Interstellar CBDC Impact Studio

Currencies issued by sovereign states are critically important financial instruments and design considerations for Central Bank Issued Currencies (CBDCs) need a safe, secure network environment that is robust, scalable and can achieve cross-asset interoperability as well as network interoperability without compromising monetary policymaking.

With this in mind, Interstellar designs and delivers End-to-End CBDC Instruments, Infrastructure, Ecosystem & Governance Solutions for Central Banks and their stakeholders through their Hybrid, Wholesale or Retail CBDC Deployments.

Beyond CBDC, Interstellar delivers bespoke Interoperable solutions with the CBDC infrastructure for Financial Institutions, Non-Banks, Governments, and Businesses. All our offerings are user friendly, scalable, low cost and highly available (24/7), which are designed to foster trust, provide transparency whilst providing the Central Banks with greater monetary authority and control.

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The CBDC Impact Studio provides a safe and secure environment through strong security, data protection and privacy standards.

Through the Impact Studio, societies and economies can enjoy broad access to financial services and greater liquidity, fostering inclusion of the unbanked and underserved segments of the society. Our solutions reach the last mile by enabling offline transactions for the inaccessible, hard to reach places in remote areas or in times of disasters.

Key Benefits for Central Banks

• Greater Monetary Authority Control without sacrificing inclusion
• Optimal Regulatory Compliance with Privacy Standards
• Customer-Centric Design & Inclusivity
• Standardization & Interoperability
• Scalability & Throughput
• Integrity & Resilience
• Programmability & Extensibility
• Security

Greater Monetary Authority Control without sacrificing Inclusion

The Bantu Blockchain Infrastructure is uniquely suited for CBDC deployments. Interstellar leverages the CBDC agnostic elements of the Bantu Blockchain Infrastructure to design a private-permissioned CBDC network. This uses the Harambee Federated Byzantine Agreement (HFBA) to achieve consensus within the network.

The Harambee Federated Byzantine Agreement is a form of Federated Byzantine Agreement (FBA) in which the membership to the network is open, giving each network participant rewards and maximum freedom in choosing which combinations of other participants to trust. For example Citizens, Businesses can join a two-tier retail CBDC private-permissioned network established by the Central Bank and can choose to trust Financial Institutions (FI) and Non-Bank Financial Intermediaries within the network or directly trust the Central Bank application.

This Federated Architecture provides a permissioned participation into the network and also enables a balance between centralisation, based on trusted entities and decentralised membership participation which mirrors the peer-to-peer structure of existing financial networks to achieve global consensus without compromising privacy.

In other words, in the use case of CBDC, the Central Bank as the Issuer of the CBDC Instrument can designate validators i.e regulated Financial Intermediaries to enforce transaction finality through consensus.

In a Cross-Border Private Network implementation, the designated validators of the CBDC Instruments from other countries must come to a consensus before anyone can commit to the transaction history.

Resolve Disputed Transactions & Reversals

In a CBDC deployment, the network can be designed to enable the reversal of transactions on the Private-Permissioned Blockchain network. The permissioned multisignature feature of the CBDC wallet can create a non-custodial process for delegating back-up responsibility between two third-party entities.

This feature is key in the event of a regulatory requirement where freezing the issued assets is necessary. It is also useful to mitigate against theft, or loss.

Optimal Regulatory Compliance & Privacy Standards

Unlike Cryptocurrencies, the underlying DLT infrastructure has baked in its design elements that inherently supports broader Data protection policies and laws yet finding the right balance which meets the transparency and data requirements of Central Banks for supporting Know Your Customer (KYC)/Customer Due Diligence (CDD) and anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements along with any other regulatory expectations or disclosure National laws in a private CBDC implementation.

Decentralised Digital Identity Management

Interstellar deploys a shared infrastructure for Digital Identity through the DLT enabled non-custodial multi-asset wallet infrastructure which is deployed to multiple users.

The multi-asset wallets are designed to implement tier-based risk management approaches for KYC/CDD compliance requirements. From the simplified onboarding process, a simplified first level KYC/CDD authorization feature is incorporated, which captures the user's name, email address, phone number and other personal identifiers. The wallets can be tailored and customised to incorporate third party applications which facilitate remote age verification and identity verification through liveness detection and hybrid automated and manual document authentication. This would also enable Financial Intermediaries to manually administer manual verification if required.

The CBDC system in its design considerations can be flexible enough to implement privacy-by-design and privacy-by-default approaches (e.g in the case of EU’s General Data Protection Regulation). With personalization in-mind, Individual users are empowered with radical transparency to own and manage their own digital footprint as well as review how their digital information is being used. For enabling trade, the system enables the Central Bank to design privacy features so users are in control of their personal identifiable data and they opt to share it with a trusted merchant user on their own. Ensuring monetary and financial stability for the public good.

CBDCs are a tool to pursue monetary and financial stability for the public good through enhancing safety and neutrality in digital payments, financial inclusion and access, innovation and openness. Central Banks as issuers can leverage the design features of the CBDC infrastructure to imposing limits in compliance with the AML/CFT regime and in the scenarios where there is are suspected illegal transactions and tax evasion, the Central Bank can use the optional programmable feature for auth_reqired flag on the CBDC accounts, restricting ownership of the assets they issue to authorised accounts.

The decentralised ledger provides full Traceability. Central Banks can securely track CBDCs with every transaction being immutably recorded. In addition, for broader applications of digital economy regulation, digital assets and asset backed goods and services can be tracked more effectively and can foster methodological innovation in the statistical frameworks that the Central Banks currently use to measure the value of the supply-side of the economy.

The multifactor authentication feature provided in the multi-asset wallet provides an anti-counterfeit mechanism which uses multifunction restrictions in the CBDC Wallet. The use of MAC address mapping, Device ID mapping and two-factor authentication collective can be used to mitigate adversarial attacks.

In a CBDC deployment, the network can be designed to enable the reversal of transactions on the Private-Permissioned Blockchain network. The permissioned multisignature feature of the CBDC wallet can create a non-custodial process for delegating back-up responsibility between two third-party entities.

Privacy by Design & Governance

While the DLT infrastructure in its current deployment was deployed as a Public Permissioned DLT Network, the infrastructure in-herently is designed to combine privacy constructs to support scalable Private Permissioned DLT Network instances, as required by CBDC implementations.

This applies mature privacy building blocks which mitigate privacy risks offered by alternatives;

Security & Multi-signatures

The CBDC DLT infrastructure utilizes transaction signatures as an authorization mechanism which are protected by industry-standard public-key cryptography tools and techniques. Multi-signature (Itakura and Nakamura 1983) schemes can guarantee that sensitive data are disclosed only when an adequate number of entities.

Cryptographically secure transactions use Elliptic-curve cryptography and are created by cryptographically signing the transaction object contents with a secret key. Transactions always need authorization from at least one public key in order to be considered valid. Generally, transactions only need authorization from the public key of the source account. In the case of the DLT agnostic infrastructure used by Interstellar CBDC Impact Studio, the Multisignature feature enables up to 100 signatures to be attached to a transaction. This is a significant enhancement to other Federated Byzantine Agreement consensus protocols such as Steller that only allow 20 signatures, making this CBDC infrastructure more appropriate for large scale deployments.

Zero-knowledge proofs

Zero-knowledge proofs (Blum, Feldman and Micali 1988) can prove claims about data without revealing them (e.g., they can prove an account balance is adequate for a transaction without revealing the balance). The Bantu Blockchain Infrastructure is by far the mature in its design considerations for Enterprise wide deployments whereby Private permissioned networks are required in which data claims can be proved without revealing them. In the context of a hybrid retail CBDC deployment, there are elements that might need a hybrid approach to implement both Private and Public permissioned networks, this combines the permissioning from private consortiums with a decentralised governance model for the transaction network making it distinct from a permissioned federated governance model which is required for the Central Bank as the issuer and the Issuance of the CBDC Instrument itself and in the main Distribution Account. To achieve this, Interstellar designs and deploys cutting edge zero-knowledge proofs which are advanced cryptographic techniques. The majority of DLT Infrastructure developers and system integrators tend to shy away from privacy enhancing technologies (PET) such as zero-knowledge proofs due to absence of skills sets, however the Interstellar CBDC impact studio talent boast cryptographers with advanced competencies in the production and practical deployments of zero-knowledge proofs. Because of the privacy-preserving design of the Bantu Blockchain Infrastructure, the CBDC Public Permissioned Network would not know about (and has no way of finding out) what trade is being conducted, or what CBDC enabled Dapps are being used to transact between parties because of Zero-knowledge proofs.

Prevention of Double Spending

The CBDC as a monetary asset, would need to be held in specialised accounts. Interstellar’s CBDC Studio framework utilises Bantu Blockchain Network’s account-based system to provide issuance, distribution and end user accounts to Central Banks and end users respectively.

The CBDC Issuance is facilitated by the robust token-creator functionality embedded in the underlying infrastructure which is utilised to mint the CBDC Genesis block and the CBDC’s for the Central Bank.

Money has value only when it is scarce, which means, among other things, mitigating the double-spending of CBDC and reconciling the distributed parts of the ledger.

The underlying DLT infrastructure enables entities to carry out transactions in payment and settlement systems without necessarily relying on a central authority to maintain a single ledger. In a permissioned CBDC instance, the validation protocol defines how transactions are validated and included in the overall transaction history. In the case of the framework, the Harambee Consensus is used to achieve consensus and settlement finality. In this consensus, the account must explicitly consent to holding an asset by accepting explicitly along with biometrics to prevent spammers from saddling accounts with unwanted assets.

This consensus layer also ensures that all the transactions are digitally signed, and has a mechanism to enforce any transaction to be applied once. This is done using a sequence of numbers. If the compatible sequence of numbers linked to an account is compatible, the transaction executes and the account is updated with a new counter. In the event of a double spend attack, the transaction will not execute, the ledger stays immutable and user funds are not affected.

Accounts are fully auditable, and best suited for CBDC deployments and the Central Bank has the ability to retire CBDC entirely by transferring it from the Distribution Account back to the Issuing Accounts. Customer Centric Design & Inclusivity Interstellar CBDC Impact Studio solutions are specifically designed to foster inclusion.

Our DLT-enabled multicurrency asset wallet is built with an intuitive user-centric and responsive design which provides users with simplicity, ease of use and secure access.

Our CBDC framework and infrastructure is modular and can be integrated with multiple end user touch points beyond Smartphones. Features include but not limited to

• QRcodes
• mPOS with Data Over Voice and/or NFC functionality
• NFC enabled Smart Cards/wearables
• SMS
• USSD

Digital Sovereignty

Interstellar deploys a shared infrastructure for Digital Identity.

In many parts of the world, Financial inclusion of Unbanked and Underserved individuals is linked to a lack of identity. Digital Identity infrastructures empower individuals by providing them with greater access to services and opportunities.

For example, an unbanked individual can obtain a CBDC account without the need for onboarding with a Financial Institution through our KYC/CDD module embedded into the Wallet design.

This same infrastructure can empower identity verification for additional services such as access to land and finance, unlocking capital and improving livelihoods.

In addition this last-mile approach can reduce customer acquisition costs for financial intermediaries and can be used to implement monetary policy that benefits the bottom of the pyramid.

Reaching Humanity

The end-to-end CBDC architecture is designed to foster accessibility and bridge last mile connectivity in areas with varying or low levels of digital penetration.

One of the biggest challenges in the deployment of a CBDC especially in developing countries is last mile connectivity and access. In addition, given the evolution of Climate Change, climate impacts and disasters have also underscored the importance of resilient digital financial infrastructure that can function during disasters such as Hurricanes, Floods, Earthquakes, and even Pandemics.

The unique design consideration that Interstellar's CBDC Impact studio addresses is ensuring optimal accessibility.

For example, A Masai farmer in rural Kenya, with issued local CBDC in his Wallet, can transfer value using SMS or USSD functionalities on their low range phones over an inter-connected IOT infrastructure network.

Another example is an Emergency Responder in the aftermath of a disastrous hurricane, can leverage a mobile point of Sale (mPOS) system integrated with Data SIM Card to make payments using their CBDC for emergency supplies.

Standardization & Interoperability

Interoperability: Serves as a building block for cross border payment for central banks to work together in linking domestic CBDCs and setting standards to support interoperability. Leverage existing Domestic, Regional and Global Payment Rails & Monetary Infrastructure The Bantu Blockchain Infrastructure is designed with Interoperability at its core, with Global Financial Market Infrastructures and other Digital Infrastructures. Hybrid Network Infrastructure As a hybrid network, its design can implement both Public and Private Permissioned instances. One wallet, One world, Empowering your Digital Life Within the Wallet Infrastructure, the Secure Asset Bridge feature specifically integrates any digital asset, irrespective of the blockchain network it resides on, into the multi-asset wallet without any third party aggregators or clearing institutions. For CBDC instruments, this means that a CBDC issued in the Eastern Caribbean can be incorporated into the wallet of other CBDC’s issued from other countries such as Nigeria, China and Bahamas as examples.

In addition to CBDCs, other digital assets such as stable coins e.g NGN, USDC and also tokenzied commodities e.g Digitised Agriculture Commodities, NFTs, Security tokens, just to name a few, can be incorporated into the Multi-asset Wallet. A wide spread of online payment gateways can also be incorporated as on/off ramps within the embedded wallet infrastructure. Diversity in development Bantu Blockchain as a CBDC DLT Infrastructure provides a relatively high-level of flexibility and freedom for integration and adoption, offering a variety of programming languages within a variety of Restful APIs and where necessary SDKs can be utilised in situations where financial institutions are dealing with legacy infrastructure. Programming language options include but are not limited to, Python, Java, JavaScript , GO, AngularJS & React to name a few. It’s so Simple, you would not need a blockchain specific developer to programme, which bodes well for adoption and fosters greater employment prospects.

Scalability & Throughput

Efficient CBDC implementation is impossible without a scalable regulated blockchain platform. This means that due to the high numbers of transactions CBDC users will need to carry out, a regulated blockchain should be capable of conducting thousands of transactions per second.

Interstellar CBDC Impact Studio, uses an agnostic blockchain infrastructure that leverages a Federated Byzantine Agreement (FBA) method for achieving consensus.

Classical solutions like DLS, BFT, PBFT are not designed to scale on mass. BFT and PBFT are commonly utilised in CBDC implementations such as Project Ubin, and the live pilot in Bahamas Sand Dollar nd DCash, which solve BFT among a small-to-medium group of known participants and are not known to scale to extremely large numbers which extend to the millions. Whilst this might not be a factor for Small Island States, it becomes a critical factor for two-tier retail CBDC deployments in very large populations.

Innovations in consensus mechanisms are seen to marginally improve scalability and throughput in the case of BFT derivatives such as Tendermint, Casper, Hotstuff -BFT. A close comparable throughput to the Harambee Consensus mechanism that Interstellar uses for its CBDC deployments is Cosmos, which leverages the Tendermint Protocol with a high throughput of 10,000 TPS and transaction time of 2 seconds, however Tendermint does not scale and well and increases the latency of the protocol, due to the all-to-all communication method for achieving consensus it employs. Our investigations point to the communication complexity which drives up network bandwidth, increases energy consumption and raises the CPU costs of serialization and deserialization of the messages. While protocols such as Hotstuff BFT which is to be utilised in the Libra currency, proposes replaces all-to-all communication with all-to-one communication streamlining the broadcast messaging my collating all signatures, however whilst CPU costs may be reduced, these are replaced by expensive threshold signatures to linearize consensus, not to mention lower throughputs. Scaling this would incur significant Total Cost of operations.

In contrast, Proof of Work (POW) consensus mechanisms like Bitcoin solves BFT among a very large group of unknown users. In each time-period, one user broadcasts a single message carrying a Proof-of-Work (PoW). No other messages or information is exchanged, however this mechanism is designed to reward validators based on solving progressively harder puzzles like a lottery scheme. This process is extremely energy intensive and harmful to the environment. In reality, Central Banks are Central Authorities and are not selected using a Lottery.

Secondly, given that for every $1 of value POW creates, it is responsible for $0.66 in health and climate damages according to a Harvard study, and as such, Central Banks should not even consider practices that introduce morale hazards which are harmful to society and farless do not have the ability to scale. Unlike other, traditional or modified Byzantine and Proof of Work (POW) consensus protocols, the Harambee Consensus mechanism as a variant of the FBA, is considered as the most novel solution, optimised for faster payment settlements in real time, at significantly lower costs while incorporating scalability in its inherent design and overcoming the majority consensus bottlenecks.

The underlying blockchain utilised to implement a CBDC is naturally designed to Scale. In a practical implementation of a CBDC, participants can independently select to install the designated CBDC Wallet and choose to Trust the entity or entities that send the CBDC instrument, in a manner that is truly democratic and in a deterministic process that is not dependent on any type of energy intensive process, making this design low carbon efficient and green.

In addition, the federated consensus protocol enables faster transactions by design. The transactions are broadcast and verified using a voting mechanism between select trusted nodes within a cluster. This implies that the broadcast is not done to the entire network but only select parties. This streamlines communications, lowers costs and enables real time settlement confirmation times of approximately 2-3 seconds with a throughput of 15,000 Transactions per Second (TPS), processing over 100,000 payment transactions for less than USD$0.10cents.

This light-bolt speed, and transaction capacity makes this infrastructure highly appropriate for CBDC deployments in comparison with other infrastructure such as Steller with a throughput of only 1,000 Transactions per second (TPS) and a settlement confirmation time 3-5 seconds.

Interstellar's ability to deploy a CBDC platform to execute over 15,000 Transactions per Second (TPS), eliminates scalability issues for central banks and governments.

Security

The CBDC Wallet Infrastructure is designed to secure end users from unauthorised access through a plethora of features. The underlying protocol uses “Asymptotic Security”. Asymptotic Security rests on digital signatures and hash families whose parameters can realistically be tuned to protect against bad actors within the network with unimaginably vast computing power. In addition to the use of digital signatures and cryptographic proofs, in-order to protect unwarranted access from user entry points, the embedded wallet infrastructure also employs multi-factor authentication methods.

Additional features include Biometric security with Inactivity Time-out, and the multisignature functionality which enables consensus and mitigates against fraud and unauthorised access. The security features include but not limited to the following;

• Biometric Security
• 2FA
• Unique PNEUMONIC key phase for (Private Key)
• Federated Name
• Inactivity Time-Out
• Multisignatures

These features combined with the ease of use, give Central Banks, Financial Institutions and Enterprises the desired security and peace of mind they crave.

Programmability & Extensibility

Interstellar's CBDC Impact Studio is an operating framework that has the potential to accelerate digital transformation and unlock societal and economic benefits beyond the provision of digital money or payments. Programmable money promises to deliver an inevitable frictionless digital future.

There are many use cases that Central Banks can explore with this capability. Leveraging tools such as service model innovation, the attributes technology platform and innovations in the CBDC business model can deliver optimal outcomes once the right design constructs are employed.

On the one hand, the infrastructure features a robust token creator utility, which can programme smart contract-like logic into a CBDC. Smart contracts automatically ensure compliance with preset rules and regulations when an operation is executed. This attribute and approach along with Interstellar's co-creation and co-design methodology can unlock many use cases.

For example, highly debated conversations are had about CBDC as an Interest-bearing instrument, the interest payment modalities can be programmed into the issued CBDC. Depending on policy priorities i.e support for National Safeguard systems such as conditional CBDC transfers which can be spent for specific purposes for humanitarian purposes or as we recently witnessed, fiscal policies related to emergency public payments as a result of the Covid-19 pandemic, can all be programmed into the CBDC without compromising security, privacy and transparency.

The extent to which the advantages of digital settlement in CBDC deployments can be exploited, is largely dependent on whether the associated cash flows will become equally programmable and can be synchronised with flows of services.

Financial Sector Development

CBDC as an engine for digital transformation and promoting electronic governance, can stimulate much needed product innovation and development in wholesale banking CBDC deployments. A useful area for research and development is the replacement of legacy RTGS systems itself by utilising programmable CBDC. For example, commercial banks can utilise the infusion of CBDC’s for large value transfers and to facilitate payments for digital assets could be settled instantly, or combined with custodial wallet functionalities and multi-signature capabilities for escrow, can effectively deploy delivery versus payment (DvP) methods that are currently deployed in securities. The utility of CBDC by Financial institutions can also provide greater liquidity for businesses. E.g CBDC replacing traditional credit lines although one would need to revise operational governance models that might incorporate shared liability between the Central Bank and the Commercial Bank. In a post pandemic world, this may be a feasible option to explore. Combined with the underlying blockchain network, new financial service models can evolve leveraging the capabilities of the network itself such as alternative risk lending models, using DLT for alternative credit scoring., value added services such as Agtech payment index Micro insurance.

Other programmable CBDC use cases that can be explored are M2M payments, IoT payments, automated settlement payments and pay-per-use payments. E.g Financing for Clean Energy from a Public Utility and (IOT enables Billing & Payments e.g Solar Pump).

Cross-Border Settlements

Whilst CBDC’s are relegated to domestic deployments, the Interstellar CBDC Impact Studio, interoperability framework enables international trade and facilitates cross border settlements between two different CBDC instruments, and other payment instruments. Additional functionalities can be programmed to incorporate embedded finance features to streamline efficiency in e-Commerce and cross-border trade. Financial Sector Expansion

The implementation of CBDC architecture lays the framework for the re-design of Financial Market infrastructures and can aid in the redesign of Capital Markets for a Sustainable Future.

Using CBDC in regulated, digital economies offers new Initiatives for Sustainability.

With Climate Finance and Sustainability becoming a greater priority especially in the developing world and Sustainable Finance gap widening with public sector funding dwindling, the underlying infrastructure can fast track the evolving DLT based bond landscape. The underlying infrastructure can enable Central Banks and governments to expand the capabilities of the infrastructure based on blockchain technology allowing for new products e.g sustainability linked bonds, digital green bonds, blue bonds and to implement new sustainable measurement, reporting and verification standards for an enhanced and more secure digital economy. These new advances could be the key to reducing our carbon footprint and other sustainability concerns.

Integrity & Resilience

Data Integrity

Due to its decentralised nature, of the network infrastructure, there are no centralised transactional data stores, since data is recorded on a chain of distributed nodes, making it more resistant to malicious changes by any single party. This eliminates concentration risk of a single point of failure. Instead within the CBDC Transaction network, data is distributed and registered on a single ledger in a controlled environment and as the number of network participants increases, so also does the security of the network. The use of Federated Byzantine Agreement and DLT Infrastructure, enhances operational resilience and improves the monetary and payment landscape.

Failure Safeguards

The CBDC protocol’s Fault tolerant algorithm guarantees “Liveness”, that is, avoids catastrophic failure by built-in network redundancy via its distributed nature.

When bad actors attempt to attack the network, the attack is easily detectable by at least two nodes providing different results from the other normal operating nodes, thus triggering a partial failure to parts of the network. However, this failure is isolated and contained and does not affect the rest of the network due its distributed nature. This protects network participants' interests.

Settlement Finality

CBDC Impact Studio maintains an Issuer-enforced finality for Central Authorities.

In addition, the design also enables payment verification to be carried out without dependency on any single party, which promotes flexibility. This is done through the Harambee Consensus mechanism which leverages trusted validator nodes to achieve consensus in a Quorum. A Quorum or Cluster is a set of nodes adequate to reach consensus and a Quorum slice is a subset of quorum which can help convince a node about the agreement. Quorum intersections are required to ensure that the majority of the network achieves consensus on the transaction making it immutable and ensuring settlement finality.

CBDC Governance & Regulatory Innovation

Our CBDC Impact Studio utilises an immersive, participatory foresight & design thinking process to deploy networked governance and achieve coherence management amongst the CBDC Network Participants. This includes utilising a robust Governance Framework for empowering a Central Authority and facilitating effective decision making, which results in cutting edge CBDC policies, and legal and regulatory recommendations.

As CBDC End-to-End focused deployment partners, we look beyond technology and payments, to address broader key governance tensions which can impact Financial Stability, System Integrity, Inclusion and Economic Development.

We deploy holistic CBDC solutions which are needs based and context driven for the Ecosystems we serve, fostering Innovation and multidimensional impact.