Centrally Banked Cryptocurrencies

TL;DR

This paper proposes RSCoin, a cryptocurrency framework where central banks control monetary policy while distributed authorities ensure transaction security, combining centralized monetary control with scalable, transparent transaction validation.

Contribution

It introduces RSCoin, a novel hybrid cryptocurrency model that centralizes monetary policy but decentralizes transaction validation to improve scalability and efficiency.

Findings

RSCoin reduces computational waste compared to Bitcoin.

The system maintains strong transparency and auditability.

Experimental results show improved scalability and security.

Abstract

Current cryptocurrencies, starting with Bitcoin, build a decentralized blockchain-based transaction ledger, maintained through proofs-of-work that also generate a monetary supply. Such decentralization has benefits, such as independence from national political control, but also significant limitations in terms of scalability and computational cost. We introduce RSCoin, a cryptocurrency framework in which central banks maintain complete control over the monetary supply, but rely on a distributed set of authorities, or mintettes, to prevent double-spending. While monetary policy is centralized, RSCoin still provides strong transparency and auditability guarantees. We demonstrate, both theoretically and experimentally, the benefits of a modest degree of centralization, such as the elimination of wasteful hashing and a scalable system for avoiding double-spending attacks.