Netherlands Central Bank seeks protection against cyber attacks in the transition to the blockchain

Published on July 15, 2016

Netherlands Central Bank seeks protection against cyber attacks in the transition to the blockchain

    The future of the blockchain and its importance is still the subject of much controversy, but the bets on it are becoming more and more serious. The central bank of not the poorest country in the Netherlands is implementing an ambitious experiment, which could result in the transfer of the entire financial infrastructure of the bank to the blockchain.


    One would expect that these experiments will take all the central banks, but so far this does not happen,
    - said Ron Berndsen, head of market infrastructure DNB

    Earlier, the Dutch Central Bank has already carried out a number of preparatory studies to simulate the life cycles of Bitcoin from the initial stage, until 2140, when the last coins will be mined.

    To create a modeling environment, the DNB gathered a working group of “motivated experts” who acted as fictitious members of the network.

    At the first stage, the working group adapted Bitcoin software to repeat the ecosystem cycles in the first two months of the existence of a digital currency, which was played by the experimental DNBcoin, which was designed specifically for this experiment. Using five laptops, the DNB team extracted the first DNBcoin block, known as the genesis block, and generated thousands of new blocks. They sent coins to each other, testing various scenarios and experimentally determining the corridor of commissions.

    In the course of the second part of the experiment, the DNB research team worked on the Bitcoin development scenario in 2140. Although the end of the Bitcoin emission cycle will not come soon, the DNB wanted to imitate the conditions for the implementation of the final stage of the cycle.

    The second prototype of DNBcoin takes the other extreme of Bitcoin, jumping right into the year 2140, when the last of 21 million Bitcoins will be created.
    - Berndsen

    For this imitation, the Central Bank team had to immediately mine all the DNBcoin coins. They were created using a single laptop and subsequently distributed throughout the network. To reduce the amount of electricity spent on mining, the initial remuneration for the unit was 1 billion DNBcoin, and then sharply decreased, eventually coming to zero. Researchers generated 3 billion DNBcoin in 30 seconds.

    While the first two stages of research focused exclusively on the functioning of a digital currency in a simulated environment, the third part of the experiment will test the possibilities of the blockchain, as an alternative to existing financial instruments, which is a significantly more time-consuming task.

    We understand that the next prototype will require even more coding, more cogitative efforts, and for this we will need more people.
    - Ron Berndsen

    However, the goal justifies the money spent: using the blockchain experiment, DNB expects to significantly reduce, if not negate, the risk of hacking online services of the Central Bank, as recently hacker attacks have become a serious threat to large financial institutions around the world.

    For example, in March of this year, the Bloomberg news agency reported on numerous parallel hacker attacks against dozens of US financial services, including the New York Stock Exchange and the Nasdaq, and the Bank for International Settlements called for immediate action to prevent the actions of intruders. The DNB believes that a blockchain can be a solution. To break into a network based on distributed register technology, hackers will need enormous computing power.

    Using blockchain technology, it is possible to distribute nodes in such a way that it will be impossible to find out where they are.
    - Berndsen

    For the experiment, the same team that Berndsen assembled earlier this year will be involved. The DNB acknowledges that the full potential of the blockchain may not appear soon, but using the modeling environment, researchers will try to speed up this process and look forward to working with other central banks.

    Mine is not too late: