The Bank of Netherlands is preparing for the most ambitious blockchain experiment ever, where the whole financial market could be based on a blockchain technology.
The person, responsible for cryptocurrency experiment in the central bank says that the distributed nature of blockchain technology could lead to entirely re-imagined financial market infrastructures (FMIs), much more resilient to hackers. The experiment is trying to make an outlook how internal operations within FMIs could be distributed among participating nodes. In this case, the attacker would need even more than half the computing power running the nodes to break the financial market infrastructure.
De Nederlandsche Bank’s head of market infrastructure, Ron Berndsen, told Coindesk (bitcoin news provider), why this new system should be more immune:
“If hackers were to go through the trouble of taking down two or three data centers they would take down the financial markets infrastructure. With blockchain, you could distribute the nodes and you might not even know where they are.”
After the announcement from June, the central bank started to use the open-source bitcoin software to recreate conditions at the network’s inception in 2009 in an effort to model what the system might look like in 2140, when the last bitcoin is mined. Among the facts, known from the experiment, was that the bank was able to mine what the team called DNBcoins at a much faster rate by starting with an initial block reward of 1 billion DNBcoins and halving the reward every two minutes.
The most recent experiment will be now focused on financial markets infrastructure. As this year showed, that the FMIs have become increasingly interesting targets for sophisticated international attacks, this experiment was targeting exactly this problem. For example, Bloomberg reported in March, that hackers linked to the Iranian government had attacked about four dozen US financial institutions, including the New York Stock Exchange and Nasdaq.
The attacks against FMIs were getting strong so the chairman of the BIS – Benoit Coeure published the “Guidance on cyber resilience for financial market infrastructures.” In this report, we can read: “FMIs should immediately take necessary steps in concert with relevant stakeholders to improve their cyber resilience, taking into account this guidance. FMIs should also, within 12 months of the publication of this guidance, have developed concrete plans to improve their capabilities.”
Central bank of Netherlands did not neglect this problem and motivated other central banks to weigh blockchain applications for a wide-range of possible solutions with financial market infrastructures now. Nevertheless, Berndsen stated that it will take years before the full potential of blockchain becomes clear, and that his bank is working to help accelerate that learning curve. Berndsen added: “We have the idea that this next prototype might require more coding, more thinking and we might need more people.”
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