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.

Most of the Central Bank Digital Currency implementations are based on central bank accounts for the general public or on blockchain/DLT. TDNSYS proposes a new form of payment based on digital tokens. A digital token is a unique and impossible-to-guess string of characters. The digital tokens are generated by the central bank TDNSYS sytem and put into circulation through retail banks in the same way paper money is created and put in circulation. The central bank processes the double-spending prevention.

In a payment transaction, the payer transfers a digital token to the payee printed on paper as a bar code or using digital means as used with any other digital data. It is as if the serial number on a banknote is transferred from the payer to the payee instead of the banknote itself. The payee is responsible for initiation the double spending prevention. The digital tokens are called Transferable Digital Notes or TDNs

A comparison between account-based, cash, and the proposed digital token-based payments can be found on the Analysis page. The system Specifications are identified based on this analysis.

A TDN is a unique and impossible-to-guess string of characters associated with a value denominated in the country's legal tender. The long string of characters is called the TDN Signature. It is a true random number preferably generated using a hardware random number generator (HRNG). TDN and TDN Signature are used interchangeably. The central bank maintains a repository of information about all issued Transferable Digital Notes (TDNs) their value, status, and all other relevant information. This repository is not a ledger of transactions. TDNSYS Operations Overview describes all the functionality supported by TDNSYS.

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. Retail banks make them available to their customers in the same way they make available cash.
  • The cost of creating and managing TDNs is covered by the government and there is no fee for using TDNs.It is less expensive for a central bank to issue and manage TDNs than to print paper money or manage an account-based system
  • The central bank may elect to pay interest on TDN. TDNSYS can be easily extended to support the functionality related to the intrest payments business rules.
  • 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. Increased computer power (ex. Quantum Computers) does not affect the security of the system.
  • 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.
  • TDNSYS enables the central bank to collect a large amount of 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 than paper cash because 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 bsnk or a correspondent bank involvement.
  • Credit card companies and banks can issue TDN based credit/debit cards. Besides making payments, a credit/debit cardholder 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. A person can elect to use a familiar credit/debit card based on TDNs. 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 be able to 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 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)

Next

To create digital cash all the attributes of paper money must be taken into account and replicated in the digital implementation. The most important fact is that paper money is issued and controlled by one institution, the central bank, and they are supported by legislation, economic policies, the banking system, and complicated infrastructure.

It is easy to imagine the implications of making payments using unique, impossible-to-guess strings of characters, digital tokens. The digital token can be transferred as a printed bar code or using a digital device. It is as if we were using the serial number on a central bank note instead of the note itself.

A digital cash system design using this approach is very simple and it is using existing state of the art technologies used in the Financial market infrastructures (FMIs).


During Fiscal Year 2013, the Bureau of Engraving and Printing delivered 6.6 billion notes at an average cost of 10 cents per note. ($660 million)
Deploying and maintaining TDNSYS has a much smaller cost.


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.


Similar to cash, the security of a TDN is the responsibility of the owner. One specific aspect is that when the digital token is printed, the owner must make sure nobody in the vicinity can photograph the printout if the TDN is not secured with a PIN or PKI.


Notice that the ownership request is not an ownership transfer. For example, if the owner of a TDN suspects that his/her TDN is compromised (somebody else is in the posession of the TDN Signature) he/she may request ownership from TDNSYS, invalidating the TDN Signature in his/her, and possibly other parties possession, and receive a new TDN Signature, making sure that nobody else has access to the value associated with his/her TDN.