An Auditable, Privacy-Preserving, Transparent Unspent Transaction Output Model for Blockchain-Based Central Bank Digital Currency

Abstract

Auditability, privacy, transparency, and resiliency are four essential properties of a central bank digital currency (CBDC) system. However, it is difficult to satisfy these properties at once. This issue has become a crucial challenge to ongoing CBDC projects worldwide. In this article, we propose a novel unspent transaction output (UTXO) model, which offers auditable, privacy-preserving, transparent CBDC payments in a consortium blockchain network. The proposed model adopts a high-speed, non-interactive zero-knowledge proof scheme named zero-knowledge Lightweight Transparent ARgument of Knowledge (zk-LTARK) scheme to verify the ownership of UTXOs. The scheme provides low-latency proof generation and verification while maintaining 128-bit security with a smaller proof size. It also provides memory-efficient, privacy-preserving multi-party computation and multi-signature protocols. By using zk-LTARKs, users do not require numerous private–public key pairs to preserve privacy, which reduces risks in key management. Decentralized identifiers are used to authenticate users without interacting with any centralized server and avoid a single point of failure. The model was implemented in a customized consortium blockchain network with the proof-of-authority consensus algorithm.