Shadow coins: including central banks in cryptocurrency ecosystem

Abstract

The increasing popularity of cryptographic currencies, such as Bitcoin, has led to an interest from central banks in the possibility of issuing their own cryptographic currencies. RSCoin is the most noteworthy effort to include banks in Cryptocurrency economy till date. It is a technology developed in initiation of Bank of England in order to introduce central banks in the cryptocurrency ecosystem. In this work, the RSCoin implementation was extended by introducing Shadow Coins to test the feasibility of the system in respect to the existing payment solutions, which was specified but not implemented in the original proposal. Shadow Coining is a way to incorporate Cryptocurrencies in the Banking system issuing shadow coin in its central ledger for another currency it stores as guarantee. Shadow coins work as the replica of existing coins such as Bitcoin without altering its value enabling the current Cryptocurrency market to thrive as it is also allowing them to be used for day to day use with very small transactions time. Experiments were conducted to study the performance of the central bank and the comparative cost analysis was carried out. The results confirmed the suitability of Shadow Coins as the basis for a centrally banked cryptographic currency model. Keywords: Cryptocurrency, RSCoin, Central Bank Digital Currency