Dutch Central Bank: Blockchain Not Sufficiently Efficient
The blockchain doesn’t prove to be a beneficial addition to the already existing payment system in the Netherlands, says the Dutch central bank. However, the bank agrees the future of blockchain looks quite ‘promising’.
In a blog post published May 7, De Nederlandsche Bank (DSC) concluded that the blockchain or distributed ledger technology (DLT) is not a beneficial addition to the current financial payment infrastructure, as it is not capable of efficiently handling large number of transactions – at least not yet.
The Dutch central came to this conclusion after getting the results of its Dukaton project. A series of experiments were conducted under this project to test four DLT (Distributed Ledger Technology) over a period of three years.
The project was aimed at understanding how the blockchain technology could prove to be beneficial for country’s existing financial infrastructure. The research team applied many validation mechanisms and consensus algorithms at different stages, while the first prototype was based on the source code of the bitcoin blockchain.
The tests showed that the technology has the potential to make the financial infrastructure more resilient against external attacks, but the bank would have to then compromise with efficiency, scalability, and capacity, it said in the post.
The bank went on to explain:
“The current payment systems are very efficient, can handle 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 not handle large numbers of transactions.”
The DNB has, however, not completely ruled out the possibility of the blockchain industry designing a better algorithm that would meet all the technological thresholds required by the bank to make the Dutch financial system more efficient.
The bank added that it will continue to invest in further application development and also conduct more such experiments with the nascent technology.
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