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Dutch Central Bank not convinced yet about DLT/Blockchain - seems they did not look at XCurrent/XRapid


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@JoelKatz Please have a talk with the Dutch Central Bank (DNB). According to a news article this morning they researched blockchain technology but came to the conclusion that the advantages don't outweigh the disadvantages.

The disadvantages mentioned are transaction capacity, energy consumption and not 100% certainty about delivery of funds

From this it seems they did not look at XCurrent/XRapid. Time to educate them.

 

https://www.nu.nl/cryptovaluta/5302055/dnb-ziet-nog-steeds-veel-nadelen-blockchain.html

Quote

De Nederlandsche Bank (DNB) is na lang experimenteren met de blockchain nog steeds niet overtuigd van het nut van de technologie.

De blockchain is onder meer de technologie achter cryptomunten als de bitcoin. Volgens de toezichthouder voldoet de technologie niet aan de zeer hoge eisen die worden gesteld aan de systemen in de financiële markt.

DNB heeft drie jaar lang geëxperimenteerd met verschillende systemen op basis van zogeheten distributed ledger-technologie, waarvan blockchain het bekendste voorbeeld is. Doel was om kennis op te doen en om te kijken of het gebruikt kan worden voor verbeteringen in het betalings- en effectenverkeer.

De voordelen wegen nu echter nog niet op tegen de nadelen, concludeert DNB. Bij blockchain worden kopieën van geanonimiseerde gebruikersgegevens over veel computers verspreid.

Die controleren elkaar op fouten en gesjoemel, waardoor het systeem veiliger is tegen aanvallen. Dat erkent DNB, maar dat gaat wel ten kosten van de capaciteit van het netwerk, waardoor bijvoorbeeld minder betalingen tegelijk kunnen worden verwerkt.

Energieverbruik

Ook het hoge energieverbruik van blockchainsystemen is een minpunt. Dat komt doordat er veel, vaak zeer krachtige computers voor nodig zijn. Ten slotte hebben gebruikers nooit 100 procent zekerheid dat hun betaling op de juiste plek is aangekomen, zoals wel bij reguliere betalingssystemen gebruikelijk is.

DNB schrijft blockchain overigens niet af en noemt de technologie interessant en veelbelovend. Het zou kunnen dat nieuwe algoritmes de huidige minpunten op termijn oplossen. Daarom blijft DNB investeren in kennis van deze technologie en wordt gesproken met marktpartijen over mogelijke toepassingen.

 

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I wondered on what base this article  of www.nu.nl was written.  

Another recent report of DNB itself stated that Central Banks are investigating the possibilities of Bitcoin technology....and this could lead to more  efficient financial markets, lower costs and resistance against cyber attacks.:

Distributed ledger technologie en crypto’s: Crypto’s, zoals Bitcoin, worden nog maar in zeer beperkte mate gebruikt voor aankopen. Wel nemen de risico’s en varianten in de cryptomarkt snel toe. Veel centrale banken, waaronder DNB, en andere financiële instellingen onderzoeken de mogelijkheden van de technologie achter Bitcoin, de distributed ledger technologie (DLT), bijvoorbeeld voor betalingen tussen banken of voor de administratie van effecten. Dat zou kunnen leiden tot efficiëntere betaalmarkten, lagere kosten en een grotere weerbaarheid tegen cyberaanvallen en storingen. Ook bekijken verschillende centrale banken de mogelijkheden van het uitgeven van een digitale variant op bankbiljetten en munten, ook wel central bank digital currency (CBDC) genoemd.

If you go through this report there are lots of bullish sections. 

See 

https://www.dnb.nl/binaries/DNB_Visie-op-Betalen_tcm46-376439.pdf?2018060711

 

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The DNB is quite bullish about solutions like Ripple offers with xCurrent. They acknowledge the risks involved with innovation but are convenced the payment channels need to be changed and therefore the need for blockchain innovation could outweigh the risks.

 

https://www.dnb.nl/binaries/Bijlage bij de Visie op innovaties_tcm46-332794.pdf

Box 3. Ripple Ripple is een decentraal betalingssysteem, waarbinnen gebruik gemaakt wordt van een eigen virtuele valuta, ook Ripple genaamd (afkorting XRP). Opmerkelijk is dat XRP centraal is uitgegeven, maar dat deze alleen gebruikt kan worden binnen het decentrale Ripple-netwerk. De software van Ripple is open source. Er is geen centrale partij die het Ripple-protocol bezit of controleert en het wordt gerund op computers uit de hele wereld, waardoor iedereen het kan gebruiken, ontwikkelen of uitbreiden. Gebruikers van het systeem kunnen betalingen direct en tegen verwaarloosbare kosten verzenden en ontvangen, in elk soort valuta (dollars, bitcoins, goud, etc.). Als de zender de ontvanger (in)direct kent, kan de transactie direct plaatsvinden als er een keten van ‘vertrouwde’ gebruikers tussen zit. Wanneer de zender de ontvanger niet (eventueel via een derde persoon) kent, gebruikt hij een ‘gateway’: een persoon of onderneming waar (virtuele) valutategoeden kunnen worden gestort, in ruil waarvoor de gebruiker een IOU ontvangt. De balans van de gebruiker toont vervolgens het bedrag dat is gestort. Gateways zijn in die zin een soort interface tussen de buitenwereld en het Ripple-netwerk. De kern van het Ripple-netwerk is de ‘general ledger’: een gedistribueerde database die met alle servers in het netwerk wordt gedeeld en informatie over alle Ripple accounts opslaat. Elke server kan een transactie introduceren in het netwerk. Deze transacties worden uitgezet naar alle Ripple-servers, die automatisch tot consensus komen om een set transacties op de ledger toe te passen. Dit proces vindt elke 2-5 seconden plaats. Ripple is daarmee een stuk sneller dan Bitcoin, en kost ook minder computercapaciteit. Om overbelasting van de ledger te verkomen ontmoedigt Ripple transactiespam, door bij elke transactie een voor de normale gebruiker verwaarloosbare hoeveelheid XRP’s te vernietigen. Er is vanuit banken steeds meer interesse in het Ripple-protocol. Integratie van het betalingsprotocol biedt banken de mogelijkheid hun klanten direct geld in elke valuta en elke hoeveelheid te laten overmaken naar andere instellingen die hier gebruik van maken, zonder gebruik van tussenpartijen. Banken kunnen daardoor kosten besparen. Momenteel maken één Duitse en twee Amerikaanse banken gebruik van het Ripplenetwerk, en verschillende andere banken experimenteren ermee. De aandacht die er met name uit de bancaire sector is om het Ripple-netwerk te gebruiken betekent dat het gebruik in de nabije toekomst snel zou kunnen groeien. Het is daarom van belang om deze ontwikkeling goed in de gaten te houden en betrokken te zijn bij mogelijke stappen die banken ondernemen.

 

Update: Translation from Dutch to English. Hopefully it is understandable.

Box 3. Ripple

Ripple is a decentralized payment system, which makes use of a private virtual currency, also called Ripple (abbreviation XRP). Remarkable is that XRP has been issued centrally, but that it can only be used within it decentral Ripple network. Ripple's software is open source. There is no central party that owns or controls the Ripple protocol and runs it on computers from all over the world, so that everyone can use, develop or expand it. Users of the system can make payments directly and against negligible Send and receive costs in any kind of currency (dollars, bitcoins, gold, etc.). If the sender knows the receiver (in) immediately, the transaction can take place immediately if there a chain of 'trusted' users is in between. When the transmitter is the receiver does not know (possibly via a third person), he uses a 'gateway': a person or company where (virtual) currency credits can be deposited, in exchange for which the user receives an IOU. The balance of the user then shows the amount that has been deposited. Gateways are in that sense a kind of interface between the the outside world and the Ripple network.

The core of the Ripple network is the 'general ledger': a distributed database that with all servers in the network is shared and information about all Ripple accounts save. Each server can introduce a transaction into the network. These transactions are turned off to all Ripple servers, which automatically come to a consensus a set of transactions on the ledger. This process takes place every 2-5 seconds. Ripple is therefore much faster than Bitcoin, and also costs less computer capacity. To avoid overloading the ledger, Ripple discourages transaction spam with each transaction a quantity of XRPs negligible for the normal user to destroy.

There is increasing interest from banks in the Ripple protocol. Integration of it payment protocol offers banks the opportunity to direct their customers money in any currency and have each quantity transferred to other institutions that use it make, without the use of intermediary parties. Banks can therefore save costs.

Currently, one German and two American banks use the Ripple-network, and several other banks are experimenting with it. The attention paid to the Ripple network, particularly from the banking sector using means that the use could grow quickly in the near future.

It is therefore important to keep a close eye on this development and to be involved in possible steps that banks take.

 

Edited by Picard
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4 minutes ago, Picard said:

The DNB is quite bullish about solutions like Ripple offers with xCurrent. They acknowledge the risks involved with innovation but are convenced the payment channels need to be changed and therefore the need for blockchain innovation could outweigh the risks.

 

https://www.dnb.nl/binaries/Bijlage bij de Visie op innovaties_tcm46-332794.pdf

Box 3. Ripple Ripple is een decentraal betalingssysteem, waarbinnen gebruik gemaakt wordt van een eigen virtuele valuta, ook Ripple genaamd (afkorting XRP). Opmerkelijk is dat XRP centraal is uitgegeven, maar dat deze alleen gebruikt kan worden binnen het decentrale Ripple-netwerk. De software van Ripple is open source. Er is geen centrale partij die het Ripple-protocol bezit of controleert en het wordt gerund op computers uit de hele wereld, waardoor iedereen het kan gebruiken, ontwikkelen of uitbreiden. Gebruikers van het systeem kunnen betalingen direct en tegen verwaarloosbare kosten verzenden en ontvangen, in elk soort valuta (dollars, bitcoins, goud, etc.). Als de zender de ontvanger (in)direct kent, kan de transactie direct plaatsvinden als er een keten van ‘vertrouwde’ gebruikers tussen zit. Wanneer de zender de ontvanger niet (eventueel via een derde persoon) kent, gebruikt hij een ‘gateway’: een persoon of onderneming waar (virtuele) valutategoeden kunnen worden gestort, in ruil waarvoor de gebruiker een IOU ontvangt. De balans van de gebruiker toont vervolgens het bedrag dat is gestort. Gateways zijn in die zin een soort interface tussen de buitenwereld en het Ripple-netwerk. De kern van het Ripple-netwerk is de ‘general ledger’: een gedistribueerde database die met alle servers in het netwerk wordt gedeeld en informatie over alle Ripple accounts opslaat. Elke server kan een transactie introduceren in het netwerk. Deze transacties worden uitgezet naar alle Ripple-servers, die automatisch tot consensus komen om een set transacties op de ledger toe te passen. Dit proces vindt elke 2-5 seconden plaats. Ripple is daarmee een stuk sneller dan Bitcoin, en kost ook minder computercapaciteit. Om overbelasting van de ledger te verkomen ontmoedigt Ripple transactiespam, door bij elke transactie een voor de normale gebruiker verwaarloosbare hoeveelheid XRP’s te vernietigen. Er is vanuit banken steeds meer interesse in het Ripple-protocol. Integratie van het betalingsprotocol biedt banken de mogelijkheid hun klanten direct geld in elke valuta en elke hoeveelheid te laten overmaken naar andere instellingen die hier gebruik van maken, zonder gebruik van tussenpartijen. Banken kunnen daardoor kosten besparen. Momenteel maken één Duitse en twee Amerikaanse banken gebruik van het Ripplenetwerk, en verschillende andere banken experimenteren ermee. De aandacht die er met name uit de bancaire sector is om het Ripple-netwerk te gebruiken betekent dat het gebruik in de nabije toekomst snel zou kunnen groeien. Het is daarom van belang om deze ontwikkeling goed in de gaten te houden en betrokken te zijn bij mogelijke stappen die banken ondernemen.

This!  dou you have an English translation for the other members? Good and Bullish article.

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27 minutes ago, Picard said:

That is a BS article on www.nu.nl The DNB is quite actively in testing blockchain solutions and is also talking to and with Ripple.

It seems the journalist hasn't done his homework.

It is not a BS article, it is just not 100% complete. DNB has indeed tested several prototypes of blockchain and DLT tech. They tested a POW based own blockchain, a pre-mined system with transaction fees, a centralized wallet-based system and a consensus based system. No system fulfilled all criteria, they were all inferior to Target2.

The thing is that DNB compared DLT tech to Target2 and not to FX Swift transactions. They are very well aware of the fact that DLT can be a solution for cross border FX transactions.

BTW Europe wants to get rid of Swift for Target2 for a long time, so it's certainly not the end of the story for Eurosystem payments either.

Edited by mrenne_17
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4 hours ago, Picard said:

That is a BS article on www.nu.nl The DNB is quite actively in testing blockchain solutions and is also talking to and with Ripple.

It seems the journalist hasn't done his homework.

OMG, a journalist who doesn't know what they're writing about? Stop the trains!!! And people who see something in print and presume that it's gotta be right because, of course, it was written by an "expert" in the field. It's almost kind of fun to pick apart these various so called "journalists" once you have even a decent basis in understanding all the parts, processes and objectives of Ripple. 

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12 hours ago, Picard said:

The DNB is quite bullish about solutions like Ripple offers with xCurrent. They acknowledge the risks involved with innovation, but the need for change could be changed and outweigh the risks.

 

https://www.dnb.nl/binaries/Appendix to the Vision on innovations_tcm46-332794.pdf

Box 3. Ripple Ripple is a decentralized payment system, which uses its own virtual currency, also called Ripple (abbreviation XRP). It is noteworthy that XRP is centrally distributed, but that it can only be used within the decentralized Ripple network. Ripple's software is open source. There is no central party that owns or controls the Ripple protocol and it is run on computers from around the world, allowing anyone to use, develop or expand it. Users of the system can send and receive payments directly and at negligible costs, in any type of currency (dollars, bitcoins, gold, etc.). If the sender knows the receiver (in) immediately, the transaction can take place immediately if there is a chain of 'trusted' users. If the sender does not know the recipient (possibly via a third person), he uses a 'gateway': a person or company where (virtual) currency bonds can be deposited in exchange for which the user receives an IOU. The balance of the user then shows the amount that has been deposited. Gateways are in this sense a kind of interface between the outside world and the Ripple network. The core of the Ripple network is the 'general ledger': a distributed database that is shared with all servers in the network and stores information about all Ripple accounts. Each server can introduce a transaction into the network. These transactions are routed to all Ripple servers, which automatically come to a consensus to apply a set of transactions to the ledger. This process takes place every 2-5 seconds. Ripple is therefore much faster than Bitcoin, and also costs less computer capacity. To avoid overloading the ledger, Ripple discourages transaction spam by destroying a quantity of XRPs negligible for the normal user in each transaction. There is increasing interest from banks in the Ripple protocol. Integration of the payment protocol offers banks the possibility of having their customers transfer money directly in every currency and every quantity to other institutions that use them, without the use of intermediary parties. Banks can therefore save costs. Currently, one German and two American banks use the Ripplen network, and several other banks are experimenting with it. The attention paid by the banking sector in particular to using the Ripple network means that the use could grow rapidly in the near future. It is therefore important to keep a close eye on this development and to be involved in possible steps that banks take.

 

Update: Translation from Dutch to English. Hopefully it is understandable.

Box 3. Ripple

Ripple is a decentralized payment system, which makes use of a private virtual currency, also called Ripple (abbreviation XRP). Remarkable is that XRP has been issued centrally, but it can only be used within the decentral Ripple network. Ripple's software is open source. There is no central party that controls the Ripple protocol and runs on computers from all over the world, so that everyone can use it, develop or expand it. Users of the system can make payments directly and against negligible Send and receive costs in any kind of currency (dollars, bitcoins, gold, etc.). If the sender knows the receiver (in) immediately, the transaction can take place immediately if there is a chain of 'trusted' users in between. When the transmitter is the receiver does not know (possibly via a third person), he uses a ' gateway ': a person or company where (virtual) currency credits can be deposited, in exchange for which the user receives an IOU. The balance of the user then shows the amount that has been deposited. Gateways are in that sense a child or interface between the outside world and the Ripple network.

The core of the Ripple network is the 'general ledger': a distributed database that with all servers in the network is shared and information about all Ripple accounts save. Each server can introduce a transaction into the network. These transactions are turned off to all Ripple servers, which automatically come to a consensus on the ledger. This process takes place every 2-5 seconds. Ripple is therefore much faster than Bitcoin, and also costs less computer capacity. To avoid overloading the ledger, Ripple discourages transaction spam with each transaction a quantity of XRPs negligible for the normal user to destroy.

There is increasing interest from banks in the Ripple protocol. Integration of it payment protocol offers banks the opportunity to direct their customers money in any currency and make use of the intermediary parties. Banks can therefore save costs.

Currently, one German and two American banks use the Ripple-network, and several other banks are experimenting with it. The attention paid to the ripple network, especially from the banking sector using means that we could grow quickly in the near future.

It is therefore important to keep a close eye on this development and to be involved in possible steps that take banks.

 

 

Here is an English version of the Appendix.  And you're right, don't bother reading the article when you can read the primary source.  Here is the DNB Bulletin itself, which provides much more detail.  To be sure, DNB was not satisfied with the four prototypes, but at the end of the notice, it seems to indicate further exploration into DLTs "involving different currencies."  

Therefore, with DNB's awareness of Ripple and its intent to continue exploring, it is reasonable to suspect that the ILP may be tested in the near future.

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22 minutes ago, Simoun said:

 Here is the DNB Bulletin itself, which provides much more detail.  To be sure, DNB was not satisfied with the four prototypes, but at the end of the notice, it seems to indicate further exploration into DLTs "involving different currencies."

Thanks for posting this! I was not aware they had a report on their website.

I had also heard they are looking into DLT for foreign exchange transactions, could you please tell me what is written about it in the report? Can't seem to find it anywhere but my Dutch is not perfect.

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28 minutes ago, mrenne_17 said:

Thanks for posting this! I was not aware they had a report on their website.

I had also heard they are looking into DLT for foreign exchange transactions, could you please tell me what is written about it in the report? Can't seem to find it anywhere but my Dutch is not perfect.

I just Google-translated the DNB Bulletin.  As for DNB's underlying position papers, I found links to the English version here.  I haven't fully read them, but from what I've gleaned, the focus is on the domestic payment system and SEPA.  Perhaps the DNB has other publications on its website on cross-border transactions, but I haven't done any research on that.

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6 hours ago, Simoun said:

I just Google-translated the DNB Bulletin.  As for DNB's underlying position papers, I found links to the English version here.  I haven't fully read them, but from what I've gleaned, the focus is on the domestic payment system and SEPA.  Perhaps the DNB has other publications on its website on cross-border transactions, but I haven't done any research on that.

Ok, thanks! That‘s in line with what I thought. Was hoping to see more details about the parts „involving different currencies“ in the report, but I guess we will have to wait  little longer.

I find it a little disappointing, for a highly open and innovative country like the Netherlands, they focus so much on Target2, but okay it is a European Central Bank so that‘s what keeps them most busy of course.

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3 hours ago, xrpthestandard said:

But Swift and Target are different things right? So why do you say Europe wants to get rid of Swift?

Yes, they are different things. And I did not say Europe wants to get rid of Swift :)

Target2 is the European RTGS system and runs almost exclusively on Swift, for the simple reason that 15 years ago when the system was implemented there was no alternative. Meanwhile there are other network providers on the market and newer systems such as T2S, the securities settlement system, work on different network providers (max. 2 to make it not too complicated, but still allow competition between them). Eurosystem wants to consolidate Target2 and T2S to make some kind of a gigantic settlement platform, more efficient, better liquidity management, safer and less vulnerable against cyber attacks, multi-currency, cheaper and easier to implement, by e.g. consolidating interfaces and gateways.

The process has started last year and now they are studying different alternatives, which will for sure lead to a system that is not relying on Swift any more. Implementation is planned in 3.5 years from now.

They are taking advantage of the fact they are redesigning the whole system to study DLT and see if this technology could be of any use.

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