Yesterday the European Central Bank (ECB) shared details about current design features in its briefing for retail digital euro prototypes. In September, it announced five partners who will build front-end prototypes for the central bank digital currency (CBDC). The prototype briefing reveals the current digital euro iteration is token-based and uses UTXO, a token model popularized by Bitcoin. However, that does not mean it uses blockchain.
MIT worked with the Boston Federal Reserve on Project Hamilton, using Bitcoin’s UTXO model but not blockchain. The technology was released as open source software. However, the ECB document states the digital euro UTXO ledger is a greenfield design by Eurosystem experts.
Users will not control their private keys in the digital euro prototype. Instead, the keys will be held in custody on their behalf by wallet service providers, who currently will be the front-end prototype providers. The goal of centralizing key management is to improve end-user usability, and central banks are less enamored by decentralization.
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