The Dutch Central Bank, De Nederlandsche Bank (DNB) is not convinced about the transformative capability of the innovative blockchain technology. The bank has expressed in a blog post that blockchain fails to satisfy the needs of the financial markets infrastructure.
DNB said the tests conducted over three years involving the blockchain failed to meet the expectations owing to increased energy consumption, lack of capacity and inefficiency in making payments. However, the bank has not yet stopped experimenting with digital currency since it has not yet given up the hope.
The Dutch Federal Bank has conducted tests on blockchain over the past three years in 4 prototypes under the project named Dukaton. It actually started experimenting with Bitcoin (BTC) like systems to produce Dukaton, a new token, but ended in creating a payment processing platform. Thus, it has concluded from the trial run that blockchain failed to satisfy the infrastructure needs of the financial markets.
According to the bank, the blockchain should meet the requirements like costs, availability, legal certainty, sustainability, security, reliability, efficiency, and resilience. But, the new technology failed to meet some of these requirements.
DNB Satisfies with Target 2, a Eurosystem interbank payment solution
The central bank is satisfied with Target 2, the present Eurosystem interbank payment solution. Target 2 handles multiple transactions simultaneously and ensures compliance in terms of completing the payments. When we use the blockchain, it is not cost effective in terms of energy consumption. It is also deficient when handling high volume transactions.
Also, the blockchain will not be efficient in handling several consensus algorithms to ensure certainty of a complete transaction. The transaction cannot be reversed. But, it can be achieved with Target 2.
Other algorithms withstand the transactions with malicious intentions and provide cyber resilience, but fails to comply with other FMI needs.
However, the bank came to a conclusion that distributed ledger technology will improve efficiency when it comes to payments.
Bitcoin (BTC) has certain risks but provides certain promising opportunities. The bank is testing the new technology to achieve cost savings and more efficiency in markets. It could also withstand the cyber attacks. Therefore, the central bank is continuing to explore the new technology.