De Nederlandsche Bank (DNB), the Dutch central bank, is not positive about the potential of the blockchain. In a current blog article, the lender announced that the tech had failed to satisfy the “needs of monetary markets ”
DNB, which reveals that they have experimented with blockchain over the past three years, said the technology fell short of expectations because of its lack of capacity, high energy consumption, and inefficiencies in payments.
Nonetheless, the institution hasn’t pulled the plug on its own blockchain experiments since it thinks the technology is promising.
In the previous 3 years, the central bank has analyzed blockchain in four prototypes under a project named Dukaton. The prototypes began with Bitcoin-like approaches to make a new token called Dukaton and finished with the invention of an entire payment processing system that implemented a system of blockchain nodes.
Depending on the trial results, DNB reasoned the blockchain solutions analyzed had failed to fulfill the prerequisites for financial market infrastructures. The latter need to fulfill a broad collection of requirements associated with ability, accessibility, authorization, prices, efficacy, reliability, protection, legal certainty (obligations ), scalability, sustainability, and endurance. Each one these aspects are extremely important for monetary market infrastructures and blockchain doesn’t appear to scratch on many points.
DNB remains met with the recent Eurosystem interbank payment alternative. Called Target2, it may manage several trades and supply legal certainty concerning payment completion. Blockchain wasn’t efficient in regards to prices, energy intake, and coping with higher transaction volumes.
“Furthermore, several consensus algorithms we used will never achieve the full certainty of a transaction, so that it cannot be undone, which the central banks’ Target2 system offers. Other algorithms are able to withstand parties with malicious intent and have the potential of raising the FMIs’ cyber resilience, but they currently fail to meet other FMI requirements,” the bank said.
“DLT [distributed ledger technology] may well offer enhanced efficiency in payments that involve multiple currencies, however,” it concluded.