Digital cash should be better than physical cash. Better trust, better privacy and accountability, and better performance.


Advances in cryptography and decentralized trust are disrupting the world’s financial systems. Financial institutions and central banks are actively exploring Central Bank Digital Currencies (CBDC) and new forms of digital cash. The transformation from physical money to digital cash raises several challenges. One has to balance the needs of privacy with the needs of trust, security, accountability, and auditability. These solutions need to provide a scalable, interoperable, and inclusive infrastructure that can support the demanding requirements of 21st century democratic economies.

Digital cash should be better than physical cash. It should provide better trust, better trade-off between privacy and accountability, and better performance. Our VMware research technology preview is by no means a complete solution for digital cash. Our goal is to expose partners, technologists, policymakers, and the public to core ideas that we believe will be essential to future digital currency solutions. We hope this will help contribute to a global dialogue towards the future of digital cash and central bank digital currencies. Our system for Digital Cash is designed to highlight three properties: trust, accountable privacy, and performance.
  1. Trust: Physical cash often contains physical protections that make it hard to double spend and counterfeit. We envision systems that are operated by licensed, supervised, established, and highly regulated parties. For digital cash, we use threshold cryptography and Byzantine Fault Tolerance to provide the highest possible guarantees for safety and liveness. Safety is the resilience against double spending and malicious use. Liveness is the availability and resilience of the system against malicious actors that aim to delay or deny service.
  2. Accountable Privacy: For cash, small transactions are very much anonymous, but high-value payments typically go through more scrutiny and audit. Very high-value payments are often highly regulated, time delayed, and meticulously audited. We envision a digital cash solution that provides a similar experience: entities have a digital anonymity budget that can be replenished at a regular time interval (say monthly). All transactions that stay within this budget remain completely anonymous. Digital payments beyond the anonymity budget and any other high-value transactions retain a high degree of privacy but do require real-time auditor approval. Very-high value transactions require more meticulous audits that may incur a time delay.
  3. Performance: Using highly efficient zero-knowledge proofs, commutativity, and modern multi-core servers (vertical scaling, parallelism) we aim for thousands of transactions (payments with accountable anonymity) per second. With multiple systems working in parallel (horizontal scaling, sharding) performance can be increased to tens of thousands of transactions per second. Adding privacy-preserving payment channels (hierarchical scaling, channels) we can scale to much higher loads. Better performance is also about enabling programmability, which we will support.
One of the most distinctive aspects of VMware’s digital cash is accountable privacy. Anonymity budgets are an example of what accountable privacy technology enables. We are exploring many other uses like guaranteeing tax compliance while maintaining privacy, integrating privacy preserving transactions with Automated Market Makers, and enabling exceptional access to deanonymize high-value transactions based on Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) controls. Different jurisdictions and different institutions may require different privacy vs. auditability trade-offs. Accountable privacy technology provides considerable flexibility and future tuning. Our goal is to highlight the power of accountable privacy technology and the flexibility of its design.

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