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Response to the UK Treasury's Digital Pound(CBDC) Technology Working Group - on Wallets and a Public Blockchain Core Ledger

We believe the platform design using a 'private' Core Ledger is a fundamental mistake. It also signals the technical team are not fully aware of how blockchain technology works at the root - to deliver new found privacy, security and scalability, not to mention soon to be discovered innovation. And what previously made a public ledger widely attackable, is now obviated with the new tech.

Is the real challenge for the BoE that it cannot allow the Core Ledger to be public? The fear being that a public database like this is wide open for attack? Though we fully sympathise with this view, we can show you how this fear is totally unfounded, once the DLT technology is understood in the whole rather than though a limited fintech or crypto expert mind monopolising the thought space today.

There is no reason to fear a public core ledger. Unless one does not understand fully how the technology works. It is not what the fintech and crypto world tell us.

The Digital Pound is de facto a stablecoin - the best kind because the bank guarantees its par value. Why don't we start speaking about in this way. Its far easier for public understanding because the public mind knows for certain par value makes it inherently stable

Why not use a scalable, secure, privacy preserving, yet public blockchain, as the Core Ledger? The challenges the project currently faces by keeping the ledger private will almost certainly turn it into a leviathan open to failure and political abuse. And certainly will not be able to deliver further innovation because it will be no different, fundamentally, to what is used today. Whereas using a public blockchain obviates the most severe challenges and presents for the first time, astonishing opportunity for innovation because it is something new from the root up. Such public chains already exist and have been running for years. Why not make the UK's Digital Pound the world leader in money technology? Where the most capital naturally flocks to.

Why not remove the burden of scalability from the Core Ledger and surrounding systems. And place them on the public blockchain which can already scale to 100,000 tps. Public access makes scale 'unbounded' because now there are many firms broadly engaged in the various services and competing for the transaction business, who can directly access the token data carried by ultra cheap transactions. It scales yet further because being publicly accessible, PIP services, merchants, users can all access the chain securely, with more privacy and identity than before - the chain data is firewalled using crytpo tech(not encryption - though this could be used too but would make identity anonymous from the data, a big no no for the BoE).

There is no reason to fear a public core ledger. Unless one does not understand fully how the technology works. It is not what the fintech and crypto world tell us.

For similar benefits, why not redeem the function of transactions registrar and allow that to be done more directly and scalably by the PIP's or a service provider devoted to that? Make private banks the PIPs, and, have them issuing and directly transacting the public money in Digital Pounds, in the same way as they do today with cash. Using BoE API calls from the private bank wallets for whatever remains necessary for the BoE and Treasury to assure the essential needs to securely and stably maintain the Digital Pound.

Yet further still, innovatively, why not incentivise banks to become PIPs - as blockchain miners, creating and verifying the blocks containing all the transactions they're processing? The incentive is that they will be paid per transaction, to pay for costs, And also for profit, the best incentive. Nakamoto Consensus delivers security though economic competition, not voting. Miners do not vote, they enforce the rules. This is why its a golden rule, not to change the rules. Else that would be quasi-government forming in the financial space! I would recommend the only new regulation needed for DLT tech is to assure the nation that the rules will not be changed unilaterally and requires parliament to authorise a change and under emergency and exceptional conditions. The most efficient miner gets the fees in the blocks. Banks stand to gain by taking part. They have nothing to fear from DLT. Except fear itself. Is there are vested interest in being both a miner and a payment processor? No! The technology and economic competition makes that impossible. Censorship of transactions is not only a financial crime which would close down your business. Your business will tend toward bankruptcy anyway if you do not compete under free conditions. This fact also gives another opportunity for further public confidence in the Digital Pound. People would implicitly see the integrity in it.

(Note: the block subsidy has already halved too much for there to be profit there and the coin price must be artificially pumped - by changing the rules(quasi-government), to 'encourage' miners to keep mining on non scalable chains with few transactions per blocks mined).

On a public blockchain, much like when using open source software, everyone will continuously be checking it for various reasons, usually to minimise risk and improve their enterprise. What could deliver more stability than this ultra high level and quality of scrutiny. Using a public blockchain delivers minimal stability and disintermediation risk, by implication. This super adequate level of public scrutiny can only be achieved on a public blockchain. This level of scrutiny can only serve to elevate public confidence in the Digital Pound as the new form of cash, everyone is most likely to use, without needing to understand more complex detail, so gives further levels of inclusivity.

On identity, why not use a certificate authority to link identity to the pounds owned removing the privacy risk form the private banks and PIP's. Using a deterministic wallet, have the master private key created and stored at the CA utilising PKI technology. Much like web sites use a CA for certificates today very securely and successfully on an ultra large scale? The CA could also deal with the KYC etc.

Balances are really stored in wallets. The blockchain is a public ledger time stamping all exchanges immutably. The Digital Pound is really a stablecoin token of par value with the UK pound guaranteed risk free by the BoE. The blockchain Core Ledger is populated directly by miners with the records of ultra low cost Bitcoin micro-transactions at ultra high scale. But the wallet is where citizens Pounds are stored. As a chain of digital signatures in Bitcoin, containing the data representing the Digital Pound tokens. The entire core ledger, proven by a merkle tree of block headers, can verify all transactions historically and is tiny. Maybe just tens of megabytes, easily fitting on a card or user device. So offline payments can be checked for double spending without issue. Just as my grandparents used to check their pockets for how much money was in their wallet before paying, the public core Ledger and Wallet can be checked by the payer and merchant at all times, making this new cash, more useful publicly. The wallet infrastructure is as important as the core ledger. The nations public money, as cash, has become integrated with 'data', officially with the Digital Pound. This can only be achieved when using a public Core Ledger.

These factors of DLT have been totally missed by the technology working group. We believe this misunderstanding is so serious for the Digital Pound, the working group should face some renewed and proper scrutiny by the BoE, the Treasury leadership and even possibly the Chancellor.