Data-at-Rest refers to all data in computer storage. It excludes data while it is moving across or within a network, and it excludes data that is temporarily residing in computer memory.

Data-in-Motion , also referred to as Data in Transit or Data in Flight, is a Digital Asset transmitted between locations (i.e., between computers or computer components). Data-In-Motion also describes data within Random Access Memory (RAM).

Data-in-Use covers data being processed (i.e., updated, processed, erased, accessed or read) by a system. Data-In-Use is not passively stored, but is actively moving through parts of a Computing Platform (i.e., Central Processing Unit (CPU), Dynamic Random Access Memory (DRAM),, Data Bus, etc.). Data-In-Use is one of three states of digital data – the other states are Data-at-Rest and Data-in-Motion.

This is highly dependent on the Currency Model used for the CBDC. If it is Digital Cash Model then the need for deposit money is nil, since there are no deposits (i.s., just like there is no insurance on U.S. Dollars).

However, if it is based on a Digital Account Model, then by definition there are accounts, and by experience, deposit insurance is required to stabilize (See: R0012) the assets stored in those accounts. Deposit insurance provides three important benefits to the economy:²⁾

1. It assures small depositors that their deposits are safe and will be immediately available to them if their bank fails.(See: B0007, B0019, B0027, B0050)

2. It maintains public confidence in the banking system, thus fostering economic stability. Without the confidence of the public, banks could not lend money but would have to keep depositors' money on hand in cash at all times. (See: R0009, R0012)

3. It supports the banking structure. Deposit insurance makes it possible for the United States to have a system of both large and small banks. If there were no deposit insurance, the banking industry would probably be concentrated in the hands of a very few enormous banks. (See: R0001, R0003, R0018)

Safety and trust are both about perceived risk.

1. Safety is defined as freedom from risk and risk is the possibility of suffering harm or loss. Both controllable and uncontrollable factors affect risk³⁾.

2. Risk and trust are inextricably intertwined and loss of trust is possibly the biggest risk an endeavor can encounter since trust is the basis of all interactions.

Therefore, the key is to manage risk, which is the probability or threat of damage, injury, liability, loss, or any other negative occurrence caused by external or internal vulnerabilities, and that may be avoided through preemptive action.

The goal of Systems Engineering is to manage the risk, including the risk of not delivering what the customer wants and needs, the risk of late delivery, the risk of excess cost, and the risk of negative unintended consequences. One measure of the utility of Systems Engineering activities is the degree to which such risk is reduced. Conversely, a measure of acceptability of the absence of a System Engineering activity is the level of excess risk incurred as a result.

In the U.S., savings accounts are a safe place since deposits (with limits) are guaranteed by Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

Additionally, Certificates of Deposit (CDs) and U.S. government securities are also considered safe savings places. Both of these options offer some return on money. However, money safety is often associated with a high degree of liquidity, and relatively low fees.

1. The Federal Reserve Act does not authorize direct Federal Reserve accounts for individuals See: P0018

2. Federal Reserve accounts for individuals represent a significant expansion of the Federal Reserve’s role in the financial system and the economy. See: P0019

See the Overview of "What operational or cyber risks might be unavoidable?"

The term Risk-Averse describes the investor who chooses the preservation of capital over the potential for a higher-than-average return. In investing, risk equals price volatility. A volatile investment can make you rich or devour your savings. A conservative investment will grow slowly and steadily over time. https://www.investopedia.com/terms/r/riskaverse.asp

See the detailed discussion in section 4.5 National Security Considerations.

See:

1. 4.1 Stakeholders

2. 4.4 National Privacy Considerations

3. 4.5 National Security Considerations

Although the private sector is more than willing to take on this role, without some assurance that the wallets cannot be hacked and any losses will be covered by insurance, achievement of this desirement will probably have limited success.

Hacks and data breaches happen almost daily. Cryptocurrency exchange hacks are particularly damaging because it affects thousands of users and involves the loss of funds. ⁴⁾.

Cryptocurrency exchanges come and go, and it’s almost inevitable that an exchange will get hacked at one point or another. While cryptocurrencies themselves are very secure, exchanges can be affected by a variety of vulnerabilities, making them a prime target for malicious actors.

State of the industry – February 2020: As it stands, 2019 saw a record number of twelve crypto exchanges being hacked. That being said, across the board the amounts of crypto stolen were worthless. In total, \$292,665,886 worth of cryptocurrency and 510,000 user logins were stolen from crypto exchanges in 2019.

One would hope that as time goes on cryptocurrency exchanges would become more secure. The unfortunate reality is that more exchanges are hacked every year. As cryptocurrency and exchanges remain largely unregulated, it is unclear who has jurisdiction over cryptocurrency markets.

in 2019, there was a hack of a South Korean exchange that suffered a \$51 million dollar breach. The stolen crypto has been on the move. It is moving between wallets, although it is unclear what purpose this will serve.

At the current time, it is easy for exchanges or wallets to make lots of claims about security, but until there is a detailed assurance claim model to substantiate the claims, the promises are hollow.

See:

1. OMG: Structured Assurance Case Metamodel (SACM)

2. OMG: Test Information Interchange Format (TestIF)

3. OMG: Case Management Model and Notation (CMMN)

The lion's share of U.S. CBDC intermediaries will be building, delivering, and offering the services of software applications. This is not unlike the current situation in the smartphone world. However, the intermediary's applications will have to run not just on smartphones, but also on personal computers, servers, and mainframes. The Federal Reserve and a U.S. CBDC must be able to achieve and retain the confidence of consumers that these applications are sufficiently robust and provide reliable security to hold their vital assets.

Therefore, there is a need for a U.S. CBDC “application store” to act as a web portal through which end users can access, download and install U.S. CBDC-approved software applications that rigorous Assurance Case Models with which the quality and security of these applications are validated.

See:

1. OMG: Structured Assurance Case Metamodel (SACM)

2. OMG: Test Information Interchange Format (TestIF)

3. OMG: Case Management Model and Notation (CMMN)

1. If the Digital Cash Model is used, then just like physical cash, there should be no IDs required.

2. If the Digital Account Model is used, it might depend on the rules placed on the intermediaries, Here are the rules for cashing checks in the U.S.:

a. When cashing a check, people use an ID to complete the transaction. Banks are required to have an identity verification policy by the Federal Deposit Insurance Corporation, which is why an ID is necessary⁵⁾

i. Ways of not showing an ID for cashing checks are:

1. Signing it over to another individual

2. Using ATM check to cash if it’s offered by your bank

3. Depositing it into your own account using a bank ATM

b. When using Credit Cards, the major Credit Cards (i.e., Visa and Mastercard) do not require an ID to complete a transaction.

They both have rules that limit stores from requiring you to show your ID as a condition of purpose. These rules also make them accept your card even if you refuse to show your ID.⁶⁾

The risk-free rate of return is the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.

The so-called “real” risk-free rate can be calculated by subtracting the current inflation rate from the yield of the Treasury bond matching your investment duration. https://www.investopedia.com/terms/r/risk-freerate.asp

See: 4.6 International Considerations

If the U.S. CBDC avoids most of the safeguards built into the current U.S. financial system, then there is an increased risk of loss, theft, and fraud. Most of the laws and regulations outlined in section 4.5 National Security Considerations have evolved over time in response to consumer demand for protection. Although it seems appealing, more efficient, and even “modern”, consumers should demand the same level of protection from a U.S.-based CBDC.

According to Ryan Browne of CNBC⁷⁾

• Overall losses caused by Decentralized Finance (DeFi) exploits have totaled \$12 billion so far in 2021, according to a report from Elliptic.
• Fraud and theft accounted for \$10.5 billion of that sum — a sevenfold increase from last year.

In order to protect data during all aspects of data handling and processing, there will most likely need to be new network hardware, computer processors, and even new encryption algorithms based on Quantum Computing's ability to crack encryption.

See:

1. State of Data

2. OMG DIDO-RA Netword Devices

3. Data in Use

4. Access Control List (ACL)

5. Zero Trust Security Model

6. Zero Trust Architecture (ZTA)

7. The Onion Router (Tor)

8. Secure Memory Encryption (SME)

9. Full Memory Encryption (FME)

10. Total Memory Encryption (TME)

11. Software Guard Extensions (SGX)

12. Multi-Party Computation (MPC)

13. TRESOR

14. Homomorphic Encryption (HE)

See: Question: 18. Should a CBDC have “offline” capabilities? If so, how might that be achieved?

See: Question: 18. Should a CBDC have “offline” capabilities? If so, how might that be achieved?