Korea’s central bank considers blockchain implementation in settlement system

FinTech | December 29, 2016 By:

The Bank of Korea has published a research report on blockchain or distributed ledger technology conducted together with IT companies, academics and financial experts.

Published as part of an overview of the central bank’s future plans, the report titled “Present Status and Key Issues of Distributed Ledger Technology” further details policy issues that it believes could hinder the growth of distributed ledgers.

The research has quantitatively estimated the cost-cutting effect of the application of the blockchain technology for the first time in Korea. Substantiating it with statistics, the report said that blockchain implementation could save the bank about ₩107.7bn (16% its total costs), a figure based on previous research by Goldman Sachs.

“In order to utilize distributed ledger technology in financial services, it is necessary to resolve technical issues such as securing trade secrets, controlling authority, maintaining trust and security, and securing scalability”, it said. “Bank of Korea assumed the situation of applying the distributed ledger technology to BOK-wire+ (Bank of Korea settlement system), considered the solutions in each process’s potential problem, and suggested specific implementation plan.”

In addition, the report also recommended the supernode to be responsible for token issuance and granting participants (or token users) access to the shared ledger. It also calls for a Merkle root-based implementation of a public blockchain capable of conducting 3,000 transactions per second.