The central banks for Japan and the European Union have published the results of a months-long assessment of distributed ledger tech (DLT).
Launched in December 2016, “Project Stella” was aimed at exploring whether a distributed ledger-based system could be used to replace the real-time gross settlement (RTGS) systems employed by the Bank of Japan and the European Central Bank (ECB). That specific application has been weighed by other central banks, mostly notably the Bank of England, which said earlier this year that it would pass on replacing its RTGS system with blockchain but would make it compatible with the tech.
The 23-page report published today ends with a similar conclusion: that, as it stands today, the tech shouldn’t be used to replace the systems being used by either central bank. That said, the two institutions dubbed the results “encouraging evidence” that some degree of application could happen in the future.
As stated in the report:
“Findings in relation to efficiency show that,with regard to the specific aspects of RTGS services tested to date, a DLT-based solution could meet the performance needs of current large value payment systems.Given the nature of DLT arrangements, in which the process of validating transactions and reaching consensus is more complex than in a centralised system, this is encouraging evidence.”
Among the findings, the report details, were that an increased number of nodes led to an overall increase in the time it takes to settle transactions across the network. Conversely, investigators also noted that “the distance between validating nodes has an impact on performance”.
Yet an accompanying statement from the central banks ultimately highlights the “immaturity” of blockchain for this purpose, and that the question of whether the Bank of Japan or the ECB will one day move to adopt blockchain remains an open one.
“In conclusion, while the test series produced promising results, it should be taken into account that no direct conclusions can be drawn from the test set-up with respect to a potential usage in production,” the central banks said. “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.”
The full ECB/Bank of Japan report can be found below:
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