Monday, May 29, 2023

The ECB offers a glimpse into the prototyping of the digital Euro pilot as the launch approaches

The European Central Bank (ECB) has released the final results of its central bank’s digital currency prototyping exercise. The exercise explored the online use of a simulated digital euro and four other cases of interoperability with existing payment systems.

The proposal was the second part of the Eurosystem’s preparation for the pilot phase of the possible launch of the digital euro in the autumn of this year. The exercise runs from July 2022 to February 2023.

The Eurosystem has implemented a centralized settlement instrument called N€XT, which is used without a transaction model (UTXO). Private companies provided five prototype client interfaces representing different use cases. The bag was also tested for self-defense.

The UXTO model preserved customer privacy by using one-time UTXO addresses that did not reveal the networks they contained. User usage was the same in custodial and non-custodial networks.

The case of offline transactions proved more inconvenient. The report concluded that the goal was to “deeply understand how the combination of hardware and software protocols could prevent double spending and ensure robustness and non-repudiation of the firm combination”;

“Doubts remain as to whether existing technology can deliver, in the short to medium term (five to seven years), a secure, production-ready offline solution.”

However, the exercise shows that “online and offline digital euro prototypes can be interoperable even if they are based on different models and technical characteristics”.

Together with the summary of the financial year, the ECB published “Market Research” on digital currencies. It was also concluded that “the solutions to be met by the Eurosystem would be new and could cause uncertainty when the offline solution was ready”.

Honored to have President Ursula @vonderleyen join us in Frankfurt as we celebrate the ECB’s first quarter century.
We will continue to work together for a united and peaceful Europe.

Respondents favored communication around the field, Bluetooth interfaces, or QR code for offline transactions. In market research, 12 most technical aspects of the digital potential of the euro are introduced, such as a manager dedicated to hunting and cash management.

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