DNB puts blockchain to the test
A new report from the Dutch central bank claims that blockchain technology currently falls short of the requirements of financial market infrastructures.
Following tests as part of a three-year project, the country’s central bank De Nederlandsche Bank (DNB) pointed to shortcomings in capacity and transaction verification as well as issues linked to high energy usage that make it less efficient.
On the plus side, DNB reckons blockchain technology could improve a financial market infrastructure’s resilience to external attacks.
DNB experimented on four prototypes based on blockchain technology aiming to gauge its potential role in improving financial transactions.
“The prototypes have shown that the blockchain solutions we tested currently fail to meet the high demands made of financial market infrastructures (FMIs),” concluded DNB.
An example of an FMI is Target2, which is the Eurosystem’s interbank payment system.
“Today’s payment systems are highly efficient, can handle large volumes and offer the legal certainty that a payment is completed. The blockchain solutions we tested proved to be inefficient – in terms of both costs and energy consumption – and unable to handle large numbers of transactions,” added DNB.
DNB, however, did not rule out a growing role for blockchain in the future, especially as algorithms improve.
“We believe the blockchain technology underlying bitcoin is interesting and promising, and future algorithms may well offer improved compliance with FMI requirements. This is why we keep investing in deepening our understanding the technology and conducting experiments. We are also engaged in discussions with new and incumbent market players about potential applications in order to contribute to innovation based on our own role in society,” said DNB.
Some of the tests carried out by DNB used Bitcoin software, while others used a centrally created in-house digital wallet.