Dutch Central Bank says Blockchain isn’t Beneficial to the Payment System
As per Netherlands central bank, Blockchain technology isn’t a beneficial addition to the payment system.
In a blog post published on Thursday, De Nederlandsche Bank (DNB) came to the summing-up that distributed ledger technology (DLT) is not suitable for its existing financial payment system because of its insufficient ability to scale for large for a high volume of transaction and other issues.
The DNB gave the opinion on based on results of the project called Dukaton, which performed a series of experiments that have tested four DLT prototypes over the past three years.
Dukaton set out to research in an effort to know how much value the nascent technology, can bring to the country’s current payment system. Its first prototype is based on the source code of the bitcoin blockchain, and the team used different consensus algorithms and validation mechanisms in later stages.
After the test, the central bank recognizes that the blockchain can improve the resilience of financial infrastructure against external attacks, although, this benefit comes at the cost of “scalability, capacity, and efficiency,” it said.
The Bank wrote,
“The existing payment systems are very efficient, can manage large volumes and provide the legal certainty of payment. The blockchain solutions tested show that they are not sufficiently efficient, with regard to costs and energy consumption, and they can’t control large numbers of transactions.”
That said, DNB doesn’t rule out the possibility that, as blockchain technology moves ahead, a better design algorithm would have the capacity to meet all technological thresholds needed by the Dutch financial system.
To that effort, the central bank stated it will continue investing in further application development and conducting experiments with blockchain technology.