Securing Offline CBDC Transactions: DigiVault Card and MarkoPayChain with Mobile Phone Integration

Research on offline payment systems for Central Bank Digital Currencies (CBDCs) faces challenges in convincing stakeholders of their practicality for widespread use. Implementing such systems entails overcoming significant technological hurdles while ensuring privacy and regulatory compliance. Although some solutions utilize mobile devices, few capitalize on the advantages of smart cards, which enhance security, flexibility, and portability. Moreover, integrating effective privacy and security measures in offline environments remains limited. This research proposes a novel solution with significant contributions:1) It employs a hybrid approach using smart cards for secure storage and cryptographic key management, coupled with smartphones for computational and authentication tasks. 2) It introduces proactive fraud protection utilizing Markov chains, enhancing security against double spending. 3) It employs two Privacy Enhancing Technologies (PETs): blind signatures and zk-SNARKs, ensuring robust privacy.4) It meets regulatory standards by enabling verifiable transactions without compromising user privacy. The evaluation of the offline payment protocol showcased strong reliability, achieving a success rate exceeding 88 % across all simulations.