Transferable Digital Notes Project

The Transferable Digital Notes System is a viable solution allowing central banks to put in circulation fiat currency in digital form.

All central banks are evaluating the feasibility of issuing what it is called Central Bank Digital Currency or CBDC. The name seems to imply that a new currency will be put in circulation by the central bank. The currency of the Unites States is the US dollar and it is a fiat currency. To clarify, Transferable Digital Notes Project is proposing a digital form of the US Dollar not a digital currency. It is more appropriate to call this effort ‘digitizing fiat currency’ or creating fiat currency in ‘digital form’.

Transferable Digital Notes Project (TDNSYS), offers a simple, reliable and easy to implement solution for creating fiat currency in ‘digital form’. Transferable Digital Notes or TDNs have a behavior almost identical as paper money. This solution is not based on blockchain or distributed ledger technology. The main strength of the system consists in the fact that there is no debiting and crediting of accounts when a transaction is performed. The user does not have an account on the system, all transactions are anonymous (the anonymity can be waived if the holder of the TND so desires).

The TDNSYS specifications are generic and can be used for other purposes. For example a system can be design to implement banking transactions without need of clearing, merchants reward points systems, gift cards or play money.

A TDN is a unique, large and impossible to guess string of numbers associated with a cash value. The long string of numbers is called the TDN Signature. The main actor of the system is the Central Bank that controls and manages it. The Central Bank maintains a repository of information about all issued Transferable Digital Notes (TDNs). This repository is not a ledger of transactions. The Central Bank system prevents TDN double spending.

The Transferable Digital Notes System is only the technical solution to Central Bank Digital Currency. Putting in circulation Digital Currency is a very complex process with legal, social and economic implications.

Here are the main features of TDNSYS and Transferable Digital Notes (TDNs):

  • Centralized, only the Central Bank controls the digital cash. The Central Bank distributes TDNs to the retail banks instantly.
  • Contrary to Bitcoin mining the cost of creating and managing TDNs is covered by the government and there is no fee for using TDNs
  • Not based on blockchain, distributed ledger (DTL) or unspent transaction output (UTXO).
  • Not based on Central Bank debit/credit accounts, TDNs users do not need an account on the system.
  • The system is implemented using proven technologies used in the Financial Market Infrastructures (FMIs). Existing infrastructures may be repurposed to support this system.
  • There are only a few database operations and minimum processor time for processing one TDN transaction making the system as fast as, if not faster than credit card transactions.
  • It is impossible to counterfeit TDNs.
  • TDNs can be converted to paper money and vice versa at any retail bank.
  • Offers substantial security, privacy and anonymity.
  • TDNs exist alongside paper money.
  • Minimum impact on current financial systems.
  • Current legislation covering the use of paper money can be easily extended to cover TDNs.
  • It is less expensive for a Central Bank to issue and manage TDNs then to print paper money or manage an account-based system.
  • TDNSYS enables the Central Bank to collect a large amount a statistical data without affecting the privacy of TDN holders.
  • Using TDNs does not incur any expenses for the parties involved in a transaction which constitutes a strong instrument of financial inclusion.
  • TDNs have a much higher velocity then paper cash because cash payments are instant without the parties being in physical contact.
  • Financial institutions can clear transactions instantly when using TDNs. There is no need for the Central Bank or a Correspondent Bank involvement.
  • Credit card companies and banks can issue TDN based credit/debit cards. Besides making payments, a credit/debit card holder can get TDNs instantly using an electronic device (phone, computer, etc...) without going to an ATM.
  • Performing transactions with TDNs does not require a bank account or a digital wallet. However using a TDN based credit/debit card isolates the user from all the details of processing TDN payments. Using such a card is identical to using any credit/debit card with the advantage that the money is immediately available to the payee after a sale.
  • The retail banks customers will withdraw TDNs from their accounts the same way they withdraw paper cash.

TDNSYS is based on the client/server model. The server side is owned by the Central Bank. The main component is the TDN Repository, a very fast, ACID compliant ISAM database in compliance with all the security, reliability and redundancy applying to today’s financial systems. The server side interacts with the clients through a published API. Performing a TDN transaction requires only one or two database operations and minimum processor time. When a TDN is secured with a PIN or PKI a few more transactions are executed.

Clients can be bank terminals, cash registers, personal digital devices connected to the Internet, ATMs, vending machines, eCommerce websites or desktop applications. The server side of TDNSYS contains a website supporting all TDN transactions.

In a TDN transaction the payer gives the payee the TDN and the payee requests from the Central Bank server side of TDNSYS the ownership or the TDN in order to prevent double spending. The payee is now in the possession of the cash value associated with the TDN. The payer will not be able to use the TDN in another transaction.

Here is a possible infrastructure for a TDN system. (see Infrastructure for more details)