A proposal for a layer-2 CBDC on a rollup

Remo Nyffenegger ()
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Remo Nyffenegger: University of Basel

Digital Finance, 2024, vol. 6, issue 3, No 7, 543-571

Abstract: Abstract This paper presents a proposal for introducing a central bank digital currency (CBDC) within a permissionless blockchain environment, specifically utilizing a layer 2 rollup. Several factors make exploring a CBDC on a blockchain worthwhile, including the potential demand for public money on blockchains and leveraging blockchain fundamentals for programmable payments. While the issuance of CBDC on a layer 1 blockchain may be a straightforward approach, it comes with drawbacks such as dependencies on network rules and limited privacy. Instead, I propose a design where an intermediated CBDC is issued on layer 2 through a zk-rollup architecture by licensed financial intermediaries who also provide tokenized deposits on layer 1. This paper delves into the technical specifications, economic considerations, as well as the advantages and limitations of this proposed design.

Keywords: Central bank digital currency; Tokenized deposits; CBDC design; Blockchain; Rollup; Layer 2 (search for similar items in EconPapers)
JEL-codes: E02 E42 E50 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s42521-024-00115-2

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