In its blockchain experiments spanning three years, De Nederlandsche Bank (DNB) has found that the technology, in its current form, fails to meet the high demands of a robust financial market infrastructure.
According to the central bank, the principal limitations of the technology include capacity shortages, inefficiency caused by high energy consumption, and a lack of full certainty that a payment is completed.
Over the past three years, the DNB said that it developed and evaluated four blockchain-based prototypes, named Dukaton, in order to explore the technology’s potential in improving payments and securities transactions. It said:
“The prototypes have shown that the blockchain solutions we tested currently fail to meet the high demands made of financial market infrastructures (FMIs)...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. 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.”
However, the central bank believes blockchain technology to be “promising,” saying:
“DLT may well offer enhanced efficiency in payments that involve multiple currencies, however. We believe the blockchain technology underlying bitcoin is interesting and promising, and future algorithms may well offer improved compliance with FMI requirements.”
