CBDC and Zero-Knowledge Proof — Is your privacy at risk? — Principled Discord Pt.4
With the ever-increasing popularity of digital currencies, it’s important to look towards centralized systems already in place and their unique perspective. The BIS has shown that Central Bank Digital Currencies (CBDC) have not only skyrocketed in popularity but been in circulation for twice as long as Bitcoin. These digital assets at their core clash with traditional cryptocurrencies while still being heavily reliant on the same blockchain technologies.
These two ideas come to blows in this week’s episode of Principled Discord hosted by Thierry Arys Ruiz, CEO/founder of TARCO NGO, and AgAu AG, joined by Matthieu Saint Olive, Sales Strategist, CBDC & Stablecoin Expert at ConsenSys.
Think about the Central Banks. Now, think about blockchain or distributed ledger technology. What if the Central Banks start using blockchain technology? Then you might have the same thought as Mr. Arys Ruiz: “Central Banks by definition are centralized. Blockchain technology is more fit to a decentralized system. Aren’t they an antithesis?”. However, Mr. Saint Olive does not think that way. He is assured that “blockchain is the best technology available today to build CBDC”.
Mr. Saint Olive believes that both, in wholesale and/or retail, CBDC can use this two-tier distribution model where Central Banks issue, and regulate CBDCs without necessarily distributing them to end users. This gives an opportunity to Central Banks to have a freedom to switch services from one industry to another through intermediaries without losing its power over transactions.
Countries like China have heavily invested in CBDCs leveraging blockchain for its safety, decentralization operation method, and ease in controlling the transactions. According to Mr. Saint Olive, the features of this technology is so advantageous, that “a lot of Central Banks wouldn’t create cash today if they had the choice”. However, Mr. Arys Ruiz says that it is not in the interest of the legacy financial system to disintermediate banks completely because that would basically cannibalize itself. If given the choice everyone would choose to have an account with central banks rather than retail banks.
Thierry claims that increased competition in the space will lead to a better quality of money and of the services that come with it although his main concern remains privacy. In terms of money, the Central Banks are probably more secure. On the topic of privacy, Mr. Saint Olive shares innovative protocols such as Zero-Knowledge Proof (ZKP) technology. ZKP allows private transfers, whilst still making sure that the transactions are validated. A combination of ZKP and Blockchain could be used for CBDCs.
Follow the link to watch the full podcast and learn from two industry leaders about your privacy implications when using CBDC and/or other digital currencies and don’t forget to subscribe to Principled Discord’s YouTube channel to watch more episodes.