Chapter 21: Technical Architecture
"The question is not whether a global monetary system can be built on modern infrastructure—it's whether the infrastructure can be made sufficiently transparent, resilient, and politically acceptable to earn global trust."
Overview
This chapter presents the technical architecture for the K-Dollar system. We address two audiences: policy experts who need to understand system capabilities and constraints, and engineers who may eventually build implementations.
Chapter Structure:
- Design Principles — Architectural philosophy
- System Overview — Four core subsystems
- Issuance Subsystem — Money creation infrastructure
- Verification Subsystem — Energy production validation
- Settlement Subsystem — Transaction processing
- Governance Subsystem — Voting and policy execution
- Blockchain Anchoring — Immutable audit trails
- Integration Architecture — SWIFT, central banks, existing systems
- Parallel Operation — Transition-period dual-system architecture
- Technology Evaluation — Options analysis per component
- Security Architecture — Threat mitigation at infrastructure level
21.1 Design Principles
Core Architectural Principles
| Principle | Rationale | Implementation |
|---|---|---|
| Transparency by default | Legitimacy requires visibility | All non-security-sensitive data publicly queryable |
| No single point of failure | Geopolitical resilience | Distributed infrastructure across jurisdictions |
| Graceful degradation | Attack/failure tolerance | System continues operating with reduced capability |
| Auditability | Trust verification | Complete audit trails, cryptographic attestation |
| Technology neutrality | Longevity | Abstract interfaces allowing component replacement |
| Minimal complexity | Security, maintainability | Simplest architecture meeting requirements |
Non-Functional Requirements
| Requirement | Target | Rationale |
|---|---|---|
| Availability | 99.99% (52 min/year downtime) | Global monetary infrastructure |
| Latency | < 2 sec for settlement confirmation | Competitive with existing systems |
| Throughput | 100,000 TPS sustained | Global trade settlement volume |
| Data integrity | Zero tolerance for corruption | Monetary system integrity |
| Recovery time | < 4 hours from catastrophic failure | Business continuity |
21.2 System Overview
Four Core Subsystems
┌─────────────────────────────────────────────────────────────────────────┐
│ K-Dollar System Architecture │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ ┌──────────────────┐ ┌──────────────────┐ ┌──────────────────┐ │
│ │ ISSUANCE │ │ VERIFICATION │ │ SETTLEMENT │ │
│ │ SUBSYSTEM │◄──►│ SUBSYSTEM │◄──►│ SUBSYSTEM │ │
│ │ │ │ │ │ │ │
│ │ • Money creation │ │ • Energy data │ │ • Transactions │ │
│ │ • Allocation │ │ • Multi-source │ │ • Clearing │ │
│ │ • Cooperative │ │ reconciliation │ │ • Settlement │ │
│ │ registration │ │ • Fraud detection│ │ • Reserves │ │
│ └────────┬─────────┘ └────────┬─────────┘ └────────┬─────────┘ │
│ │ │ │ │
│ └───────────────────────┼───────────────────────┘ │
│ │ │
│ ┌────────▼─────────┐ │
│ │ GOVERNANCE │ │
│ │ SUBSYSTEM │ │
│ │ │ │
│ │ • Voting │ │
│ │ • Policy rules │ │
│ │ • Access control │ │
│ └──────────────────┘ │
│ │
├─────────────────────────────────────────────────────────────────────────┤
│ CROSS-CUTTING CONCERNS │
│ ┌──────────────┐ ┌──────────────┐ ┌──────────────┐ ┌─────────────┐ │
│ │ Blockchain │ │ Security │ │ Monitoring │ │ External │ │
│ │ Anchoring │ │ Layer │ │ & Alerting │ │ Integration│ │
│ └──────────────┘ └──────────────┘ └──────────────┘ └─────────────┘ │
└─────────────────────────────────────────────────────────────────────────┘
Data Flow Overview
Energy Production
│
▼
┌───────────────────────┐
│ Verification Subsystem│
│ (Multi-source data) │
└───────────┬───────────┘
│
┌─────────────┴─────────────┐
▼ ▼
┌─────────────────┐ ┌─────────────────┐
│ Voting Weight │ │ K$ Allocation │
│ Calculation │ │ Calculation │
└────────┬────────┘ └────────┬────────┘
│ │
▼ ▼
┌─────────────────┐ ┌─────────────────┐
│ Governance │ │ Issuance │
│ Subsystem │ │ Subsystem │
└────────┬────────┘ └────────┬────────┘
│ │
└─────────────┬────────────┘
▼
┌───────────────────────┐
│ Settlement Subsystem │
│ (Transactions, Balances)│
└───────────────────────┘
21.3 Issuance Subsystem
Functions
- Money creation: Execute primary issuance rule based on verified energy growth
- Allocation calculation: Distribute new K-Dollars per entity's verified production share
- Entity registration: Onboard nations, cooperatives, licensed producers
- Credential management: Issue and revoke issuance credentials
Component Architecture
┌─────────────────────────────────────────────────────────┐
│ ISSUANCE SUBSYSTEM │
├─────────────────────────────────────────────────────────┤
│ │
│ ┌─────────────────┐ ┌─────────────────┐ │
│ │ Entity │ │ Issuance │ │
│ │ Registry │───►│ Calculator │ │
│ │ │ │ │ │
│ │ • Nations │ │ • Growth rate │ │
│ │ • Cooperatives │ │ • Allocation │ │
│ │ • Producers │ │ • Discretionary │ │
│ └─────────────────┘ └────────┬────────┘ │
│ │ │
│ ▼ │
│ ┌─────────────────────┐ │
│ │ Issuance Ledger │ │
│ │ │ │
│ │ • Mint transactions │ │
│ │ • Allocation records│ │
│ │ • Audit trail │ │
│ └─────────────────────┘ │
│ │
└─────────────────────────────────────────────────────────┘
Issuance Calculation Logic
// Annual issuance cycle (simplified pseudocode)
function calculateAnnualIssuance(year):
// Get verified global energy production growth (3-year geometric mean)
g_E = geometricMean(
verificationSubsystem.getGrowthRate(year - 1),
verificationSubsystem.getGrowthRate(year - 2),
verificationSubsystem.getGrowthRate(year - 3)
)
// Get current money supply
M_prev = ledger.getTotalSupply(year - 1)
// Get discretionary adjustment (requires governance approval)
epsilon = governanceSubsystem.getApprovedAdjustment(year)
// Primary issuance rule
delta_M = (g_E * M_prev) + epsilon
return delta_M
function allocateIssuance(delta_M, year):
entities = entityRegistry.getActiveEntities()
totalVerifiedEnergy = sum(e.verifiedProduction for e in entities)
allocations = []
for entity in entities:
share = entity.verifiedProduction / totalVerifiedEnergy
allocation = share * delta_M
allocations.append({entity, allocation})
return allocations
Entity Registration
| Entity Type | Registration Requirements | Verification Level |
|---|---|---|
| Sovereign nation | Treaty ratification, designated national authority | National aggregate |
| Citizen cooperative | Legal registration, K-Dollar Authority approval, verified production | Facility-level |
| Licensed producer | Regulatory compliance, audit certification, insurance bond | Facility-level |
21.4 Verification Subsystem
Functions
- Data ingestion: Collect energy production data from multiple sources
- Reconciliation: Cross-validate data sources, flag discrepancies
- Fraud detection: Identify anomalies suggesting falsification
- Attestation: Produce cryptographically signed verification reports
Multi-Source Architecture
┌─────────────────────────────────────────────────────────────────────────┐
│ VERIFICATION SUBSYSTEM │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ DATA SOURCES │
│ ┌──────────────┐ ┌──────────────┐ ┌──────────────┐ ┌──────────────┐ │
│ │ Satellite │ │ IoT │ │ Financial │ │ Third-Party │ │
│ │ Imagery │ │ Sensors │ │ Records │ │ Auditors │ │
│ └──────┬───────┘ └──────┬───────┘ └──────┬───────┘ └──────┬───────┘ │
│ │ │ │ │ │
│ └────────────────┼────────────────┼────────────────┘ │
│ ▼ ▼ │
│ ┌─────────────────────────────────┐ │
│ │ Data Ingestion Layer │ │
│ │ • Schema normalization │ │
│ │ • Source authentication │ │
│ │ • Timestamp verification │ │
│ └───────────────┬─────────────────┘ │
│ │ │
│ ▼ │
│ ┌─────────────────────────────────┐ │
│ │ Reconciliation Engine │ │
│ │ • Cross-source validation │ │
│ │ • Discrepancy detection │ │
│ │ • Confidence scoring │ │
│ └───────────────┬─────────────────┘ │
│ │ │
│ ┌─────────────┴─────────────┐ │
│ ▼ ▼ │
│ ┌──────────────────┐ ┌──────────────────┐ │
│ │ Fraud Detection │ │ Attestation │ │
│ │ • ML anomaly │ │ • Signed reports │ │
│ │ • Pattern match │ │ • Blockchain │ │
│ │ • Alert triggers │ │ anchoring │ │
│ └──────────────────┘ └──────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Reconciliation Logic
function reconcileEntity(entityId, period):
// Gather data from all sources
satelliteData = satelliteProvider.getData(entityId, period)
sensorData = iotNetwork.getData(entityId, period)
financialData = revenueRecords.getData(entityId, period)
auditData = auditorReports.getData(entityId, period)
// Calculate confidence-weighted estimate
sources = [
{data: satelliteData, weight: 0.25, accuracy: ±5%},
{data: sensorData, weight: 0.35, accuracy: ±2%},
{data: financialData, weight: 0.20, accuracy: ±8%},
{data: auditData, weight: 0.20, accuracy: ±3%}
]
estimate = weightedAverage(sources)
variance = calculateVariance(sources)
// Flag if sources diverge beyond threshold
if variance > DISCREPANCY_THRESHOLD (5%):
triggerEnhancedReview(entityId, period, sources)
return {status: "FLAGGED", estimate, variance}
return {status: "VERIFIED", estimate, confidence: 1 - variance}
Data Source Specifications
| Source | Data Type | Frequency | Accuracy | Tamper Resistance |
|---|---|---|---|---|
| Satellite imagery | Facility operational status, thermal signatures | Daily-weekly | ±5% | High (external) |
| IoT smart meters | Real-time production readings | Continuous | ±2% | Medium (cryptographic) |
| Financial records | Revenue reconciliation | Monthly-quarterly | ±8% | Medium (audit trail) |
| Third-party audit | On-site verification | Annual | ±3% | High (reputation) |
21.5 Settlement Subsystem
Functions
- Transaction processing: Execute K-Dollar transfers between accounts
- Clearing: Net multilateral obligations
- Settlement finality: Guarantee irreversible completion
- Reserve management: Track central bank holdings
Architecture
┌─────────────────────────────────────────────────────────────────────────┐
│ SETTLEMENT SUBSYSTEM │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │
│ │ Transaction │ │ Clearing │ │ Settlement │ │
│ │ Gateway │───►│ Engine │───►│ Finality │ │
│ │ │ │ │ │ │ │
│ │ • Validation │ │ • Netting │ │ • Ledger update │ │
│ │ • Authorization │ │ • Queue mgmt │ │ • Confirmation │ │
│ │ • Rate limiting │ │ • Priority │ │ • Notification │ │
│ └─────────────────┘ └─────────────────┘ └─────────────────┘ │
│ │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ Core Ledger │ │
│ │ • Account balances • Transaction history • Audit log │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
│ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │
│ │ Reserve │ │ Liquidity │ │ Reporting │ │
│ │ Accounts │ │ Management │ │ & Analytics │ │
│ │ │ │ │ │ │ │
│ │ • Central banks │ │ • Credit lines │ │ • Real-time │ │
│ │ • Sovereign │ │ • Collateral │ │ • Aggregates │ │
│ └─────────────────┘ └─────────────────┘ └─────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Transaction Flow
1. SUBMISSION
Participant → Transaction Gateway
• Validate format, signatures
• Check authorization
• Apply rate limits
2. CLEARING
Transaction Gateway → Clearing Engine
• Queue for batch processing
• Calculate multilateral netting
• Prioritize by type (central bank > commercial)
3. SETTLEMENT
Clearing Engine → Settlement Finality
• Update ledger balances atomically
• Generate settlement confirmation
• Anchor to blockchain (batch)
4. NOTIFICATION
Settlement Finality → Participants
• Confirm completion
• Provide settlement reference
• Update public dashboards
Account Types
| Type | Holder | Features |
|---|---|---|
| Reserve account | Central banks | Direct settlement, no credit limits |
| Sovereign account | National treasuries | Issuance receipt, policy operations |
| Cooperative account | Registered cooperatives | Issuance receipt, standard settlement |
| Commercial account | Licensed institutions | Standard settlement, credit limits |
21.6 Governance Subsystem
Functions
- Voting: Execute dual-weighted voting on proposals
- Policy enforcement: Apply approved rules across subsystems
- Access control: Manage permissions and roles
- Audit: Record all governance actions
Architecture
┌─────────────────────────────────────────────────────────────────────────┐
│ GOVERNANCE SUBSYSTEM │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │
│ │ Voting Weight │ │ Proposal │ │ Voting │ │
│ │ Calculator │───►│ Manager │───►│ Engine │ │
│ │ │ │ │ │ │ │
│ │ • Energy votes │ │ • Submission │ │ • Ballot │ │
│ │ • Population │ │ • Validation │ │ • Tabulation │ │
│ │ • Adjustments │ │ • Scheduling │ │ • Thresholds │ │
│ └─────────────────┘ └─────────────────┘ └─────────────────┘ │
│ │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ Policy Rule Engine │ │
│ │ • Discretionary bounds • Sanctions • Constitutional rules │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
│ ┌─────────────────┐ ┌─────────────────┐ │
│ │ Access Control │ │ Governance │ │
│ │ (RBAC) │ │ Audit Log │ │
│ │ │ │ │ │
│ │ • Roles │ │ • All actions │ │
│ │ • Permissions │ │ • Immutable │ │
│ │ • Delegation │ │ • Public │ │
│ └─────────────────┘ └─────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Voting Weight Calculation
function calculateVotingWeight(entityId, period):
// Energy votes: 1 vote per GWh
verifiedEnergy = verificationSubsystem.getVerifiedProduction(entityId, period)
energyVotes = verifiedEnergy / 1000 // Convert TWh to GWh-based votes (millions)
// Population votes: 1 vote per 100 population
if entityType == "NATION":
population = populationRegistry.getPopulation(entityId, period)
populationVotes = population / 100
else:
populationVotes = 0 // Only nations get population votes
// Apply any transitional adjustments (e.g., US Favored Nation 1.5x)
adjustments = transitionRules.getAdjustments(entityId, period)
totalWeight = (energyVotes + populationVotes) * adjustments.multiplier
return {
energyVotes,
populationVotes,
adjustments,
totalWeight
}
21.7 Blockchain Anchoring
Design Philosophy
K-Dollar uses blockchain technology specifically for verification anchoring—creating immutable, publicly auditable records of verification data and governance decisions. The core transaction ledger remains a traditional high-performance database for throughput and latency requirements.
Why not blockchain for everything?
| Concern | Traditional Ledger | Blockchain |
|---|---|---|
| Throughput | 100,000+ TPS | ~1,000-10,000 TPS |
| Latency | Milliseconds | Seconds to minutes |
| Privacy controls | Flexible | Limited |
| Reversibility | Possible (governance) | Immutable |
| Energy efficiency | High | Variable |
What blockchain adds:
| Function | Value |
|---|---|
| Verification anchoring | Tamper-evident record of all production data |
| Governance transparency | Immutable record of all votes and decisions |
| Audit facilitation | Third parties can verify historical data |
| Dispute resolution | Authoritative timestamped evidence |
Anchoring Architecture
┌─────────────────────────────────────────────────────────────────────────┐
│ BLOCKCHAIN ANCHORING LAYER │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ Internal Systems Public Blockchain │
│ ┌────────────────────┐ ┌────────────────────┐ │
│ │ Verification │ │ │ │
│ │ Subsystem │──┐ │ Selected Chain │ │
│ └────────────────────┘ │ │ (Ethereum, etc.) │ │
│ │ │ │ │
│ ┌────────────────────┐ │ ┌────────┐ │ • Merkle roots │ │
│ │ Governance │──┼──►│Anchoring│──►│ • Timestamps │ │
│ │ Subsystem │ │ │Service │ │ • Signatures │ │
│ └────────────────────┘ │ └────────┘ │ │ │
│ │ └────────────────────┘ │
│ ┌────────────────────┐ │ │
│ │ Settlement │──┘ Anchoring Frequency: │
│ │ Subsystem │ • Verification: Daily │
│ └────────────────────┘ • Governance: Per decision │
│ • Settlement: Hourly batches │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Anchoring Data Structure
// Daily verification anchor
VerificationAnchor {
timestamp: ISO8601,
period: "2026-01-14",
merkleRoot: bytes32, // Root of all verification records for period
entityCount: uint,
totalVerifiedEnergy: TWh,
signature: K$AuthoritySignature
}
// Governance decision anchor
GovernanceAnchor {
timestamp: ISO8601,
proposalId: string,
decision: "APPROVED" | "REJECTED",
votesTally: {
for: votes,
against: votes,
abstain: votes
},
merkleRoot: bytes32, // Root of all individual votes
signature: K$AuthoritySignature
}
Chain Selection Criteria
| Criterion | Weight | Rationale |
|---|---|---|
| Security (hashrate/stake) | 30% | Anchors must be tamper-resistant |
| Decentralization | 25% | No single-nation control |
| Longevity/stability | 20% | Data must persist decades |
| Cost efficiency | 15% | Minimize operational expense |
| Tooling/ecosystem | 10% | Developer accessibility |
21.8 Integration Architecture
SWIFT Integration
K-Dollar settlement integrates with SWIFT for institutions requiring bridge connectivity.
┌─────────────────────────────────────────────────────────────────────────┐
│ SWIFT INTEGRATION │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ External K-Dollar Gateway K-Dollar │
│ ┌──────────────┐ ┌──────────────┐ ┌──────────────┐│
│ │ │ MT103 │ │ Native │ ││
│ │ SWIFT │──────────►│ Message │──────────►│ Settlement ││
│ │ Network │ │ Translator │ │ Subsystem ││
│ │ │◄──────────│ │◄──────────│ ││
│ │ │ MT199 │ │ Status │ ││
│ └──────────────┘ └──────────────┘ └──────────────┘│
│ │
│ Message Mapping: │
│ • MT103 (Customer Transfer) → K$ Payment Instruction │
│ • MT202 (Bank Transfer) → K$ Reserve Transfer │
│ • MT199 (Free Format) → K$ Status/Confirmation │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Central Bank Integration
┌─────────────────────────────────────────────────────────────────────────┐
│ CENTRAL BANK INTEGRATION │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ Central Bank Systems K-Dollar Authority │
│ ┌────────────────────┐ ┌────────────────────┐ │
│ │ National RTGS │ │ Central Bank │ │
│ │ (e.g., Fedwire, │◄───────────────►│ Gateway │ │
│ │ TARGET2, CIPS) │ │ │ │
│ └────────────────────┘ │ • API endpoints │ │
│ │ • Secure channels │ │
│ ┌────────────────────┐ │ • Reserve mgmt │ │
│ │ Reserve │◄───────────────►│ │ │
│ │ Management │ └────────────────────┘ │
│ │ System │ │
│ └────────────────────┘ Protocols: │
│ • ISO 20022 messaging │
│ ┌────────────────────┐ • Bilateral secure API │
│ │ Monetary │◄─ Reports ──────• Real-time reporting │
│ │ Statistics │ │
│ └────────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────┘
API Architecture
K-Dollar Public API (REST/gRPC)
Endpoints:
/v1/accounts
GET /{id} - Account details
GET /{id}/balance - Current balance
GET /{id}/history - Transaction history
/v1/transactions
POST / - Submit transaction
GET /{id} - Transaction status
GET /{id}/receipt - Settlement receipt
/v1/verification
GET /entities - All verified entities
GET /entities/{id} - Entity verification data
GET /anchors - Blockchain anchor references
/v1/governance
GET /proposals - Active proposals
GET /proposals/{id} - Proposal details
POST /votes - Submit vote (authorized)
GET /weights - Current voting weights
/v1/rates
GET /exchange - K$/USD, K$/EUR rates
GET /issuance - Current issuance parameters
Authentication: OAuth 2.0 + mTLS for institutional access
Rate Limits: Tiered by participant type
21.9 Parallel Operation Architecture
During the 25-year transition period, K-Dollar operates alongside the dollar system.
Dual-System Architecture
┌─────────────────────────────────────────────────────────────────────────┐
│ PARALLEL OPERATION (TRANSITION) │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ Dollar System K-Dollar System │
│ ┌─────────────────────────┐ ┌─────────────────────────┐ │
│ │ │ │ │ │
│ │ • Federal Reserve │ │ • K-Dollar Authority │ │
│ │ • SWIFT │ │ • K$ Settlement │ │
│ │ • USD clearing │ │ • K$ clearing │ │
│ │ │ │ │ │
│ └────────────┬────────────┘ └────────────┬────────────┘ │
│ │ │ │
│ └───────────────┬───────────────┘ │
│ │ │
│ ┌──────────▼──────────┐ │
│ │ Bridge Layer │ │
│ │ │ │
│ │ • FX conversion │ │
│ │ • Cross-settlement │ │
│ │ • Reserve bridging │ │
│ └─────────────────────┘ │
│ │
│ Participant Options: │
│ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │
│ │ USD Only │ │ K$ Only │ │ Dual System │ │
│ │ (declining) │ │ (growing) │ │ (transition) │ │
│ └─────────────────┘ └─────────────────┘ └─────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Bridge Functions
| Function | Mechanism |
|---|---|
| FX conversion | Market-determined K$/USD rate; authorized dealers |
| Cross-settlement | Transaction initiated in one system, settled in other |
| Reserve bridging | Central banks hold both; convert at published rates |
| Trade denomination | Contract specifies currency; settlement in either |
Transition Milestones
| Phase | Years | Dollar System | K-Dollar System |
|---|---|---|---|
| Pilot | 1-3 | Full operation | Limited testing |
| Early adoption | 4-7 | Full operation | Coalition settlement |
| Growth | 8-15 | Full operation | Expanding adoption |
| Tipping point | 16-20 | Declining volume | Majority settlement |
| Completion | 21-25 | Domestic US only | Global standard |
21.10 Technology Evaluation
Database Layer
| Option | Strengths | Weaknesses | Recommendation |
|---|---|---|---|
| PostgreSQL | Mature, ACID, extensive tooling | Single-node limits | Settlement ledger |
| CockroachDB | Distributed, geo-replication | Newer, complexity | Verification data |
| FoundationDB | Extreme scale, Apple-proven | Steeper learning curve | Consider for growth |
Recommendation: PostgreSQL for initial deployment with CockroachDB for distributed verification data. Plan migration path to FoundationDB at scale.
Message Queue
| Option | Strengths | Weaknesses | Recommendation |
|---|---|---|---|
| Apache Kafka | High throughput, durability | Operational complexity | Primary event bus |
| Apache Pulsar | Multi-tenancy, geo-replication | Newer ecosystem | Alternative |
| NATS | Simplicity, low latency | Less durability | Internal messaging |
Recommendation: Kafka for durable event streaming between subsystems. NATS for low-latency internal coordination.
Blockchain for Anchoring
| Option | Strengths | Weaknesses | Recommendation |
|---|---|---|---|
| Ethereum | Largest ecosystem, battle-tested | Cost volatility, energy | Primary anchor chain |
| Polygon | Lower cost, Ethereum-compatible | Less decentralized | Secondary/backup |
| Solana | High throughput | Outage history | Not recommended |
| Bitcoin | Maximum security | Limited data capacity | Merkle root only |
Recommendation: Ethereum mainnet for primary anchoring (maximum security/decentralization). Consider Bitcoin anchoring for critical annual summaries. Polygon as cost-effective backup.
API Gateway
| Option | Strengths | Weaknesses | Recommendation |
|---|---|---|---|
| Kong | Feature-rich, plugins | Resource-heavy | External API |
| Envoy | High performance, observability | Configuration complexity | Internal service mesh |
| AWS API Gateway | Managed, scalable | Vendor lock-in | Avoid for sovereignty |
Recommendation: Kong for external API management. Envoy for internal service mesh. Avoid cloud vendor lock-in for critical infrastructure.
21.11 Security Architecture
Defense in Depth
┌─────────────────────────────────────────────────────────────────────────┐
│ SECURITY ARCHITECTURE │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ Layer 1: Network │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ • DDoS protection • WAF • Network segmentation • mTLS │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
│ Layer 2: Application │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ • Input validation • Rate limiting • Auth/AuthZ • Audit │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
│ Layer 3: Data │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ • Encryption at rest • Encryption in transit • Key mgmt │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
│ Layer 4: Operational │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ • SOC 24/7 • Incident response • Pen testing • Bug bounty │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
│ Layer 5: Physical │
│ ┌─────────────────────────────────────────────────────────────────┐ │
│ │ • Geo-distributed DCs • Access controls • HSMs • Air gaps │ │
│ └─────────────────────────────────────────────────────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────┘
Cryptographic Standards
| Function | Algorithm | Key Size | Rationale |
|---|---|---|---|
| Signatures | Ed25519 | 256-bit | Speed, security, no patents |
| Encryption (transit) | TLS 1.3 | - | Modern standard |
| Encryption (rest) | AES-256-GCM | 256-bit | NIST approved |
| Hashing | SHA-3-256 | 256-bit | Quantum-resistant hedge |
| Key derivation | Argon2id | - | Memory-hard |
Key Management
┌─────────────────────────────────────────────────────────────────────────┐
│ KEY MANAGEMENT │
├─────────────────────────────────────────────────────────────────────────┤
│ │
│ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │
│ │ Root Keys │ │ Operational │ │ Session │ │
│ │ (Offline HSM) │───►│ Keys (HSM) │───►│ Keys (Memory) │ │
│ │ │ │ │ │ │ │
│ │ • Multi-sig │ │ • Auto-rotate │ │ • Short-lived │ │
│ │ • Geo-split │ │ • Audit logged │ │ • Per-session │ │
│ │ • Ceremony │ │ • Threshold │ │ • Ephemeral │ │
│ └─────────────────┘ └─────────────────┘ └─────────────────┘ │
│ │
│ Rotation Schedule: │
│ • Root keys: Never (ceremony for compromise) │
│ • Operational keys: Annual │
│ • Session keys: Per-session (hours) │
│ │
└─────────────────────────────────────────────────────────────────────────┘
21.12 Key Takeaways
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Four core subsystems: Issuance, Verification, Settlement, Governance—each with clear responsibilities and interfaces.
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Blockchain for anchoring, not transactions: DLT provides audit trails and transparency; traditional infrastructure handles throughput.
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Multi-source verification: No single data source trusted; reconciliation creates confidence through redundancy.
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SWIFT/central bank integration: Bridge architecture enables gradual adoption without requiring immediate wholesale replacement.
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Parallel operation: 25-year transition with dual-system architecture; participants choose their pace.
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Technology evaluation: PostgreSQL/CockroachDB for data, Kafka for events, Ethereum for anchoring—with alternatives assessed.
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Defense in depth: Five security layers from network to physical; cryptographic standards future-proofed.
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Graceful degradation: System designed to continue operating under attack or partial failure.
Appendix A: API Reference
Detailed API specifications to be published separately.
Appendix B: Data Schemas
Database schemas and message formats to be published separately.
Appendix C: Deployment Runbooks
Operational procedures to be published separately.
Further Reading
- Kleppmann, M. (2017). Designing Data-Intensive Applications
- Newman, S. (2021). Building Microservices (2nd ed.)
- Buterin, V. (2014). "Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform"
- Bank for International Settlements. (2021). "Central Bank Digital Currencies: System Design and Interoperability"