Implementing a Protocol Native Managed Cryptocurrency

Abstract

Previous work presented a theoretical model based on the implicit Bitcoin specification for how an entity might issue a protocol native cryptocurrency that mimics features of fiat currencies. Protocol native means that it is built into the blockchain platform itself and is not simply a token running on another platform. Novel to this work were mechanisms by which the issuing entity could manage the cryptocurrency but where their power was limited and transparency was enforced by the cryptocurrency being implemented using a publicly mined blockchain. In this work we demonstrate the feasibility of this theoretical model by implementing such a managed cryptocurrency architecture through forking the Bitcoin code base. We discovered that the theoretical model contains several vulnerabilities and security issues that needed to be mitigated. It also contains architectural features that presented significant implementation challenges; some aspects of the proposed changes to the Bitcoin specification were not practical or even workable. In this work we describe how we mitigated the security vulnerabilities and overcame the architectural hurdles to build a working prototype.