Researchers from the Bank of Canada rejected the idea of implementing zero-knowledge proofs and similar cryptographic protocols in the country’s central bank digital currency (CBDC) because of their “infancy.”
The Canadian money regulator was one of the first central banks to begin research and development of CBDC prototypes. Between 2016 and 2018, as part of an initiative called Project Jasper, the bank studied the use of distributed ledger technology (DLT) for clearing interbank payments, as well as securities transactions.
The new report aimed to introduce a framework for evaluating various privacy models for CBDC. Various payment methods fall into the spectrum in terms of the privacy they offer users. Moreover, the anonymity of physical cash is one of the ends of this spectrum. But in the area of digital assets, “techniques to achieve cash-like privacy are immature”
As one of the promising approaches to increasing privacy, analysts considered the use of zero-disclosure proofs, used, for example, in ZCash (ZEC). The Bank of Canada noted that few people have the skills needed to deploy and maintain this protocol.
“The risk is that technical complexity, combined with its immaturity, can mask vulnerabilities,” the regulator concluded.
Bank of Canada findings are consistent with Carnegie Mellon University Research. According to its authors, the vast majority of ZCash users do not use the full cryptographic potential of anonymity due to a lack of understanding of the principles of operation of a private coin.