NSF Award
2325477
Today, several central banks worldwide are actively exploring the deployment of a centrally-banked digital currency (CBDC). A (retail) CBDC is central bank money that is (a) digital in nature, and (b) widely accessible to the public. Some of the proposed benefits of CBDCs include greater flexibility in implementing monetary policy, improved financial inclusion, and more efficient money transfers at lower fees. However, many fear that CBDCs will make it easier for cybercriminals to attack the financial system. For example, a CBDC might make it easier for malicious users to steal central bank money by spending the same digital token in two places. These security concerns are commonly addressed with algorithmic and cryptographic advances, often at the cost of serious performance degradations. The project’s novelty lies in exploring an alternate approach to CBDC security: accountability. That is, if a cybercriminal misbehaves in a CBDC, the underlying protocol should be rich enough to prove, cryptographically, who was the culprit. The project’s broader significance and importance is that it can impact the design and development of secure-by-design CBDCs. <br/><br/>The project studies accountability at the consensus and application layers of a canonical CBDC. At each layer, the project first modifies existing algorithms (e.g., consensus, anti money laundering restrictions) to provide provable accountability. These modifications require innovations in distributed systems and/or cryptography. The project also studies the fundamental performance costs of accountability, both theoretically and in practice. The performance cost of these algorithms is evaluated empirically in implementations, which are integrated with OpenCBDC, an open-source CBDC implementation that was developed and maintained by the MIT Digital Currency Initiative in collaboration with the Federal Reserve Bank of Boston.<br/><br/>This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.
