[Paper Review] Towards a Two-Tier Hierarchical Infrastructure: An Offline Payment System for Central Bank Digital Currencies

Mihai Christodorescu, Wanyun Catherine Gu+9 more|arXiv (Cornell University)|Dec 14, 2020

Blockchain Technology Applications and Security8 citations

TL;DR

This paper proposes an offline payment system (OPS) for central bank digital currencies (CBDCs) using a two-tier hierarchical trust infrastructure based on public-key cryptography and trusted execution environments (TEEs). The protocol enables secure, real-time, point-to-point digital cash transactions without internet connectivity, preventing double-spending through TEE-secured digital signatures and cryptographic verification protocols, achieving virtually unbounded throughput and low latency.

ABSTRACT

Digital payments traditionally rely on online communications with several intermediaries such as banks, payment networks, and payment processors in order to authorize and process payment transactions. While these communication networks are designed to be highly available with continuous uptime, there may be times when an end-user experiences little or no access to network connectivity. The growing interest in digital forms of payments has led central banks around the world to explore the possibility of issuing a new type of central-bank money, known as central bank digital currency (CBDC). To facilitate the secure issuance and transfer of CBDC, we envision a CBDC design under a two-tier hierarchical trust infrastructure, which is implemented using public-key cryptography with the central bank as the root certificate authority for generating digital signatures, and other financial institutions as intermediate certificate authorities. One important design feature for CBDC that can be developed under this hierarchical trust infrastructure is an offline capability to create secure point-to-point offline payments through the use of authorized hardware. An offline capability for CBDC as digital cash can create a resilient payment system for consumers and businesses to transact in any situation. We propose an offline payment system (OPS) protocol for CBDC that allows a user to make digital payments to another user while both users are temporarily offline and unable to connect to payment intermediaries (or even the Internet). OPS can be used to instantly complete a transaction involving any form of digital currency over a point-to-point channel without communicating with any payment intermediary, achieving virtually unbounded throughput and real-time transaction latency.

Motivation & Objective

• To design a secure, scalable offline payment mechanism for central bank digital currencies (CBDCs) that functions without internet connectivity.
• To address the challenge of double-spending in offline transactions by leveraging trusted execution environments (TEEs) as the primary trust anchor.
• To enable point-to-point digital cash transfers between users via a two-tier trust hierarchy, with the central bank as root CA and financial institutions as intermediate CAs.
• To ensure transaction authenticity and integrity through cryptographic verification of digital signatures and certificates, even in the absence of online intermediaries.
• To support both TEE-enabled and non-TEE clients through distinct protocols—collect for TEEs and claim for non-TEE users—preventing replay attacks and double-spending.

Proposed method

• The system uses a two-tier hierarchical trust model where the central bank acts as the root certificate authority (CA), and regulated financial institutions serve as intermediate CAs to issue digital certificates to wallet providers.
• Offline payments are secured via digital signatures generated by trusted execution environments (TEEs), which serve as the primary source of trust for offline transactions.
• The Offline Payment Protocol (OPS) enables direct, peer-to-peer transfers between two TEE-enabled devices using a request-response exchange with cryptographic verification of sender identity and payment authenticity.
• Payment verification is performed via a multi-step check: (1) TEE certificate verification, (2) signature verification using the sender’s public key, and (3) validation against a local payment log to prevent replay attacks.
• A separate Claim protocol allows non-TEE clients to securely claim offline payments by submitting them to a central server (S), which verifies authenticity and freshness using a payment log.
• The system enforces mutual exclusivity: a payment confirmation can only be collected (by TEEs) or claimed (by non-TEE clients), not both, preventing malicious duplication of funds.

Experimental results

Research questions

• RQ1 How can a secure, offline digital cash system be designed for CBDCs without relying on continuous network connectivity or trusted intermediaries?
• RQ2 What cryptographic and trust mechanisms can prevent double-spending in an offline payment environment where no central authority is available during transaction execution?
• RQ3 How can a two-tier hierarchical trust infrastructure be effectively applied to CBDCs to scale trust while maintaining security and regulatory compliance?
• RQ4 What role do trusted execution environments (TEEs) play in enabling secure offline payments and how can they be integrated into a broader CBDC ecosystem?
• RQ5 How can the system ensure that offline payments are both authentic and idempotent, preventing replay and double-spending attacks?

Key findings

• The proposed OPS protocol enables real-time, point-to-point offline payments with virtually unbounded throughput, as transactions are processed locally without dependency on networked intermediaries.
• Double-spending is prevented through TEE-generated digital signatures and cryptographic verification of certificates and signatures, ensuring authenticity and integrity.
• The system achieves strong security guarantees by maintaining local payment logs on both clients and TEEs, preventing replay attacks through freshness checks.
• The separation of 'collect' (for TEEs) and 'claim' (for non-TEE clients) ensures that each payment confirmation is processed exactly once, eliminating duplication risks.
• The hierarchical trust model allows the central bank to delegate trust to regulated financial institutions, enabling scalable and compliant deployment of CBDCs at scale.
• The protocol is resilient to network outages and maintains transaction finality even when users are offline, making it suitable for emergency or low-connectivity scenarios.