DCMA’s Universal Monetary Unit and its Impact on the current progress of CBDCs

 

Introduction

The rise of digital currencies has led to a growing interest in CBDCs as a means of strengthening monetary sovereignty and improving financial inclusion. The Digital Currency Monetary Authority (DCMA) has proposed a Best-in-Class Design for CBDC that incorporates several key features, including a Trusted Consensus Protocol - Staked Proof of Trust (SPOT) Protocol, a linear scale node degree architecture, and other important concepts. In this paper, we will explore how the Universal Monetary Unit (UMU) can impact the current progress of CBDC around the world.

The UMU, symbolized as ANSI Character Ü, is a legally recognized money commodity that can transact in any legal tender settlement currency, functioning as a CBDC to enforce banking regulations and protect the financial integrity of the international banking system. UMU is designed to be a continuous demand monetary system with a guarantor of its redemption value with a high ratio cash reserve for greater than any fractional reserve requirements of commercial banks. UMU is not defined in the classification of crypto assets chart defined by the IMF and does not pose a threat to the international monetary system as unbacked tokens, stablecoins, and other tokens. It applies the features, regulatory and compliance framework, and monetization framework of central bank digital currency (CBDC) to a money commodity. The value proposition for adopting UMU includes mitigating against local currency depreciation, making cross-border payments faster and most cost-efficient, and enabling a more open, safe, and stable economic and financial international monetary system.

Staked Proof of Trust Protocol

The SPOT protocol is a trusted consensus protocol that is designed to prevent double spend attacks. Unlike public blockchains that rely on trustless consensus protocols, central banks and monetary authorities are trusted entities for providing a safe and secure monetary system. The SPOT protocol leverages this trust by requiring validators to stake their own funds as collateral in order to participate in the consensus process. This incentivizes validators to act honestly and ensures that any malicious behaviour will result in financial penalties.

Proposed Design for CBDC

The DCMA's proposed design for CBDC incorporates several key features that make it "best-in-class." These features were presented at a public lecture on CBDC hosted by the University of Maryland and include:

1. Trusted Consensus Protocol - Staked Proof of Trust (SPOT) Protocol: As discussed above, this protocol ensures the security and integrity of the monetary system by preventing double spend attacks.

2. Linear Scale Node Degree Architecture - This architecture allows for greater scalability and efficiency by distributing nodes across multiple layers rather than relying on a single layer.

3. Collaborative Monetary Policies - Contrary to the competitive nature of legal tender markets, all members of a digital economic union collaboratively aim to adopt monetary policies to ensure an international CBDC or money commodity sustains its strength and performance in the market.

4. Politically Agnostic Digital Economic Union - A digital economic union should be politically agnostic as it is in the best interest of all participating members to create a sustainable store of value for any nation, bank, trading partner, or citizen that purchases it.

Benefits of Linear Scale Node Degree Architecture

The linear scale node degree architecture offers several benefits for financial institutions. First, it allows for greater scalability and efficiency by distributing nodes across multiple layers rather than relying on a single layer. This means that the system can handle more transactions and users without sacrificing performance or security. Second, it provides greater flexibility in terms of network topology, allowing for different types of nodes to be added or removed as needed. Finally, it reduces the risk of centralization by distributing nodes across multiple layers and ensuring that no single node has too much power or influence over the network.

Impact on CBDC Progress

The UMU has the potential to impact the current progress of CBDC around the world in several ways. First, it offers a new model for digital currencies that incorporates key features such as a trusted consensus protocol and a linear scale node degree architecture. This could inspire other central banks and monetary authorities to adopt similar models for their own CBDCs.

Second, the UMU is designed to support and strengthen the international monetary system for global banking, trade, and payments. It applies the features, regulatory and compliance framework, and monetization framework of CBDCs to a money commodity, making it an attractive option for financial institutions looking to improve their operations.

Finally, the UMU is politically agnostic which means that it can be adopted by any nation or bank without fear of political interference or manipulation. This makes it an ideal option for countries that are looking to improve their monetary systems but are wary of outside influence.

Conclusion

In conclusion, the Universal Monetary Unit has the potential to impact the current progress of CBDC around the world in several ways. Its innovative design incorporates key features such as a trusted consensus protocol and a linear scale node degree architecture that could inspire other central banks and monetary authorities to adopt similar models for their own CBDCs. Additionally, its focus on supporting and strengthening the international monetary system makes it an attractive option for financial institutions looking to improve their operations. Finally, its politically agnostic nature makes it an ideal option for countries that are looking to improve their monetary systems without fear of outside interference.