Central Bank of the Netherlands finds blockchain inefficient for the payment system

7 June 2018

De Nederlandsche BankToday, De Nederlandsche Bank (DNB), a central bank of the Netherlands, made a public statement that blockchain technologies are not good for existing financial system of the country in view of a number of drawbacks outweighing the advantages coming with the innovative system.

The conclusion was made after a comprehensive research conducted by the central bank within three years, where the working group was testing four Distributed Ledger Technology prototypes within the framework of the bank’s Dukaton program. The first prototype of the tested technology was based on the source code of the Bitcoin blockchain, and the research team piloted a number of various consensus algorithms to establish the benefit of the blockchain for the national existing payment system.

Upon the results of the experiments, the central bank came to a conclusion that despite blockchain’s potential to enhance the security of the financial system and its protection against external attacks, these few advantages come at the expense of scalability, performance and efficiency.

The DNB noted in its opinion that the existing payment system is efficient itself, as it may process large volumes of transactions, while ensuring legal certainty of payments. Meantime, blockchain technologies lack efficiency and performance in terms of their costs and power consumption and inability to process large volumes of transactions. However, the bank does not exclude future possibility to adopt blockchain technologies as they continue developing.

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