European Central Bank and Bank of Japan: distributed ledger technology immature, “not a solution”

European Central Bank and Bank of Japan: distributed ledger technology immature, “not a solution”

There have been hundreds of blockchain trials across many industries. These are launched with great enthusiasm and many press releases; when the trial is finished, there’s nary a peep.

One such trial, run by the European Central Bank and the Bank of Japan, started (per chapter 11 of the book) with the usual fanfare in both the Bitcoin and mainstream press in December 2016. They set up Hyperledger Fabric 0.6.1 — apparently without IBM’s involvement — and tried versions of BOJ-NET and TARGET2, the two banks’ real-time gross settlement systems.

The outcome has just been announced, and even the Bitcoin press couldn’t make it sound good.

The report is polite and says some positive things, mostly about smart contracts on edge nodes verifiying that the data is sensible. I’ve seen blockchain DLT enthusiasts claiming it’s a positive result, and that this is actually good news for blockchain DLT. What stood out for me, though, was the conspicuous absence of any enthusiasm — they showed that the test system was not much worse than existing systems, but gave no reasons to proceed.

The summary is rather harder to spin:

Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and TARGET2 at this stage of development.

I’m pretty sure quite a lot of blockchain pilot reports look like this, even if we don’t see them. (Anyone who feels like leaking one …) There’ll be reasons we’ve had trials of these things for years, but zero real-world production systems that aren’t a cryptocurrency, or that are actually even a blockchain.

The ECB hasn’t given up entirely — in April they were looking for a DLT project lead on a two year contract, though they noted even then that “blockchain technology lacks the necessary maturity to be part of its market infrastructure, citing deficiencies in safety and security.”



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