Banks and Brokerages Should Be Mining The Blockchain
The biggest new trend I am seeing in bitcoin/blockchain is the emergence of a number of companies building systems on the blockchain (including the NASDAQ) to handle the backoffice issues that banks and brokerage firms have to manage. The blockchain is an ideal platform to build these sorts of applications (clearing, settlement, etc) on.
One concern I hear, though, is that banks like to know who is managing their infrastructure and they are uncomfortable with miners they don’t know, located in parts of the world that make them nervous, providing the transaction processing infrastructure for these applications being built on the blockchain.
To me, that is the perfect reason for banks and brokerage firms to take a bit of their data processing infrastructure and point it to the blockchain and start mining it. They could even create a mining pool among the large money center banks. And it is relatively simple for a blockchain application to route its transactions to certain miners to process.
If you think of the blockchain as an open source, peer to peer, massively distributed database, then it makes sense for the transaction processing infrastructure for it to evolve from individuals to large global corporations. Some of these miners will be dedicated for profit miners and some of them will be corporations who are mining to insure the integrity of the network and the systems they rely on that are running on it. Banks and brokerage firms are the obvious first movers in the second category.
I wonder if the CIOs of the large money center banks are already doing this. If I was in their jobs, I would be all over this.
Will Bitcoin-Blockchain change double-entry accounting which has been with us since 14th century?* http://techcrunch.com/2015/…I especially LOVE transformative technologies that don’t only add an abstraction layer on top of what we think we may have built since AI, the Web and computing systems were invented (so the last 50-60 years) but completely reconfigures hundreds — if not thousands — of years of our global systems.Both my startups #1 and #2 are in this spirit of invention.The other tech I’d get hands-on with in terms of designing UX, coding its stack, making it more consumer usable and comms-friendly would be Bitcoin-Blockchain.
As someone who is interested in blockchain technology, and works at a firm which writes software to solve back office problems, I have to ask “what does the blockchain really provide in clearing and settlement?”As I understand it, the blockchain primarily solves the problem of transference of digital assets between parties without an existing trusted relationship or a trusted intermediary. While I can see a couple of use cases around custody and titles (of physical goods), the application seems to be limited (again, unless a digital asset is concerned). You’ll have to institute an entire protocol on top of the network (like FIX or SWIFT or FPML) to standardize the back office instructions and events, and at that point you are basically just using the network to publish messages – something that isn’t a tough problem and is solved in many ways today.I’m very serious about this question – we’ve had a couple of start-ups come in to pitch us on the applicability of the blockchain, but when we dig into exactly what it will change the answer always seems to come down to “it delivers the message”, which isn’t an unsolved problem.I’d love to hear people’s feedback.
The problem being solved is more a philosophical one: should transactions and values continue to be concentrated in the hands of various cartels (financial institutions, governments etc.) who set the prices and benefit from the margins or distributed into the hands of the global community?Following the global financial crisis, people started asking questions about trust and social contracts as well as transparency and ownership.I agree with you: “You’ll have to institute an entire protocol on top of the network (like FIX or SWIFT or FPML) to standardize the back office instructions and events.”I’m an ex-banker. My team invested in / incubated the majority of the trading platforms used by the i-banks, including clearing & settlements pieces.
Cartels rarely lead the charge to disband themselves, no?
Yet, telcos eventually decided to become ISPs even if it cannibalized their long distance calling revenues.
They did not do so voluntarily. The cable companies were going to eat their LD lunch.
Of course it was voluntary. Perhaps, based on their assessment of threat from cable companies, but they still weren’t forced at gun point.If banks see that blockchains has the potential to “disband them”, don’t you think they’ll see that as something that wants to eat their lunch too? Banks didn’t invent and develop this tech (i.e. they didn’t lead the effort), but if they perceive it as a potentially existential threat, they’re sure as hell going to embrace it rather than getting extinguished by it, don’t you think?Right now, they’re just testing the waters and wrapping their heads around it. Only time will tell what happens next.
Blockchains disband banks like guns kill people.Your definition of voluntary is faulty, at least as it pertains to competitive markets.
> Blockchains disband banks like guns kill people.Not sure if I agree with that. Banks could certainly include a “world wide ledger” into their operations. Most common people don’t want to be their own bank anyway.> Your definition of voluntary is faultyIf embracing something after having evaluated it (both as a threat and an opportunity) isn’t “voluntary”, then what is?> at least as it pertains to competitive marketsOk, so what’s the definition of “voluntary” in this context?
Voluntary = no threat of loss
Mkay, we’re talking about different things then. Mine would be the regular dictionary definition, something along the lines of “acting without compulsion” or “done by free choice”.Now that that’s out of the way, my point is still the same: Banks doesn’t in any way “lead” the invention/development of blockchain technologies, but they may still adopt them for some of the same macro reasons that telcos became ISPs.
As I recall, about the time the commercialInternet was exploding, Cincinnati Bell orsome such stated that the data rate forthe entire US long distance network wasabout 38 billion bits per second.Okay, now that’s just one wavelength onone fiber, that can carry severalwavelengths, in a cable with about 144fibers, with the cables along variousrights of way — pipelines, high voltageelectric power lines, railroad lines,highways, rivers, coast lines, etc.The Internet data rates can knock off thelong distance voice data rate as atriviality.A biggie is, what the heck was needed?Sure, solid state lasers sending lightdown an optical fiber. For the lasers,sure, the research on Ga-Al-Asheterojunctions. The optical fibers wereanother major research challenge.And, with irony, just where did thisresearch get done? Sure, heavily AT&TBell Labs.Yes, also needed was research for themodulation, detection, re-amplification(e.g., of the optical signals in thefibers and without converting back toelectrical signals), error detection andcorrection, jitter, dropped packets, outof order packets, routing, etc.
Bitcoin-Blockchain wants to sell the story, “Hey banks, you can just plug&play into this new way to deal with all transactions!”That’s not how the banks operate. After all, we didn’t see them mass-adopting Paypal for internet payments.Instead, they banded together and created their own internet payments systems.So it will be with Bitcoin-Blockchain. The banks will band together and make their own.
I know for a fact about one bank in the UK that already has
The Bitcoin-Blockchain tribe would also need to not just persuade one Global Head of Trading at-a-time but the Global Heads across all the fiefdoms (Equities, IR-FX, Corporate Finance etc.) across all 25 Tier 1 institutions at-the-same-time and let me say this with my hands-on operational experiences with Global Heads in i-bank……..It’s not going to be an easy sell for the Bitcoin-Blockchain tribe.
.Bankers are not going to give up their corner offices to geeks in skinny leg jeans.The power in a bank is in the customer facing positions.JLMwww.themusingsofthebigredca…
Haha, JLM.So I had a corner office; no open-plan because of the nature of our role (Jedis).Nowadays I wear a lot of skinny jeans.The power in a bank are in the rain-makers, revenue generators, sell-side analysts and traders.There are customer-facing positions and customer-facing positions.The salary that a customer services assistant in a retail bank makes in an entire year may be what a rain-maker etc. spends in a single restaurant meal to celebrate an M&A transaction that goes well.
.#1 son is an investment banker. Not what it was once upon a time but still an obscene comp package when they get deals done.And that is all it is about — getting deals done. Nothing else.One thing you are very correct about is the “traders” — they are an important element of the mix.Dress for the job you want to have in 5 years.JLMwww.themusingsofthebigredca…
:*).Teens: lab coat, safety googles & hair tied back in chemicals industry.20s: smart casual in startups => DKNY woolen navy skirt suit with 3-ply Egyptian cotton shirts and 100% Italian leather shoes in banking.Exactly, that end of banking (M&A, transactions) trains and instils great discipline: Get deal done. Get bottom line booked.30s: skinny jeans, fleeces, multi-colored shoes, self-knitted cardigans, smart A-line dresses with woolen jacket for meetings and… self-sewn dresses I bought the material for. ::80s: may be deep-sea diver or an astronaut!
Gads, I’m glad I’m a man!Clothes?For nearly everything, Bean’s boatingshoes (fine in wet/dry weather andotherwise nearly indestructible), somewear nearly forever thick, synthetic brownsocks, cheap, standard, Sam’s Club bluejeans (actually quite strongly sewn),black leather belt, strong, single layer(not two layers glued together), Bean’swhite knit polo shirt with a pocket.For dress up, black leather ‘pennyloafers’, black socks, traditional darkgray suit, same black belt, whitecotton/polyester button down shirt,blue/maroon silk tie.That’s all folks!I remember what my wife did in clothesshopping: She had a long list ofcriteria; that she was good at sewinghurt. For her to buy or decide to wearsomething was agony for her and,eventually, also me.So, I went clothes shopping with her:One time she wanted a dress for casualwear, say, medium priced restaurants. So,we went to a good department store, andshe looked at some candidates and pickedone for consideration:Me. Does it look okay to you? That is, doyou like the fit, the way it looks, goodenough?She. Yes.Me. Good. Since you know a lot aboutsewing, do you see anything seriouslywrong with its construction?She. No.Is the price okay?Me. It’s fine.Do you think you can get some use from it?She. Yes.Me. Then I suggest we get it. Okay?She. Okay!Me. Would you like to get a second orthird one in the same or different color?She. No.Me. Would you like to shop for adifferent dress?She. No.Me. Is there anything else you need orthink you could use you would like to shopfor now?She. No.Me. Good. Let’s buy the dress and thengo to dinner.Similarly for a ‘business suit’: Sheshopped all day and couldn’t make up hermind. So, early on a Saturday I calledBrooks Brothers and confirmed that theyhad a woman’s department, and off we went.They had a really nice navy bluehopsacking cloth, soft lines,easy fit, with a cute jacket and a lined,A-line skirt with a traditional reversepleat. We got her the jacket and twoskirts, and she liked it for years.Same drill for a winter coat, a summerrain coat, several pairs of shoes, etc.Key: “Yes, Dear. It’s fine.”One of the great all-time stories of womendoing clothes shopping is in a video aboutthe Van Cliburn Piano Competition: One ofthe contestants was a woman from Russia,fantastic pianist, yup, definitelypassionate, definitely a woman –no doubt about that!Well, the competition is careful toprovide good hosting for thecandidates, typically a well to dofamily with, of course, a piano in perfectcondition available 24 x 7 and goodinsight into every little thing thecontestant might need. Really goodhosting.So, it turned out that this Russian womancontestant did well in the competition andfor one of the last rounds really neededan appropriate dress but didn’t have one.So, …, right, with the standard ofgood hosting, the host and severalother women associated with thecompetition got on the problem, big time!Yes, they brought their plastic!She needs a dress? This is going to befun!So, it was not too far to the nearestNeiman-Marcus, right, the place set up todo something about all that Texas oilmoney!So, sure, women just love to goshopping — it starts, early, apparently,I’m no expert, as early as age 3 or so.Better still, women like to go shopping ingroups of several women.Better still, shopping for a fun,exciting, special discretionaryitem.Better still, shopping at Neiman-Marcus.Better still, shopping with a great excuseto have cost little or no object. I.e.,ignore the price tags!Better still, shopping to get big smilesfrom a passionate Russian woman who gushes”We don’t have stores like this inRussia.”So, the video showed a fun situation withthe Fort Worth women helping thepassionate Russian woman buy a greatdress!And she got a dress — it was, right, red,say, to a man, something like a Ferrari.Did I mention that no doubt she was awoman?She was also one heck of a pianist.Fun times!Clothes shopping for men? Totallydifferent situation!
I’m into the Chris Pine school of sartorial elegance: slick banker, geek chic, classic jeans + white top, country casual, scrubs up well for posh do and smart casual.This is a nice interlude from all the seriously smart (but unsexy) stuff about custody, settlements and double-entry accounting interalia cryptographic innovation.
No, but bankers’ taste in fashion will change to favor skinny leg jeans. If John Legere can get away with it, surely it will eventually catch on elsewhere. Personally I don’t and never will fit in a skinny leg anything, even if I wanted to….
I remember hearing this about newspapers and TV stations and hollywood.
.Excellent memory, I am sure. The point is exactly what?JLMwww.themusingsofthebigredca…
Not unless there is a Prime Brokerage market that they can control and leech risk free profits out of.
Great point! And where is that interbank prime brokerage platform?Hmmn… a number of big players shuttered them in 2012-3 because of the regulatory changes and because their losses didn’t warrant the reinvestment in keeping them.This leads us back to @JLM:disqus ‘s great point about “Why take a risk when the reward is either inconsequential or nonexistent?”
Just for clarity, I do see an opportunity for blockchain to eliminate banks themselves as intermediaries in multiple flows. What I’m struggling with is understanding how banks can benefit from this technology.It feels a bit like telling a taxi driver to start testing a self-driving car. It’s not going to add much value to the taxi-driver, even though it will create tremendous value by displacing him.
Well there is a certain class of people, primarily younger people I have found and/or academics or perhaps newspaper folks who don’t think like that. They just think for the greater good and that “everything will just work out”.For example newspapers and the media were all in on the Internet even when it was apparent that it would be the thing that caused their demise. Without newspapers or the media touting the Internet in no way would it have grown the way that it did. Would never have happened without all of that free exposure.Taxi drivers on the other hand are people who have to hack out a living and are certainly not (as you pointed out) going to do or support anything that displaces them. So if they had to vote on giving Uber the ability to pickup fares at the airport of course they would say “no fing way”.So as the ratio of idealistic people at banks or corporations changes it could conceivably happen.
It might be more about telling a taxi driver to test a car, and he’s asking if people can drive cars themselves why would they need me? some people don’t want to drive or be in control or know how the car works. They just want to get from a to b. While anyone can be their own bank with bitcoin, many (most?) will never want to be, but they can benefit from it transparently as a back-end rail perhaps – see Abra for example.
Change for the banks will need to come from within, for it to make a difference.Just as internet payments & banking didn’t get too much adoption early on, until the credit cards and big banks said it was OK. [I remember as I was there, waiting, and being on the fringe for 3 years].So, all the Bitcoin mining in the world won’t make a difference to banking until banks start mining themselves.
Banks didn’t become comfortable with internet payments until they could make them compliant with regulations. Trustlessness is a huge philosophical hurdle for regulators and banks. AML and KYC regulations are the philosophical opposite of the core blockchain value proposition.
It was part of it, but we’d hear “it’s not secure”. Well in truth, they hadn’t wrapped their heads around it yet. It took them a while to get it, and mobilize resources to integrate the Internet.It takes a while for something to get understood by a maverick programmer at a bank, til it reaches the CIO, til it reaches the banks executives. It’s a long road to full understanding before significant actions take place.
they hadn’t wrapped their heads around it yetI don’t know why this surprises everyone so much. If you have a person in a situation where a mistake could cost them their job or their business of course they are going to be cautious. And they should be cautious. This is not a game where bets are spread and hedged and not even close. Real business life (ie the non startup world) is not a game where failure is seen as a badge of honor and you get do overs.This might come as a surprise to anyone who “doesn’t have children” as the saying goes. Until you are in those shoes there is no way you can have any empathy for what it is like. However if you do have empathy you might be able to actually address the concerns in a way that addresses the underlying fear of failure.Not to mention how much the business climate and risk has changed over the last 35 years. From my accountant last week “oh if you do that we won’t be able to sign off on the return”.
I remember as I was there, waiting, and being on the fringe for 3 yearsHad to process initial credit card payments from a manual terminal by keying them in. And in no way could say that we were taking cards “over the internet”. Ditto for even getting liability insurance think we had to make something up that would categorize correctly.
Exactly. We were both there. I had to go through an “Internet Gateway” which were looked upon like shady operations.
“what does the blockchain really provide in clearing and settlement?”Speed and incredible cost reductions. Case closed.Have you been a recipient or issuer of a Bitcoin transaction? It gets settled in less than 10 mins. As fast if not faster than email. Boom. And cheap.
One of the reasons for using banks is accountability, security and paper trail. Friction could be considered part of that security.Separately where are you seeing that email ever takes 10 minutes?
First confirmation takes 10 minutes.The initial transaction that you can see is seconds. Try it out.. go grab a free wallet and buy $10 worth of btc and transfer it from your desktop to your phone. You’ll get it.
One confirmation takes, on average, ten minutes. There is no guarantee that it still won’t be reversed, just that once a transaction is in a block that mostly eliminates the most likely forms of double spending (i.e., race attack, replace-by-fee). After three confirmations (about 30 minutes, on average) the transaction is probably safe enough from a chargeback that most retail and other activity could use this threshold. At six confirmations the work needed to reverse a transaction is so high it is deemed economically unlikely to happen. There’s still a risk though, and that’s why maybe for very large amounts with untrusted parties that even more than six confirmations would be prudent (per Gavin, quoted after the March 2013 unplanned hard fork in which an exchange lost 10K from a confirmed transaction that got double spent.)
One confirmation takes, on average, five minutes, depending on when in the “cycle” your transaction occurred (or more technically precise: depending on how lucky you are).
.Settling a transaction in ten minutes in the current world of banking would be a big step backwards. My Schwab account updates in seconds. Trades close in 3 days but the account shows the new info immediately.What is broken?What is being fixed?What pain is being eliminated?What killer new development is being presented?This is old wine in old, cracked bottles.I could be wrong.JLMwww.themusingsofthebigredca…
Not for your trading account. That’s fast, but there, maybe the cost is high. And you don’t know if they settle with you before they clear it 100% in the market. There is a cost for the float, somewhere in there.As for speed and convenience, I’ve got more of it from within my Bitcoin wallets than from my banking App today. And one is 18 years in the making, while the other is less than 1.5 yr old. The 1.5 yr old is barely starting. I could imagine doing more there than my bank would eventually allow.
sorry, are you saying I could send you money right now via traditional banking and it would settle irreversibly within 10 minutes?
.Sorry, reading comp problem — Schwab is a brokerage firm.Was discussing “trades” & “transactions” — hard to follow, I understand.My fault.JLMwww.themusingsofthebigredca…
The Schwab trades updates in seconds, just as a Bitcoin transaction would in any wallet (yes, the transaction itself takes seconds). But actual settlement, and irreversibility, is probably way faster for Bitcoin transactions.The ledger (blockchain) is also open to anyone, worldwide, which means that you can prove that the transaction happened, possibly with additional transaction details/metadata that’s anchored to the blockchain, without the need of your broker. Where’s the Lehman customers’ transaction records now?As someone mentioned elsewhere in these comments, the “fix” is a non-walled single point of truth, immutable and everlasting, a distributed world wide ledger, open to anyone without asking permission.Now, imagining all the applications in will enable 20 years from now is as hard as predicting today’s internet 20 years ago.
.The Schwab trade is “defensible” meaning the brokerage firm has to make good on the trade as soon as it is concluded. A brokerage firm even has to deliver on a trade if you have a market bid and there is a market ask posted — and for any reason their failed to execute.I have had this happen more than once. I have had the brokerage pull the tape and there it was. The time stamping of trades in today’s environment makes this easy.We are conflating the term “settlement” with the trade itself. In a securities context, settlement is the last date of physical delivery which harkens from the time of paper share certificates. Today, it refers to the date at which a transfer agent — all public companies use transfer agents — must update their books.The discussion can get a little esoteric if you throw in OBOs and NOBOs and street name implications.One of the other reasons that stocks settle on the third day is to provide time for dividend paying stocks to process any dividend implications. Ex-dividend trades can get a little jinky.As to the implications of bitcoin/blockchain, isn’t everything you’re suggesting purely theoretical?Schwab is a reality today. How that compares to a theoretical future seems a little speculative.I am sure there will be great future applications for the blockchain. We shall see. As you correctly state, it has taken more than 20 years to get the Internet to where it is today.Nonetheless, there is no current killer bitcoin/blockchain app staring us in the face today.JLMwww.themusingsoftthebigredc…
What I’m talking about is trustless irreversibility that you can verify yourself. As opposed to you trusting a third-party to keep its promise-to-deliver after a certain amount of time. I’m not saying the latter is bad, just that the former has its uses too. There’s nothing inherently wrong with trusting third parties either. But up until now it’s been necessary. Soon (relatively speaking) it won’t.Yes, most of it is in the future, but it’s being worked on:http://www.digitalcurrencyp…http://www.investopedia.com…Anyway, one can still evaluate a technology platform and find that it brings something new and exciting to the table even if the apps aren’t production ready yet (and even then, some argue that “Bitcoin the Currency” is a killer app, it just doesn’t have the necessary network effect for people to realize it yet – just like email didn’t when almost noone had email addresses).If you prefer videos, here’s another perspective on what blockchains could enable: https://www.youtube.com/wat…
You know about T+3, right? Wall Street settles in 3 days. https://en.wikipedia.org/wi…The blockchain smacks this, because trades on it settle same day.
.T+ 3 originally had to do with delivering share certificates. Lots of other markets are T + 2/1.The blockchain can’t even make a trade in a stock today.You are trying too hard. The blockchain may replace sliced white bread but it isn’t there right now.JLMwww.themusingsofthebigredca…
no, with the blockchain, certificate delivery is included. that’s part of the innovation. if your asset is tied to the blockchain, it’s on the fast train.DTCC will be challenged. mark my words… 😉
.Please call me when the future arrives.Part of that time is necessary to ensure that all ex-dividend implications are complied with.A transfer agent has to make contact with the company to doublecheck the dividend implications.Transfer agents are very digitally advanced and with share certificate numbers they will continue to get moreso.This is a perfect example of where I see a “bash to fit” attitude being unrealistic. There is nothing with the transfer agent approach today.No pain. No gain.JLMwww.themusingsofthebigredca…
I guess you get at my point. If speed is the issue, what does blockchain provide that other electronic networks do not? All electronic messaging is fast, and all digitization reduces cost. Why is blockchain superior to the SWIFT network, or the FIX protocol? Is it just another standard?I think there are specific use cases, primarily where there is a specific transferable asset on the end, where blockchain might make sense – for example NYSE’s thought around managing private equity shares via colored coins.I’ve been thinking about this for some time and I do struggle to define the problem outside of a few specific use cases.
The fundamental problem it addresses is truth. In a digital world where humans can easily edit cells in privately controlled databases/ledgers, “The Truth” can be manipulated at any time by whoever owns the ledger… a 3rd party.Bitcoin removes the 3rd party and many of the related inefficiencies… speed, cost, and bias.The Bitcoin Blockchain is a neutral protocol which provides a mathematically guaranteed version of “The Truth”. It can’t be modified or manipulated by anyone. It is immutable. There is no other protocol that can guarantee the truth in this manner.Solving the problem of the truth in a digital environment is a big deal.
i like that.”The fundamental problem it addresses is truth.” – nice one.
I need a good one-liner for that relating to the unfairness it creates as well..
blockchain = truthchainIts almost biblical”collective truth will set us free”Maybe with its is own promotional jingle”chain chain chainchain of truth. . . . . “Using the “Chain of fools” tune 🙂
.Well played for cleverness and the Chain of Fools — did you mean that?JLMwww.themusingsofthebigredca…
I’d like to be a believer because as anyone who reads AVC comments regularly known I pray at “the church of our distributive saviour” but I have a nagging feeling that the whole process will the “Under-mined”.
.But I love the third parties. I know them. I trust them. I love them.Wells Fargo, USAA, Schwab, Amazon — my favorite third parties with whom I have decades of experience. I’ve been with USAA for over 40 years since I was a cadet.JLMwww.themusingsofthebigredca…
You’ll still have them and more.
.Are you telling me the “truth”? I may need to verify that.JLMwww.themusingsofthebigredca…
.If I like my bank, insurance company, broker, eCommercetailer — I CAN KEEP THEM?No kidding?Sorry.JLMwww.themusingsofthebigredca…
It also addresses unfairness by the earlier-you-adopt-the-more-you-gain-from-its-adoption. A financial transaction protocol shouldn’t exist in such a way. People don’t inherently gain more monetary value from using email.I’d love to have known from the beginning exactly who owns what, and see how much they are involved in pushing the adoption of Bitcoin – and how much money they’ve made – how much of other people’s labour they’re able to hire for doing nothing.
I don’t understand why you find it’s useful to know any of that…
You don’t find value to know what someone’s biases are so you can know if they have interest in manipulating you or a situation to benefit them over you?
Personally , I’m not interested in that as it pertains to blockchain technology. Might be relevant for politicial/public funding but private money should be private. I don’t care how much money you make, nor do I believe you should know mine. “[The] right to be let alone – the most comprehensive of rights and the right most valued by civilized men.” – Olmstead v. United States, 277 U.S. 479 (1928)
You don’t care if you other people are taking unfair advantage of you? Do you own Bitcoin or have vested interest in it?
Sounds like you do.
I care if anyone is being unfairly taken advantage of. Wish more of society cared.
To answer your questions you should really watch this six minute video on the true value of the blockchain:https://www.weusecoins.com/…
SWIFT takes 4 to 10 days to process international payments. 10-20 minutes is light-speed for me.
Blockchain data structures do this consistently, across great distances, in a way which is highly verifiable and fault-tolerant, with no fixed infrastructure or servers.Meaning networks using this tech can spring up and deploy blockchains (plural) which provide the same functionality as normal clearing systems (or any other interactive data application) at a fraction of the cost.
Well, a better SWIFT is what Ripple is going after.Nothing wrong with narrow use cases as a starting point, but there is more to it of course.Speed and lower costs can be big enablers of other things.Maybe we should connect. Feel free to email me wmougayar AT gmail. Thanks
Why is blockchain superior to the SWIFT network, or the FIX protocol? Is it just another standard?For one thing, As an individual or developer or entrepreneur I don’t have access to those networks. I, and everyone else on earth with an internet connection can access the Bitcoin network right now.
If everyone, but one person turned off their laptops would the block chain function?
That isn’t a fair comparison though, as one does many additional things like AML, currency conversion, flagging transactions based on tax regulations etc. while the other doesn’t.
Good point wrt compliance.
Bitcoin actors will also do this (provided they want to stay compliant), cf. BitLicense. Consumers, will now have a choice whether they want this protection (i.e. using a “Bitcoin bank”) or not (i.e. transacting directly). [If and when Bitcoin becomes a currency, that is.]
William – I agree with you in that it’s faster than the current P2P rail – ACH – but agree with Enno Shioji in that it lacks many consumer protection checks. I think we need to specify which rail blockchain is trying to improve. It’s much better than ACH, but much much slower than card networks. Card transactions are the bigger consumer touchpoint, thus a bigger business opportunity. If a compliant blockchain can replace ACH for banks their efficiency gains are rounding errors.If we’re talking decentralized credit payments, P2P lending, and insurance companies where banks hold the notes and run smart contracts, that’s banking innovation Holmes! But the Bitcoin blockchain is a long way away from the scalability and consumer protection checks needed to execute these concepts. The hard/soft-fork currently being discussed (http://www.reddit.com/r/Bit… might address the scalability, but Ethereum seems to be closer to building in AML and KYC.
.Not to put too fine a point on it but the ACH system was intended to make periodic and recurring payments — it wasn’t designed for blazing speed.It was designed to compete with paper checks, not digital funding.In that regard, it works just fine.I make my Obamacare monthly payment via ACH. Neither of us care how fast it’s made. It gets done on the first of the month and is reliable.ACH was designed to deliver reliability and certainty. It does exactly what it was designed to do.JLMwww.themusingsofthebigredca…
One “problem” with ACH (vs. say wire transfer and/or bitcoin) is that once someone has your inbound bank info they can in theory run transactions in both directions. There is no central authority that verifies that if you give someone your bank info for any purpose to make a deposit to you that they won’t take money out. In theory they need to get authorization to debit, but there is nobody that verifies that they have authorization. And if they wanted to they could bury that in the language of some TOS quite easily because who reads the TOS (terms of service)? So let’s skip the fact that they don’t have to verify and just go the easy route to “bury it in the TOS” and that’s your get out of jail free card.Not an issue with a wire, is impossible and with bitcoin as well.Of course perhaps it’s a good idea to see what is buried in the coinbase TOS. Remember this is the evil that we don’t know vs. the evil that we already know. You could protect yourself by simply keeping a nominal amount of money in the target account and the greater money in an adjacent account. But as they say on those police shows “Jackson you know how I hate paperwork and setting up more bank accounts”. https://www.coinbase.com/le…
.Access to accounts have a few firewalls to break through including user names, passwords, PINs and requiring personal verification on all transfers. I have this on several accounts.As you noted, you can also have a separate “landing account”.A Wells Fargo ACH does not expose the account info of the originating bank account — bank yes, bank account no.There is also an election called “positive pay” in which an account cannot process a transaction in either direction without each action being verified.Positive pay is about 20 years old and used to be very popular. Every day, you received a list of all deposits and all checks and transfers. We caught several scams using this.JLMwww.themusingsofthebigredca…
Herein lies the problem with communications around this topic William.Easy phrase–possibly correct but to this audience–one of the smartest and most informed–it sounds like a tshirt slogan.Blockchain may be the change agent of the times. Just possiblyNever has there been something so powerful that even the makers and the blogoshpere were so incapable–not of seeing the future–but of articulating beyond themselves.That seriously makes this as infamous as it is potentially powerful.
Chances are 90% of the advocates don’t understand the whole Block chain system. I’ve never heard of a single frailty of the chain. How is that even possible?
Judge “wy do we need a high chair for the witnessAttorney “Yout Honor, the witness while only 7, mined the block chain”.
“always seems to come down to “it delivers the message”, which isn’t an unsolved problem.”So basically you are saying we have solved the problem of sending data, this is 100% correct. However, we have not solved the problem of making sending money over the internet as easy as sending email. This is what bitcoin does, it essentially turns money into a content type.The blockchain allows for the currency/asset/token bitcoin to be able to be secure and maintain value, they are inseparable and cannot exist without each other.The big thinkers are people who are trying to understand what bitcoin the currency/asset/token can represent, for example colored coins is trying to allow for almost anything to be represented such as a deed, contract, and much more, this fundamentally changes how ownership is stored/used in both the digital and physical world globally.Here is an example of a 9 trillion dollar use case scenario youtube [com] /watch?v=uYQ5icxGvmA
The problem is that I’ve yet to see someone explain the problem! Sitting outside the infrastructure you can’t possibly understand the problems or costs, so you sort of make them up. Costs, time, and so on all come into it. However, are they really a problem? Are any of them problems a blockchain can actually reduce?Many of the pain points are really down to regulation – KYC, AML, national regs, and so on. Blockchains themselves don’t rid us of these issues.Although blockchains can do great things by circumventing the banks, any companies building apps will still need to deal with many of the same issues that banks face.Bitcoin didn’t solve the problem of sending electronic money, it solved the problem of an electronic transaction requiring a centralised point of trust (and a related one of access/lack of access). The solution comes at a cost. Centralised parties are inherently more efficient, but the cost is centralisation, with all the other issues that brings to the table.Where multiple parties need to interact with 1+ ledger style datasets, perhaps with the data having ‘automation’ (smart contracts) which cannot be interrupted and are transparent (or semi in reality), maybe that’s more interesting. However, it still feels fuzzy to me.NB I’m a smart contract developer and would very much like to discuss this further with those within the financial sector. You can find me on Skype.
If you’re sending some asset title over the blockchain that requires out-of-band clearence, then you’re right, you’re still stuck with having to do all the back-office work, and you haven’t even eliminated trust. The blockchain works best when you’re trading a bearer bond like Bitcoin itself. When someone sends you bitcoin, there is *no* clearing that needs to take place, because posession of bitcoin defined as having those assets under your cryptographic control in the blockchain.The same thing could work for stocks if the owner is defined as whoever can issue a digital signature over its public key.For physical assets, it requires some central organisation to “back” the peg (eg. gold or USD-backed coloured coins). In those cases it’s no longer a decentralized trustless model, but there are still benefits because now people can take your coloured coins to other peoples infrastructure (exchanges, market places etc) and trade with them without you needing to be involved, and you can still be sure when some new person comes back to you to claim their gold or USD, that they are the new owner. So it allows for an open platform for interoperability.
Your an idiot. You phrased your comment very well but your points were inherently stupid for someone who claims to be a software dev. Santander published a whitepaper that calculated a 20 BILLION pounds in savings per annum if it was to adopt blockchain inferstructure. I think you should try to understand the security and cost saving benefits of using blockchain technology in replacement to a vunerable centralized database.
“Your an idiot” …..Intelligent response.Your response jumped off the screen figuratively.
Thanks. I can be blunt at times but i feel clarity is important
I have limited experience with banks – and IT and Software is considered one of the biggest hindrances and pains in the asses of executives trying to do business – this is a HUGE attitude problem that needs to be overcome if banks are to survive. On the flip side, if a software or protocol development helps disrupt and smooth the way for the business, then the banks have the resources to get behind it…interesting times!….I’m inclined to think the banks are not that Fwd looking though.
Buddy of mine is the systems designer for Brixton Pound and a number of alternative barter currencies in Europe and is already designing in blockchain.
why bother?1. Consensus is established before transactions are written. irrelevant whether banks and brokerages are indirectly benefiting from transaction processing from anonymous parties in unknown locations. it’s impossible for them to do anything untoward. integrity of the data is guaranteed. why not just view mining as a secure amorphous black box.2. side benefit of keeping completely hands off approach is banks can trade on absolute impartiality of their transactional records. “we couldn’t possibly cook the books if we don’t have access to them’Moreover…as non-transactional data can be encoded and stored in the blockchain, do regulated powerhouses need the potential legal and PR liability of having trademarked/classified/pornographic content stored on their in-house servers?
Well there are some non trivial concerns like the 51% issue, for example And optics matter too
optics which way?+everyone shares the 51% issue. There are safeguards in place. Once the banks start seeing their own percentsge share of mining as an important metric to grow. They have the resources to co opt it entirely
I’m a product manager at a bank and have been studying blockchains for a year and a half. I work for a bank but these thoughts are my own. The optics are important to regulators, thus they are important to banks. Banks trust themselves, nobody else. If they mine the blockchain they are participating in a trustless stack that may be processing transactions that are not following anti-money laundering or know your customer regulations. Regulators have no tolerance for that.
Understood. But in reality whether they own 0% or 49% their effective control is the same
Agree. The optics issues are regulatory. The control is a business concern. Regulators make banks liable for their own networks. If the bank doesn’t own the stack and have the ability to verify payments from outside their network, they lose. If there’s a bitcoin wallet that decides they don’t care about knowing if their customer is a terrorist (the essence of trustlessness and the censorship problem https://blog.ethereum.org/2…, then a bank can’t/won’t help in processing that transaction.Thus, they need to control the network. You’re right, they have the resources to become massive miners. Should they get past the regulatory issues (BIG if), do they really want to compete with Chinese miners that currently make up 51% of mining power because they get subsidized power from the government and produce low cost hardware. Energy and hardware logistics make this an unfair fight. Who’s to say the Chinese government wouldn’t force these miners to collude and crash the networks that US banks would have come to rely on? The potential for a mining cold war would be disturbing.
Exactly.As a banker, I led our investment in the sector’s de facto Regulatory & Compliance platform, http://www.rdc.comSure, as a technologist and maths grad, I find Bitcoin-Blockchain interesting but there are so many pieces the movement is missing for it to be adopted by the banks — even on a mining basis.
Giving banks the right optics to give them comfort to move their apps to the blockchain
You are losing me at the optics. Have no clue what you mean by that and it doesn’t google to anything.
optics == what it looks like to everyone outside of your company/entity.
I think they’d prefer the “traditional” tiered distribution model to the existing Bitcoin model. They have to assume too much risk and lord knows the big banks don’t want to assume risk. Also, calculating a Bitcoin position against their capital structure for regulatory purposes could be challenging.
What is the breakeven price for mining bitcoin? Should banks be running this ‘currency’ risk?
That depends on your hardware’s efficiency (hashes/GWh) and running costs (cost/kWh, infrastructure costs [cooling, rent, downpayments, etc.], employee costs, etc.).For the network as a whole, break even should always be around market price (i.e. marginal cost = marginal revenue) due to the mechanics of an open market.If they don’t want the currency risk, they can sell it once they’ve mined it.
So, why mine if you are just going to sell at your cost of production.
Well, that’s a different topic (one that this blog post touches on), but I know one thing for sure: if they start mining, it won’t be for profit.
are you referring to the bitcoin blockchain, or suggesting that they user another, or that they roll their own?
BitcoinI don’t think there’s gonna be another one although there will be many overlay networks built on top of the bitcoin blockchain to solve real issues like transaction processing speeds
This is where I disagree with you (and seemingly most other bitcoin watchers). I don’t think human nature is to coalesce around a single nakamoto consensus network. There’s too much incentive to create clones and alternative networks, due to the economics of digital scarcity. Yes it’s true that USD market value of bitcoin is majority of the clone market right now. But every day dozens of new clones are coined, and I don’t see that trend decelerating. There are many forces that could pull some of the value into clone networks. The most obvious to me is that a company could create a clone network that is exchangeable for an asset that people really want. You know, let’s say a blockbuster MMO actually got on board with a clone instead of using bitcoin to track its digital asset. MMO economies exist today that dwarf bitcoin in size, although are based on boring old relational db’s administered by the company. We can also see the threat that development / maintenance resources, mobile as they are, can leave — just as Gavin threatened to do hypothetically, if his other volunteer developers didn’t get on board with a change to the bitcoin implementation that he thinks is necessary.You might say sure, but if either of those things happened, then everyone would coalesce around the newly successful alt network b/c its proof-of-work difficulty would create a security advantage. But these networks are somewhat sticky. Why wouldn’t there instead be an equilibrium between multiple consensus networks? Just as there are between all the other liquid assets that are traded in world markets, even ones that are direct substitutes for each other.
I think there will be an equilibrium (constantly shifting) between multiple consensus networks, eventually a large population of them. I could be wrong, and a lot of bitcoin pontificators whom I respect do take your view…
“network effects” …and security it begets (which is basically two sides of the same coin; one focuses on the social aspects, the other on the technical).
network effect doesn’t always produce more security; in fact, larger networks typically have much more spam/noise/error rate.
I was talking about security in the blockchain-technical sense, i.e. the hashing power that “secures” the ledger.Or in other words: the more computing power goes into hashing for a blockchain, the more costly it is to attack it… The Bitcoin blockchain is vastly more secure than any other blockchain (due to the amount of nodes/miners it has), thus my comment about network effect and security.(After all, the topic of this particular thread was which blockchain(s) would “win” and Fred argued for Bitcoin due to network effects.)
yes, i understand. but bitcoin’s value also draws more attackers, in much the way a popular social network draws more spam of a higher offensive caliber (meaning harder to defend against). in this regard, network effects are only contributing to greater security in the form of greater computing power for hashing, but also contributing to greater insecurity by fueling incentives for high-powered spam and hacking. i do not think it can simply be assumed that network effects’ positive contributions to security always outweigh its contributions to insecurity.
Fair enough, you have a point, but I think we’re talking about different issues. In my first post I specifically wanted to make the point that Bitcoin’s security is vastly greater than any competing blockchains. Your discussion is much wider, and probably better suited as a reply to Fred’s original post about network effects. 🙂
My guess is they are paying some attention to it-but a bank CIO has a pile of regulations to deal with and their eyes are diverted. Bitcoin isn’t perceived to be a big enough threat to their business to expend resources (which are severely constrained).
Cuber.ee/news, it’s already beginning,
Oh please:LHV Bank is young forward thinking bank from Estonia. Originally an investment firm the bank was established in 2009. We are dedicated to serve private customers and SME-s as well as quickly growing enterprises.
The Banks and to a lesser extent the Exchanges will have trouble swimming in un reged waters. The risk is too much their own and they like risk covered by someone else’s cash or tail
Bitcoin, Blockchain and the Banks. Wow. That’s a BIG topic.What the Nasdaq is doing is more of a threat to the DTCC than to banks.Banks = control. Blockchain = losing some control.The big banks are paying some lip service more than doing anything significant. When it happens, it will be first in the areas outside of their core, like back-end stuff or between banks.The day that a big bank decides to invest in a Bitcoin mining infrastructure will be a good day for Bitcoin. Just like it took them 3-4 years to come to grips that Internet payments and banking were safe, and they didn’t touch it for a long time. It was being done via outside gateways first.That said, there are also private blockchain solutions that financial institutions are looking at; ones that don’t depend on a public infrastructure. Frankly, at this point I’m not sure which direction will win. Maybe both approaches are valid.
Yes! I would think that anyone who makes a living moving financial assets around, or speculating on financial markets, should start running their own bitcoin node and mining ops if only to develop in-house capability. Maybe they are, and I just don’t hear about it, of course. But I rather suspect that most institutional forays into bitcoin are at best like Xerox Parc — will create a generation of technologists who produce amazing breakthroughs in financial networks, but the value of which will not be captured by the banks. Non-technical management will say, hey, that’s interesting, but let’s put it on the shelf and look at it for a few years.
Only trick is that mining is not cheap initially, and the majority is done in China. It presents an interesting energy challenge: you need lots of electricity to run the computers, but also to keep them cool. So, if you’re using solar you still need to cool them. And if you put them in cool climates like near the north pole, there is no solar. Someone needs to solve that equation.
Relatively expensive, but if a big bank can buy acres of empty warehouses in the Midwest, and pay a staff to drive around aluminum ingots on forklifts all day, just to arbitrage some regulatory loophole, then I gotta think they could come up with the hundred mil or so they need to make a serious entry into cranking out SHA-256 solutions… Could even sell the waste heat to residential customers, or recapture it somehow.
WIlliam, so are you saying that the only the ultra rich can mine? What does a lot of electricity mean? I assume that you can mine with a laptop, how long does the laptop run?
you can’t mine with a laptop. not anymore. you need special purpose computers with ASIC chips. but you could mine other blockchains like Ethereum on your regular PC.
Fred, that’s a brilliant idea to encourage banks to invest some of their infrastructure to mining Bitcoin. It’s like the ground zero of blockchain operations. They will gain a lot of experience.But the same can be said for any large company running a huge IT infrastructure. I predict in 2015, at least a couple of Fortune 500 companies will announce they are starting to do Bitcoin mining.
Hi William, what happens when a miner dies? How does one access his block chain?
Nothing much. The block chain is shared globally and doesn’t depend on any single node (very much like the internet in that regard).
Same as what happens to their other assets.
I don’t know how much effort the banks are putting into mining, but I believe every investment bank has small teams of people experimenting with bitcoin and gaining hands-on experience in block-chain.
This is more obvious than “brilliant.” It’s a wiser perspective, though, than Reid Hoffman’s recent Wired article, where he still thinks mining is performed by a distributed network of individuals.Bitcoin (en vogue: “Bitcoin Blockchain”) mining is over 70% controlled by four Chinese companies. Hundreds of millions of venture capital, perhaps many billions of expectations, are all betting on a network that is, in essence, controlled by China.Most in this industry assume that miner incentives are never at odds with the greater good of the network. The issue is that nation-state incentives can be at odds, and have the possibility to manifest in the Battle for The Blockchain, when incentives are high enough.With BTC value at $3B+, there is not enough incentive. If BTC reaches $300B+, or $300T+, or a good percentage of American banks and securities exchanges are integrated with the blockchain, then the incentives for China or Russia or Iran to disrupt this *open* network might increase.https://twitter.com/ittayey…
Completely agree and glad you brought up Chinese control of the mining pool. Why would banks try to compete with Chinese miners that have cheaper hardware and subsidized power? Say banks decide to mine and the US banking system begins to rely on the blockchain. What would keep the Chinese government from forcing the current miners to collude and take down the US banking system? Why would banks open themselves up to that risk? Can US regulators allow them to take on this risk?
.Great point.Know this. Nothing–NOTHING–happens in China without the gov’t’s permission.It is important to be wary of the Chinese.JLMwww.themusingsofthebigredca…
+A LOT. I don’t care what people say. They are still communists.
I agree that banks should do their own blockchain data processing, but am not so sure that doing it with Bitcoin makes a great deal of sense. Bitcoin mining isn’t “transaction processing” in the traditional sense – transactions are validated by every node on the network in any case. “Mining” is solely the participation of individual computers in a schelling game where participation is motivated by value at stake (i.e. the Bitcoins) with a view to choosing which transaction history of the blockchain is valid (i.e. ensuring that only valid blocks are added).Assuredly guaranteeing that transactions get processed to the standards most commercial banks require, would require the bank (or its collaborators) to mine every single block!
Could there be the equivalent of a VPN grafted unto the Bitcoin blockchain, so that there is assurance within certain perimeters? Is that something that Eris could provide?
Yes. The VPN analogy is imperfect, but apt if we refer to Bitcoin as the backbone of a distributed internet.There are good reasons to use Bitcoin – the best I can think of is on account of the fact that Bitcoin is arguably the most persistent and resilient distributed data store on the planet (it would probably survive a nuclear war). The downside to this is that there is a heavy cost imposed (a) to add blocks, to protect the network from attack and (b) to the Bitcoins themselves (in the form of scarcity), in order to prevent spam.If you’re a bank, using the Bitcoin blockchain for your transactional platforms means you have to square off your commercial aims against those constraints. This is a huge commercial problem because (a) you can’t ensure your transactions get added into blocks by miners (driving up your costs in transaction fees, but also introducing substantial execution and settlement risk) and (b) you have to pay every time you transact with the network (which means a private blockchain-based service or SQL server can undercut you).These aren’t mutually exclusive propositions. If what you’re after is a high-capacity blockchain to manage your transactions while leveraging Bitcoin as the persistent data store, checkpointing your chain into Bitcoin is very easy to do (you take a hash of the state of your private chain and write it into the Bitcoin chain).This means you can objectively verify the data on an ErisDB. It’s a great hack: you leverage the verifiability that Bitcoin miners create, can guarantee your transactions are processed all of the time, and do it more cheaply than buying a bunch of mining hardware.We actually know one startup that’s leveraging both Eris and Bitcoin in the same application like this – they’re coming out of stealth in the near future so I don’t want to blow their cover before they emerge!
If you think of the blockchain as…….is still the biggest issue in the space.
James speaketh always for Everyman.
Nicest thing anyone has said to / about me in a couple of weeks!
TOPIC TRANSLATIONThe BITCOIN cryptocurrency is a open-source software payment system allegedly invented by Satoshi Nakamoto which provides a secure transaction without an intermediary (Financial Institutions) and verified by network nodes and recorded in a public ledger (Block Chain) which is one of the primary topics.Many BITCOIN early adapters blogs are viewing investments in companies that attempt to monetize off the platform as the reason for motivation to promote financial institutions to get involved with gatekeeping with BITCOIN. Similar to how CISCO did with the internet with patents and follow-up included litigation on something they didn’t invent. (The prevalent thought)BITCOIN’s lack of Joe Public scale in retail (Who would actually benefit fromadopting BITCOIN by eliminating fees charged by credit card companies) is due to the financial institutions inability to profit and be the gatekeepers of a platform that wasn’t invented for them to exploit.The early adapters and supporters are actively listening to the conversations.Our view is early adapters and supporters would benefit from support from financial institutions. This technology maturing and being accepted isn’t all Darth Vader and darkside motivation .
and some of them will be corporations who are mining to insure the integrity of the network and the systems they rely on that are running on it.It is 100% unclear to me how corporations mining will allow them to “insure the integrity of the network and the systems they rely on that are running on it”.
My thoughts exactly. It’s not like you pick the block in the block chain to work with. Moreover, there are jurisdictional issues to deal with.
I wonder if the CIOs of the large money center banks are already doing this. If I was in their jobs, I would be all over this.If you are in that job exactly what is the upside vs. the downside of going down that path? Because I am not seeing the upside only risk for someone in a secure job in a staid industry.
I’m a product manager at a bank, but my thoughts here are my own.I’m a huge fan of all blockchain projects, but the banks are going to be followers. Banks and regulators aren’t comfortable with the current pace of innovation. If blockchain is going to be the internet of value exchange it’s going to have to follow the same adoption and regulation arcs as the original internet, but it’s going to have to happen on a condensed timeline because users care more about the security of their money than their cat photos. Plus, until there is a 10x benefit to bitcoin as compared to the traditional banking system (unless you live in Argentina), banks won’t be motivated to change or participate.Blockchain will need to be user-driven movement until it forces regulation that essentially turns the right blockchain into a utility (maybe it’s not the Bitcoin blockchain), just like how Net Neutrality played out. Should this scenario play out, the banks that have kept pace will merely be brands that consumers trust. They will run on this new blockchain similar to how they currently run on ACH/FIX/SWIFT/FPML. Thus, I’m less interested in blockchain as a transaction rail that’s just a more efficient network or protocol. Blockchain 2.0 smart contracts are the real business opportunity because they “are” the businesses that will displace insurance companies, card companies, and banks. The first banks that can lend their brands to smart contracts that instill trust in consumers will win.The optics of the blockchain are important to regulators, thus they are important to banks. Banks trust themselves, nobody else. If they mine the blockchain they are participating in a trustless stack that may be processing transactions that are not following anti-money laundering or know your customer regulations. Regulators have no tolerance for that, thus banks will always be followers on the transaction rail.
Love this point: “…The first banks that can lend their brands to smart contracts that instill trust in consumers will win.”It makes sense that user-friendly smart contract services will be the part of the blockchain innovation stack where banks as risk averse gatekeepers might start to make bets that improve their position with customers.
.Small quibble with you on the comparison to Net Neutrality.The FCC is a much more political body than the SEC by its very nature.We will find out that the entire NN movement was a combination of the big guys trying to secure their winnings and the gov’t finding yet another well spring to tax.The SEC is not likely to allow a spigot to be inserted to drive tax revenue. Not their thing.They are disciplinarians not Rotary guys.Back to our regular programming.BTW, the secrecy the FCC was able to get away with is why the trade agreement secrecy is encouraged. They paid no price for sticking their thumb in the public’s eye.JLM
Agree that the comparison doesn’t completely correlate due to regulatory complexity, but the concept of blockchain as a worldwide utility is imperative. Just the name “Internet of Value Exchange” could attract an alphabet soup of regulators that want to have input. Convincing all of them that this isn’t a spigot for revenue is the real hurdle.
.Anything that takes root in the US and moves anything of value anywhere or is the basis for commerce will fall under existing law and be regulated and taxed.You will never convince taxers that allowing money to move or commerce to be transacted will not be a taxable event.We have managed to make dying and the forgiveness of debt taxable events.JLMwww.themusingsoftheredcar.com
Also, America is not the world.
.Over my head completely. Sorry. What does this have to do with my comment?JLMwww.themusingsofthebigredca…
” Blockchain 2.0 smart contracts are the real business opportunity because they “are” the businesses that will displace insurance companies, card companies, and banks. “In what way do you see them working, and do they need to be decentralised or running on one or more trusted platforms?Considering that automation can only go so far and needs to account for regulation (national, international), how will it improve those services? Will it be through some kind of P2P Insurance with a central party covering regulation but transparent smart contracts processing actual transactions?
Decentralizing P2P lending can use the same model as current P2P lending services where banks just handle the transferring and purchasing of the loan notes but with more transparency and automation. The contracts would have to be written in a compliant way, which would require an initial audit by the bank versus ongoing compliance maintenance. Lending contracts could be expanded to lines of credit and payments. Insurance payments and services would be a more complex expansion but possible in theory. Insurance is in desperate need of transparency.Overall, compliance is a top operating expense for all heavily regulated businesses. Smart contracts can help automate that but the bank compliance teams will need to manage changes due to the evolving regulatory landscape. Blockchain developer/compliance officer will be a job title in this future.This all assumes that one blockchain wins and that it’s managed as a utility. This is the bigger challenge.
“If I was in their jobs, I would be all over this” . .this is why you are not in their jobs. What do they care about right now? Security/Protection/Peace of Mind + Making More Money. They have very closed, secure, trusted networks that are integral to their business . . and they work. Not a can of worms they want to open up. How does this help them make more money? not sure . . but they have hundreds of other ways they are trying to make more money that have them very excited.
.I agree more with you than you do with yourself.Precisely, banks are all about product driven broadening within their existing customer base.They have individual brands and are not going to sacrifice their brand for a standard, one size fits all solution that won’t have their brand on it.JLMwww.themusingsofthebigredca…
.Banking as an industry is the exact target — trusted intermediaries — which the blockchain desires to replace. The dinosaurs did not commit suicide and the banks won’t either.Banks have a fiduciary duty to safeguard the assets — translates to safeguarding the process by which money is moved — under their stewardship. Allowing anything to escape their continuous security and control would subject them to legal liabilities.Banks are highly regulated — not just banking laws but also SEC and GAAP conventions which are based on standard systems that are industry wide rather than bank specific.There is no pain point or new capability being contemplated — rather, it is the replacement of a system which the banks and others (include me here) think is working just fine. This is a mudflaps on a Cadillac kind of development.Banks, in the movement of money, are a critical control point in behavior including criminal behavior (witness Silk Road and Dennie Hastert). So, the idea of anonymity is not going to be supported by anyone particularly the regulators.There is no evidence that back offices are broken. In fact, there is ample evidence that back offices are healthy, accurate and fast. Make a trade on Schwab and see how fast your account is updated.Banks are chartered with an eye toward providing critical support to the community they serve. This is one of the criteria for receiving a bank charter in the first place. Banks do not serve themselves, they serve their community and customers. Absent some customer driven or community driven demand, it is difficult to see how they can justify this.The blockchain feels like a head fake. It is looking for a solution to a problem that has not manifested itself in the world of banking.If the blockchain is to meet the promise that smart guys like Fred and Wm see, then there has to be a killer app that opens the world’s eyes. Right now, it is not out there and banking doesn’t feel like it to me.Color me a skeptic waiting with anticipation but until then I just don’t see it. Has a sort of Segway feel to it.JLMwww.themusingsofthebigredca…
Spoken by a man (to my point below about roughly “what happens if the shit hits the fan and you ordered it!”) who has built a building and isn’t going to be the one to put a canard on it unless there is a wealth of evidence and benefit in doing so. Because he knows his house is on the line (or his job) and he will end up being the pioneer that is shot in the back.It’s amazing how people who have never been in this position simply fail to understand this basic principle of human nature.
“Banks do not serve themselves, they serve their community and customers.” Are you talking about credit unions/small community banks or big banks? If it’s the latter, I’m surprised.
The blockchain feels like a head fake. It is looking for a solution to a problem that has not manifested itself in the world of banking.I often come up with things that I feel will improve my wife’s job. And she typically has the same reply “it’s working fine the way it is, not enough of a problem”. My record is perhaps 20:1 in terms of getting a suggestion adopted (arbitrary and made up number).She also is in a career (medicine) where they follow a very rigid and defined set of procedures and principles and are not rewarded for stepping out of that box and certainly not going to even come close to implementing a new solution to a problem that doesn’t (in their opinion) exist. Only reason there is EMR is “the bribe”.Easy for a VC (sorry Fred) to say “this is great you should do it” when he isn’t putting everything on the line and betting the ranch. Having everything that is important to you on the line changes the way you view risk unless you are an immature naive idiot.The media of course supports (because it’s a good story which is their business) taking risks. They win either way. They get a story about how someone was rewarded for taking a risk and betting the ranch, and they get a story if the bet fails and then they can talk about how the risk was foolish to take. It’s perfectly hedged.
.To expound further on your line of reasoning, risk has to be balanced with reward.Why take a risk when the reward is either inconsequential or nonexistent?What is the improvement in banking by offloading the entire back of house on the blockchain?It’s like taking a Ferrari to the grocery store. You can’t actually use the real or imagined improvements.Why take any risk when there is no meaningful reward?JLM
Good point with the Ferrari. When I told my mom to buy a nice car she said she is already happy with the car that she drives because “it gets me to the grocery story”. But why did I want her to buy a nice car?I want her to have a nice car because I like to have a nice car! And because I get appreciation from driving a nice car. She gets appreciation from clothing or pocketbooks or cooking pots and pans. I don’t need a fancy pan, any pan will do to cook an egg, right?But the difference is this. I could learn to appreciate a nice pan to cook an egg and she could learn to appreciate driving a nice car (if I educated her in the differences). But the only downside to driving a nice car is the cost. If you can get beyond the cost there isn’t any downside. So there it is. We have people who are absolutely convinced that bitcoin solves a problem when the problem that it may very well solve is the same “problem” that my nice car solves which is not what it appears to be the purpose of solving. I want my wife to buy a nicer car but she is happy with her Honda CRV. The angle I have been working on her with is that appears to hit the nerve is the safety angle. “Has better acceleration and better stability in highway driving so it’s worth the money”.
What is the improvement inbanking by offloading the entire back ofhouse on the blockchain? Maybe if the money being transfered wasjust BitCoin instead of dollars therewould be some “improvement”.
.Wouldn’t that likely be a duplication of effort? A new “one off” process?You well?JLMwww.themusingsofthebigredca…
“Well?” Sure. Gee, my comment was badenough to imply infirmity?!”duplication of effort”?Some people see doing financialtransactions with BitCoin and theblockchain as having some advantages –e.g., doing the transactions anonymously,that is, without governments knowing aboutthe transactions and as a way tocircumvent tax and various financialregulations — over transactions withdollars, pounds, etc.If BitCoin and the blockchain becamepopular enough, then traditional banksmight have to join the party and, thus,use the blockchain in their back offices.
.Haha, I was just saying “howdy”!Even a whiff of illegality will doom BitCoin and the Blockchain. The life sentence for the Silk Road founder and the Federal charters for banks will not allow even a whiff of trouble.JLMwww.themusingsofthebigredca…
I often come up with thingsthat I feel will improve my wife’s job.And she typically has the same reply “it’sworking fine the way it is, not enough ofa problem”. My record is perhaps 20:1 interms of getting a suggestion adopted(arbitrary and made up number).Of course, you are facing a fundamentalchallenge which necessarily on average isnot easy:Once a friend of mine in businesssummarized business as two challenges, (1)offer something other people want and (2)offer it at a price they are willing topay.There are lots of ideas for what tooffer that pass none or one of these twochallenges but not both of them.Satisfying both (1) and (2) and with bigmargins, fast, cheap, and easy to start,good barrier to entry — on average noteasy.Why is the challenge “fundamental”? Elsethere would be more billionaires than theeconomy can support now.In some sense, to do well, really haveactually to move the needle on atleast the economy and maybe alsocivilization itself, e.g., Intel,Microsoft, Cisco, Apple, Google, Facebook,Twitter, and a few more. Hula hoops, petrocks, and novel Teddy Bears won’t cut it.Of course, for selecting an ideafor a business that will move theneedle, there’s another equallyfundamental challenge: So far suchsuccess is rare. So, with something sorare, that there be much consensus beforethe work is done and the juicy bottom lineis visible would contradict that suchsuccess is rare. Or, if many people couldsee the potential clearly with low riskand high payoff, then that success wouldbe common instead of rare, really alreadydone, that is, a solved problem.Of course, this is an old story and goesback to that centerpiece of a good MBAprogram, Mother Goose and The LittleRed Hen where everyone else thoughtthat she was wasting her time until theydetected the fragrant loaves of breadfresh from her oven.Is there a way to know in advance? Forpart of the work, yes: There is somemethodology, quite solid, with afantastic track record.
I never thought I’d start liking you more. Kudos.
.Mattie, but do you “respect” me?JLMwww.themusingsofthebigredca…
To use a metaphor – still on the fence.I certainly respect your experiences, however our experiences and our perspective on how things move forward with care of people and systems seem to greatly differ – and that is where I struggle.Perhaps I do respect you, however am angered by you as well – anger which overshadows quite well.
.Mattie, that was a joke. Don’t over think it. I am very, very, very shallow. Not worth getting angry over. Anger kills you. It eats you from the inside.I stopped caring in the early 1970s. My GAS meter broke and I forgot to pick it up from the shop.Stay well.JLMwww.themusingsofthebigredca…
I agree anger eats you from inside.Anger is a sign, a signal that something is wrong.If you ignore anger or avoid getting into situations that anger you then you no longer have the energy or drive to figure out what is wrong, nor will anything relating to what is wrong have a chance to be changed.I’m still playing that game, determining what I should be angered over and once I have enough of it and my path is clearly guided towards solving the source of anger then I will leave it at bay.With my father recently passing there is a lot of anger I have had to process. Fortunately, for much of it, the path I am currently on is part of the solution of societal change that I had wished my father had been part of.
.Fathers & sons is a very difficult thing. My father just turned 97 on 2 June. We are still sorting out our relationship.My condolences at your father’s passing. Grieving is a process and it cannot be and should not be rushed. We owe it to those we love and who have loved us — imperfections and all.Let me give you one little nudge — nothing done in anger ever really works out well.What we can do is to harness the energy we would otherwise spend hating and hurting and make it the fuel that drives us. I have lived that and it works.Anger is like the theory of many martial arts — take the other guy’s power and weight and use it against him by harnessing it to your benefit.JLMwww.themusingsofthebigredca…
Very sorry to hear about your dad Matt. JLM is right about the grieving process I believe
Sending you hugs and good wishes, Matt. Sorry to hear about your father’s passing.I went through the anger phase when my Dad died — not anger at him and it gives me comfort to know we’d made our peace with each in his final weeks.Anger at the absurdity and stupidity of instruments that are used to measure what’s happening inside our brains and how we and our values are reduced to the binary:0 = unconscious = brain dead1 = conscious = brain aliveMy suggestion would be to harness that anger, master and convert it into creating something new (a business, new relationships, putting yourself beyond comfort zones).That’s what I did and, years later, I’m grateful for what that anger did to change my life in great, positive ways.
No matter what, respect the enemy…it can only highten your own game.
.Knowing the nature of your enemy is the only way to win strategically.As an example, while Russia is a renegade, their army is not very good. Professional soldiers who have seen them up close know this.Remember the vaunted Iraqi Republican Guard? More like Republican poll watchers?If Russia did not have strategic nuclear weapons, they would have gotten their asses kicked a long time ago.JLMwww.themusingsofthebigredca…
Just to get a little mushy for a moment…I probably sit to the left of you on most issues…but often find myself nodding my head in agreement with your stances enough that it at least forces me to re-think/evaluate my own opinions and what I make my own stances on.That’s how you’ve earned my love…but you, as everyone else, has had my respect from day one…and you’ve done nothing over the years to lose it (yet). 🙂
.It’s early in the game, friend.Like Nolan Ryan said, “You can respect them and still throw the bean ball.”Back at ya.JLMwww.themusingsofthebigredca…
If by respect you mean study/know your enemy and be kind, then I agree.And yes, the only way to understanding oneself is having something to contrast against – naturally the strongest contrast will be those who you’d consider an enemy, towards polar opposite of oneself.
An invitation to quote the man, “keep your friends close but your enemies closer”:https://youtu.be/TqoMFLXsyA…Way way back, in my first wife’s side business, I remember telling her to be nice and to try to be friends with the guy who ran a competitive operation to what she was doing at the time. I told her “he will have a much harder time screwing you if he has to face you later”. The strategy did work.
If I’ve understood it correctly, there was some confusion about who owned what in the Lehman Brothers collapse, which a properly transparent and verifiable blockchain-based system could’ve prevented (*could*, I’m not saying it necessarily would).Patrick Byrne of Overstock, if you believe him, also has something to say about the insufficiencies of some of today’s settlement systems, which you can read more about here (under the “Aims of Medici” section): http://www.investopedia.com…”Medici would offer complete traceability of trades, as opposed to the Depository Trust & Clearing Corporation’s (DTCC’s) Continuous Net Settlement (CNS) system. Patrick Byrne illustrates by hypothetical example the potential problem with CNS: (…)”For some, it was hard to see the vast possibilities of the internet before its killer apps were developed too. For others, it was an “obvious” from the start that it would have a huge effect on society, they just didn’t know what form it would take. Bitcoin/blockchain tech feels a bit like that at the stage it’s in right now.https://www.youtube.com/wat…
.Seems like everyone is pressing hard to find their exemplars and what you mention is history rather than the future.First, as to the Internet — there was a killer app which provided the attraction, fuel and continues to this day. EMAIL.At the core of many platforms which are the reality of the success of the Internet is still EMAIL. It is still the killer app.It did not exist and then it did.As to everything mentioned by you or the speaker — somebody is already doing just that already. There is still not the killer app.The notion that being closer to the beginning of the transactional stack is a big deal is nonsense. Schwab balances its book of trades in any security within its own book — a market buy order is offset against a market sell order before it gets to the trading desk.Public companies are all served by transfer agents who can account for every single share of stock of an entity with only NOBOs being a mystery and they are held in “street name”. Bit esoteric, I admit.As to eCommerce settlement systems, Amazon seems to be doing just fine. People look at Best Buy and buy at Amazon because of the quality of their order entry, shipping, fulfillment and, most importantly, their warranty, guaranty, return policies.The Amazon inflection point is both a “trusted third party” but also an administrative bit of genius. I not only don’t want this trusted third party to be jettisoned, I want them in them in the deal and sitting in first class. They are serving me.Perhaps the most obvious difference between credit card administration and the blockchain is not the one that people talk about–the cost.It is the actual extension of credit itself. Credit cards are not just transactional boons, they EXTEND CREDIT. Without the extension of credit, much of the impulse buying of eCommerce and traditional retail would evaporate.It does feel to me like there is something in the wind and it does feel prescient. It doesn’t have the killer app and nobody can really articulate what that will be.I had the same feeling about the Segway.JLMwww.themusingsofthebigredca…
Family debt would come way down too without that credit.There needs to be some kind of Netscape/browser for all this to cross over into mainstream life.
> First, as to the Internet — there was a killer app which provided the attraction, fuel and continues to this day. EMAIL. (…) It did not exist and then it did.Uhm, no. You clearly didn’t use email at its outset. You had to type in the path from your server to the server of the recipient. [email protected]ple.com seem like a “killer app” address to you? Before that you typed in the raw IP addresses (somewhat akin to the cryptic Bitcoin addresses we see today).It slowly(!) evolved into the “modern” email we see today, over decades of gradual testing and adoption.If it just suddenly sprang into existence, what would be its value proposition? Sure, email would exist, but who would you send them to? User adoption and network effects take time and most killer apps aren’t really “killer” until they get a critical mass.If you think that what we see today is all there is to Bitcoin/blockchain, you’re clearly missing the larger picture (comparing Bitcoin to Segway really drives that point home) – and your internet lessons aren’t worth much.
.I was the CEO of a multi-state, multi-unit operating business in those days and I can assure you that the motivation for all those internet connections we bought at my shop was the ability to use email.I don’t think I said that I was using email or the internet at the dawn of the age and if you inferred that please let me correct you.To this day, email continues to be a core use of the Internet and, in some form, drives many of the big platforms.As to Segway, please embrace that as an analogy, a metaphor for an anticipated bit of wizardry that failed to live up to its promise.On that basis, it works for me.I am a skeptic — someone with open eyes and an open mind looking for convincing evidence. Today, there is little to see and not much to actually use.Interestingly enough, there was a “killer” app — Silk Road — which, unfortunately, ended tragically. That app worked apparently.JLMwww.themusingsofthebigredca…
When you say, “It did not exist and then it did”, it really sounds like you think the internet (other preceding internetworks in general) came bundled with a fully fledged killer app which made it useful. It may even have seemed like it from a business perspective.So I’m trying to tell you that isn’t how it actually was, and lack of (in your eyes) obvious killer apps, shouldn’t be construed as a lack on Bitcoin’s part. Basically, you’re comparing different epochs of the two technologies, and I’m arguing you should wait a while and observe what happens with Bitcoin tech before dismissing it altogether.In that sense, just keep being skeptic as long as you keep your eyes open as well.As for Silk Road, again you seem to take your information from mainstream media, not actual data. The dark net markets now have 4 times as many listings as SR had – and there’s more sites it total than there ever was: https://en.wikipedia.org/wi…And your own USAA seems to both have invested in a major Bitcoin player (Coinbase) and are researching it internally:http://www.bizjournals.com/…http://www.reuters.com/arti…Santander also sees huge savings potential in “infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance”:http://bravenewcoin.com/new…Give it 5-10 years and we’ll see what comes out of it. 🙂
Martin Lie:thank you for the YouTube presentation with Blythe Masters.Techcrunch had this article on Bitcoin.http://techcrunch.com/2015/…
CIOs are “support” so don’t have the clout to change a bank’s strategy to mine Bitcoin-Blockchain.It would need to be championed by CEO-Chairman’s Office team working with all the Global Heads (the “revenue” people). They’d have to make the robust business case.
A CIO with big clout could do it as an experiment, but to reach higher scope, indeed would need the top brass supporting it.
Every major IT infrastructure investment that involved equity participation with the other banks and was revenue-focused had to be signed-off by my team.Bitcoin-Blockchain is not like the CIO being able to say, “Yes, let’s pipe in Bloomberg and mine its information and have tools and charts to log our transactions and positions.”All 25 of the Tier 1 institutions would need their CEO-Chairman’s Office teams and Global Heads to sign-off on Bitcoin-Blockchain…At the same time.
UBS Group CIO on Bitcoin-Blockchain: “You need a critical mass of parties in the end, so it will take time, but the advantages are real and very competitive. Not this year, maybe, but in the next few years.” (Risk Waters interview, Feb 2015).Let’s hope he has strategists around him who can write those proposals to secure internal Global Heads sign-offs and external co-investments from Group CIOs and Global Heads of the other banks. Plus articulate Bitcoin-Blockchain tor retail customers.Is it doable? Yes. If he has strategists with my hands-on experiences on teams that delivered pan-European retail brokerage platforms, retail IPO platforms, co-invested across all the wholesale banking platforms with the other banks and knowledge of the revenue-risk models of banks at CxO level.Btw, my first graduate job was on editorial team of http://www.risk.net. Published on derivatives, Black-Scholes and risk mgmt systems.
It’s important to note that because mining has an application that is outside of its use as generating Bitcoin (ie securing the network of settlement), this commoditized service, will very likely be pushed to a profit margin below $0, thus pushing both big and small mining-exclusive operations out of the way. This would mean banks, big tech conglomerates, and even nation states will probably begin committing resources to securing the network. As such, these same people will be hosting nodes since they need to be able to trust the network. The future is going to get weird.
Exactly right. In fact, the businesses built on top of the blockchain should be valuable enough, in time, to create a shock absorber to the price of BTC. Banks wouldn’t pull back mining if the price drops if they have sufficient stake in a functioning blockchain (the ‘reward’ for them is not the bitcoin, it’s the network). Helps mitigate a 51% bad actor event if/when price crashes.*”bank” is shorthand for any company or group building a blockchain based business.
I wonder how this will affect profit-driven miners. If banks start to mine not-for-profit, in an activity, that is already almost non-profitable, then this will make mining bitcoin cost money.If this drives the for-profit miners, and only big-giant corp-banks are mining, they’ll easily control over 51% of the mining capacity.This will return us again to same problem bitcoin tried to solve: Decentralization. And this is putting us in the hands that we wanted to escape from in the first place.
There is an exchange on regulatory constraints and risk/benefit assessments the way banks do it way down below. Between JLM and LE. I recommend it to anyone coming in on this thread late. I ran into the OCC (Office of the Comptroller of the Currency) in trying to execute a customer-funded launch. Regs for vendor due diligence have tightened almost to the point of impossible for a start-up to contract with any bank. I felt like a pretzel after months of trying to find ways to convert some banks really excited about our app into a deal that wouldn’t run afoul of the regs. And my investors did not understand. “Well if the banks benefit as much as you say and they claim to love it why won’t they buy?” Some of us can work around it but a solution or app built on the blockchain feels almost not doable.
Ok… solve and code Bitcoin-Blockchain problems OR … design SpaceX Hyperloop Pods.This is BEYOND COOL!!!
Funny I was also thinking about EM when reading this article. I was thinking how much effort he puts for years in promoting the ‘obvious’ like electric cars and solar energy and nobody is doing this effort for Bitcoin, still the world is expected to adopt it and embrace it. I think many people would be shocked to know how basic are the tech issues banks need to keep in check everyday, I dare to doubt CIOs can even begin to think about Bitcoin. It will have to come from someone else.
A problem for Bitcoin-Blockchain is… it isn’t “sexy”.Elon Musk’s ideas for hyper loop transportation are sexy. It taps into the parts of our brains that go, “Ooh, imagine someday maybe being able to traveling at the speed of light! In a pod!! Wow!!!Hey and maybe we will be able to warp-speed or tele-transport too!”Now, if Bitcoin-Blockchain brigade could claim, “Information transmits faster than we can dream,” then that would be “sexy”.See how EM sells. Plus he has such a dry wit and child-like exuberance in his phrasing.He’s my favorite inspiration as a founder, bar none.
The goal for entrepreneurs and corporate venture teams is to enable CIOs and CXOs to say yes to the power of blockchain. We need to help them understand and “derisk” this for them
Financial institutions and governments profit from the existence of currencies, will they want to lose this important tool? I see more incentives for banks to keep the current platforms rather than improve them
It appears this topic has legs.TechCrunch Bitcoin article by Dan MoreheadMartin Lie:thank you for the YouTube presentation with Blythe Masters.Techcrunch had this article on Bitcoin.http://techcrunch.com/2015/…
This is what the BITCOIN discussion promoted. Wanted to own a physical coin.http://www.coindesk.com/10-…
Running full nodes as a vendor in the bitcoin space makes a lot of sense. Doing your own mining is just burning money.
It would ironic if regulators in 5-10 years stipulated that financial institutions must provide a certain amount of hashing power to the network. It makes a lot of sense. Personally I am a believer in DPoS and see PoW as a waste of energy but both models would benefit from serious consideration by regulators to ensure networks are not vulnerable to imbalance.
Seems like a solution in search of a problem to me.If by the blockchain you refer to the bitcoin blockchain, then i fail to see what such a technology can bring to the banking industry.Banks interact with known actors – other banks, corporates, individuals. They have sets of AML/KYC processes they abide by. And they have to abide by settled and mature legal frameworks.Banks do not interact with unknown actors and as such do not need trustless frameworks. Further, Banks need their ledger state to conform with a legal state. This is an absolute must.Let’s take the example of dematerialized securities. Very specific legal constructs rule clearing and settlement where finality is of paramount importance. A bank, any bank cannot rely on a ledger state that is derived from the validation of unknown actors (nodes) and where the ownership after settlement cannot be 100% proof. Even if the bitcoin blockchain can deliver proof with 99.5% certainty that a buyer owns an asset, it will never be able to offer 100% proof, by definition. The reason is proof of work and its intended and unintended consequences cannot deliver 100% proof.This does not mean crypto technology cannot deliver meaningful benefits to a bank’s middleware or core infrastructure. A Bank would derive many benefits from the private application of a permissioned distributed ledger – among which speed and cost reductions – without the drawback of a crypto currency, the burden and lack of finality of proof of work and the trustless nature of the network. Think of a myriad of private distributed ledgers, each tailored for specific use cases. Some FIs would have only one such ledger, others may have several. Very powerful vision.