payments that allow people to send $10000 over lightning channels, but it's coming this year.

The WEF, the Boston Federal Reserve Bank and MIT have been collaborating on this for sometime now. Expect the tech and policy to come from the globalist oriented think tanks and their affiliates.

https://www.bostonfed.org/news-and-events/press-releases/202...

https://news.mit.edu/2022/digital-currency-fed-boston-0203

https://dci.mit.edu/project-hamilton-building-a-hypothetical...

https://www.c-span.org/video/?514046-1/senate-hearing-digita...

Very interesting, thank you!

From your second link (digital currency fed boston):

The researchers also note that the faster system, the one processing 1.7 million transactions per second, the transaction quantity “appears to scale linearly with the addition of more servers,” which would sustain an even larger volume of activity.

To my understanding, the lightning network scales exponentially with the number of participants (servers) because of its edge-contracting capabilities, so I wonder if it is something they took into consideration. Granted, the lightning network transaction protocol is not the same as Taro/RGB, but I imagine it would scale similarly.

They will never do things openly, I think.

From their point of view (POW is bad, centralization is good) it's much more cost-efficient to simply give Ripple Labs INC a huge sum of money so that they make a copy of their xrp code and use that codebase as the ground base for their CBDC.

That would be the first time in history that any government does something cheaply and quickly when then have an option to let it be handled by "the market" for a huge sum (over-budget not even included) and years behind schedule...

That's patently not true, but even if it were, govt has an entirely different remit than private enterprise.

PE exists to make profit.

Govt. exists to serve the citizens. All of them, equally, fairly, and reliably, however unprofitable those conditions might make the endeavor.

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