How might future technological innovations affect design and policy choices related to CBDC?
One of the riskiest predictions for the U.S. CBDC is the advent of a real Quantum Computing. These machines are not mature at the present but will be able to “crack” most of the existing encrypted data when it happens. This kind of power will render most “private” as “clear text” and reveal all the secrets hidden within (i.e., private communications, company data, government data, and military classified data). In addition, most of the currently encrypted digital signatures are vulnerable to “craking”. Therefore, although most encrypted data currently stored in public datastores (i.e. blockchains, distributed ledgers, Directed Acyclical Graphs (DAGs) ) may become vulnerable in the future. That is why it is important for a U.S. CBDC only encrypt data in public ledgers that have a shelf life (i.e., it only needs to be kept private for a short period of time).
While quantum computers will have an impact on the current Advanced Encryption Standard (AES) encrypted data, it does not mean they will break it.
The current set of DIDO Platforms (i.e.Ethereum, Hyperledger, Iota, Hedera, etc.) are very simplistic, even though they have made great strides since their inception. It is much like the early days of databases when all the data were stored in a single hierarchy. As the Databases evolved, they became more sophisticated moving toward DataBase Management System (DBMS). Some examples of DBMSs are:
For example, DIDO Platforms currently are very good at building “accounts” and keeping tallies on the accounts (i.e. account ledgers). However, this is basically just bookkeeping. Granted, bookkeeping is a cornerstone of the financial systems, but there is so much more which requires far more sophistication.
Accounting focuses on the day-to-day flow of money in and out of accounts which DIDO Platform can do when used as a bookkeeper. However, Accounting has far more rules that are not done within the current DIDO Platforms. See Generally Accepted Accounting Principles (GAAP).
Individuals, corporations, and institutions accounting systems are far more complex than a simple account or even accounting. They may have hundreds if not thousands of accounts that need to be managed. The management of the accounts not only includes a tally of money in each account but its color (the different categories of money and the specific uses on which those funds may be spent). There are usually strict laws, regulations, or even accounting rules which prevent money from being comingled in the accounts. The current DIDO Platforms are basically only keeping the tallies on accounts and leaving the enforcement of laws, regulations, and rules to the individuals that have control over the account.
For example, if a University collects tuition, there may be rules on the tuition money that may allow it to be spent only on educators, staff, and supplies directly tied to the teaching of the students.
Finance, a broader term than accounting, is the management of assets and liabilities and the planning of future growth. It also implies the adherence to Laws and Regulations. See the following sections:
The next generations of DIDO Platforms will most likely be more sophisticated and cover concepts such as:
1. More of a Systems or System-of-Systems (SoS) approach 2. Better Business Process mechanisms that use high-level languages rather than simple procedural programming languages such as Solidity. Some examples are:
3. Better formalism of data sources inside and outside the blockchain including other blockchains. 4. More sophisticated constructs for the relationships between the data
5. Snapshotting 6. More sophisticated event processing and handling based on things like time, geographic location, the quantity of transfer, etc 7. More Sophisticated sharding to support geographic locations and time
8. More integration of Artificial Intelligence(AI) and Intelligent Agents
9. Blacklisting
The Federal Reserve would be well-advised to fund https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:r:rtd_e | Research Development Test & Evaluation (RDT&E) Funding]] projects to accelerate these developments before embarking on U.S. CBDC. Also see Appendix C: Other Transaction Authority (OTA)