Dutch Central Bank: Blockchain 'Promising' But 'Inefficient' in Payments

Blockchain technology isn't a beneficial addition to the payment system in the Netherlands - at least not yet, according to the country's central bank.

In a blog post published Thursday, De Nederlandsche Bank came to the conclusion that distributed ledger technology is not suitable for its existing financial payment infrastructure due to its insufficient ability to scale for large volumes of transactions and other issues.

Following the tests, the central bank acknowledges that blockchain can increase the resilience of financial infrastructure against external attacks this benefit comes at the expense of "Scalability, capacity and efficiency," it says.

"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."

That said, the DNB does not rule out the possibility that, as the blockchain industry moves forward, a better designed algorithm would be able to meet all the technological thresholds required by the Dutch financial system.

To that effort, the central bank said it will continue investing in further application development and conducting experiments with blockchain technology.

In similar work, South Africa's central bank yesterday announced positive results for its trial of its blockchain-based system for interbank clearance and settlement.

The South Africa Reserve Bank said it had completed a 14-week "Realistic" proof-of-concept that settled the country's typical 70,000 daily payment transactions within two hours, while preserving full confidentiality.

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