Deutsche Bank: TheDAO attack was timely, blockchain development should proceed step by step to ensure product quality

Deutsche Bank believes that The DAO incident is a timely reminder of the importance of testing products before they are released.

Back in 2014, Deutsche Bank partnered with IBM, Microsoft and Indian outsourcing company HCL to set up a series of innovation labs aimed at improving the company’s electronic banking services. Deutsche Bank’s blockchain project has now completed the ‘proof of concept’ stage.

Deutsche Bank's labs are located in Berlin, London and Palo Alto, USA. The Palo Alto lab aims to evaluate emerging technologies from Silicon Valley and apply them to improve their products. The three innovation labs, called ' Deutsche Bank Labs ', are part of Deutsche Bank's Strategy 2020 , and the bank has provided a special grant of 10 euros for these projects over the next five years.

Why Deutsche Bank is interested in Bitcoin

Deutsche Bank is not the only bank to be leveraging blockchain technology, many are also using the technology and some are exploring it.

Edward Budd, Deutsche Bank’s chief digital officer, spoke about blockchain at the bank’s press conference, saying:

“Deutsche Bank has a number of ongoing blockchain/distributed ledger technology activities underway. Some of these activities are driven and leveraged internally by Deutsche Bank Innovation Labs . Others we cannot do independently, so we have partnered with R3 to work on.”

Edward Budd, Chief Digital Officer, Deutsche Bank

The DAO incident is a wake-up call

Regarding The DAO, Deutsche Bank said in an email:

“For those of us focused on getting out of the lab and into the marketplace, The DAO is a good and timely wake-up call on the importance of clear governance/standards and product quality assurance factors. These factors must be considered by a regulated entity as technology becomes a product, whether for individual use or as part of a marketing initiative. These factors will form the core pillars of Deutsche Bank’s blockchain initiatives and will be met by all of our banking product lines running blockchain/distributed ledger technology.”

Deutsche Bank also made it clear that The DAO incident will not have any impact on their ongoing blockchain plans. They are well aware that blockchain is by no means a "revolution that can be completed overnight" for them.

Step by step

Deutsche Bank is taking a slow and steady approach to adopting blockchain technology. It expects to have commercial blockchain technology ready for implementation by the end of 2017. Edward Budd said that quality assurance, security, legal requirements and governance should be the focus before blockchain technology can be used in regulated financial markets.

According to Budd,

“It will take another five to ten years for distributed ledger technology to become mainstream. That means by 2027. The World Economic Forum predicts that by 2027, 10% of the world’s GDP will be stored on blockchain.”

Security remains an issue for most banking operations, and when you operate in a highly regulated environment, it's obvious that special attention needs to be paid to the security of customer information and transactions.

Deutsche Bank said:

“We look at a variety of blockchains/distributed ledgers, but like any technology, it’s more about how the technology is deployed and how well it’s tested that determines how secure it is. Currently, the Bitcoin protocol, as the longest-running version, has been proven to be secure. However, risks can never be completely eliminated as blockchains become more complex with the addition of smart contracts. We are increasing the areas where security needs to be applied, including increasing the level of testing and doing more testing.”