Cross-border Exchange of CBDCs using Layer-2 Blockchain
Abstract
This paper proposes a novel multi-layer blockchain architecture for the cross-border trading of CBDCs. The permissioned layer-2, by relying on the public consensus of the underlying network, assures the security and integrity of the transactions and ensures interoperability with domestic CBDCs implementations. Multiple Layer-3s operate various Automated Market Makers (AMMs) and compete with each other for the lowest costs. To provide insights into the practical implications of the system, simulations of trading costs are conducted based on historical FX rates, with Project Mariana as a benchmark. The study shows that, even with liquidity fragmentation, a multi-layer and multi-AMM setup is more cost-efficient than a single AMM.
Keywords
Cite
@article{arxiv.2312.16193,
title = {Cross-border Exchange of CBDCs using Layer-2 Blockchain},
author = {Krzysztof Gogol and Johnnatan Messias and Malte Schlosser and Benjamin Kraner and Claudio Tessone},
journal= {arXiv preprint arXiv:2312.16193},
year = {2024}
}
Comments
This paper was presented at the Crypto Finance Conference (CfC) Academic Track 2024 in St. Moritz, Switzerland