
Fidelity launches trade execution and custody for cryptocurrencies - prostoalex
https://www.cnbc.com/2018/10/15/fidelity-launches-trade-execution-and-custody-for-cryptocurrencies.html
======
corv
I'm disappointed of HN comments whenever cryptocurrency topics come up.

People are forgetting that Nakamoto Consensus is a legitimate CS breakthrough
concerning the Byzantine Generals Problem.

Is it acceptable to bash every stock in the Nasdaq just because a second tech
bubble popped and some SV companies are behaving unscrupulously?

Frenzied speculation brought about inadvertent side effects but these should
not detract from the fact that significant advancements are continuously being
researched and implemented.

~~~
gotocake
The comments seem to honestly reflect the state of the technology, its
environmental impact, the annoyance factor of its extreme adherents, the total
lack of a really compelling non-ideological or criminal use case after more
than a decade, and a deflating bubble. The insane gulf between the promises
made by the “every day brings a new breakthrough” crowd and the reality of
ICO’s and Bitcoin is vast, and hard to ignore. Blockchain is a neat idea, but
presently it is used in ways that are far from compelling, and I’m yet to hear
of a non-hypothetical application that could change that (apart from buying
drugs, or money laundering).

It’s also hard to forget the last few years of relentless evangelism, which
was equal parts annoying and ethically challenged.

~~~
corv
The comments reflect the (perceived) state of the technology.

One has to admit that the reputation of the entire space has been tarnished by
snake oil salesmen. For some historical context it is worth looking at
countless examples such as the Railway Mania[1] of the 1840s or the more
recent Dot-Com bubble[2]. For more depth one can read Mackay[3].

Some of the most promising advancements in payment channels were only
published as papers in 2016[4] and are understandably still being implemented.
If anything the speed at which enthusiasts are willing to deploy experimental
software at their own risk is breathtaking.

Regarding the environmental impact of the Bitcoin network, while being widely
derided for its energy use, it is in fact using less electricity than the
major credit card networks. It is also using less energy than global gold
mining. There are ways to reduce consumption should a consensus accept the
tradeoffs.

The term "Blockchain" as it is currently used often refers to private chains
which are in vogue with corporate stakeholders. This appears to be a solution
in search of a problem–I have not been able to identify a compelling use case
here either.

Most ICOs are outright scams.

It is truly unfortunate that promising advancements of micropayments, smart
contracts and the world's closet thing to an incorruptible currency are lumped
together with so much rubbish.

[1][https://en.wikipedia.org/wiki/Railway_Mania](https://en.wikipedia.org/wiki/Railway_Mania)
[2][https://en.wikipedia.org/wiki/Dot-
com_bubble](https://en.wikipedia.org/wiki/Dot-com_bubble)
[3][https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusion...](https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds)
[4][https://lightning.network/lightning-network-
paper.pdf](https://lightning.network/lightning-network-paper.pdf)

~~~
timmaxw
> using less electricity than the major credit card networks

I googled around for "Bitcoin vs. VISA energy consumption"; the only argument
I found in favor of VISA using more is here [0]. This compares Bitcoin to the
entire global banking system, including the cost of e.g. keeping the lights on
at physical bank branches. It very approximately guesstimates that the entire
global banking system requires ~100 TWh/year, compared to Bitcoin's ~30
TWh/year [1].

For comparison: all data centers worldwide combined use about ~400 TWh/year
[2]. I very much doubt that the credit card networks account for 7% of all
data center energy consumption.

[0] [https://hackernoon.com/the-bitcoin-vs-visa-electricity-
consu...](https://hackernoon.com/the-bitcoin-vs-visa-electricity-consumption-
fallacy-8cf194987a50)

[1] [https://arstechnica.com/tech-policy/2017/12/bitcoins-
insane-...](https://arstechnica.com/tech-policy/2017/12/bitcoins-insane-
energy-consumption-explained/)

[2]
[https://www.forbes.com/sites/forbestechcouncil/2017/12/15/wh...](https://www.forbes.com/sites/forbestechcouncil/2017/12/15/why-
energy-is-a-big-and-rapidly-growing-problem-for-data-centers/#701c2d815a30)

~~~
arcticbull
@corv come on, even if we go with the incredibly generous hypothesis that
Bitcoin alone currently uses 1/3 the energy of the entire global banking
system including physical lamps at desks (!!!), it is still only providing a
tiny, teeny, percentage of the value store or of transaction volume. It's not
even remotely a fair comparison. It's like saying my car consumes 1/3 of the
world's entire output of gasoline so it's way more efficient than the sum
total of all the transportation on the planet.

~~~
corv
I didn’t say it’s currently more efficient. I’m saying what it is designed to
replace eventually, is already using more energy.

Currencies are adopted and developed on a different time scale than most other
technologies we are used to.

Saying cryptocurrency has failed after being around for 10 years is
shortsighted and not giving the incredible minds working on these problems
enough credit.

~~~
arcticbull
It's designed to be actively anti-efficient. The more efficient tech is
deployed the _less efficient Bitcoin gets_. It's already atrocious, and it's
going to get more-so, on purpose. What it's designed to replace is using more
energy ( _maybe_ ) because it serves like 3 orders of magnitude more
customers, value and transaction volume. A single BTC payment takes 826kWh of
energy. Now, a MacBook Pro uses at most 85W, so for a single payment on
Bitcoin network you could run your laptop for almost 10,000 hours -- or your
house for a WEEK. That's stunning, and only going up (again, intentionally).

Visa OTOH is around 41Wh per transaction, or 20,000x more efficient.

~~~
corv
You’ve ignored second-layer technologies.

There need be only one decentralized, immutable ledger to handle all
transactions, the store of value and registration of assets for the entire
planet.

While we’re comparing Apples and Oranges, credit cards don’t confirm payments
for weeks and there are significant fees associated with accepting
transactions, apart from that risk for the merchant.

~~~
arcticbull
Nope, I haven't. The anti-efficiency element applies to core Bitcoin no matter
what you run on top of it. If you keep to the maximum 7tx/sec that's what
you'll encounter. I can't imagine a world where no matter what you're running
L2 that the system won't hit that incredibly low limit.

Second layer technologies, in the form of exchanges, aren't blockchain at all.
They're just varying degrees of fly-by-night bookkeeping and/or settlement.
They require blockchain tokens as much as they require the dollar - not at
all.

There's no viable L2 technology right now that anyone is using (especially LN)
yet, so it's too early to speculate. If I recall correctly it takes a
traditional transaction to open a channel, and we're still capped at 7 per
second. If there's 7.5 billion people on earth and we want to establish a
channel for each of them, well, buckle up, we'll be here melting the Earth for
1.071 BILLION seconds, or 34 years. Just to open channels. Then another 34
years to close them. Here's a mathematical proof of the LN issues [1].

Hand-waving and pretending there's a path or some solution today means we're
not even talking about objective reality anymore.

[1] [https://medium.com/@jonaldfyookball/mathematical-proof-
that-...](https://medium.com/@jonaldfyookball/mathematical-proof-that-the-
lightning-network-cannot-be-a-decentralized-bitcoin-scaling-
solution-1b8147650800)

------
pmorici
I wonder if they are working with Coinbase behind the scenes on this or if
this is a totally independent product. They have a partnership with Coinbase
that lets you view your Coinbase balances from your account page on Fidelity.

------
SideburnsOfDoom
In a gold rush, you get rich by selling shovels. You don't even have to have a
strong opinion on whether there really is any gold to be found, in order to
see the market opportunity for shovel sales.

------
tim333
They don't say if the custody is insured against loss/theft which has been a
sticking point for institutional investors. They basically can't stick your
money in unless it is, and none of the existing custodians have been. I can
see why insurers are reluctant when it only takes one or two insiders to
transfer the coins to some account they control and say oops we've been
hacked.

------
Theodores
As I understand it Fidelity have bought a chunk of Bitcoin and are currently
trying to buy more. They actually do not care about price, they just need the
coins so they can setup these new financial things they will let their bigger
customers buy into, as part of the portfolio. The cold storage thing is no
biggie, they will be holding their new and shiny bitcoins in many, many
wallets. So a customer of theirs will be able to effectively buy one of these
wallets rather than a stake in a nebulous fund.

I have heard no mention of them wanting to buy the 'fake crptocurrencies',
i.e. anything except 'bitcoin', which I think has appeal to their customers in
a way that 'ethereum' or 'crypto-kitties' does not.

But is this really progress? If a cafe has customers wanting some new fad
food, e.g. 'kale and pulled pork burgers' and if they have staff that have
bought into the 'kale and pulled pork' hype then they might as well add it to
the menu.

This is becoming a trope:

"No one said when some of these early-stage Internet companies in 2000 were
going out of business, 'Gee, the Internet is toast,'" Jessop said. "We don't
focus too much on the price. It's a foundational technology — people are
trying to get exposure to the trend and expect volatility in the assets
themselves."

Could be said about fidget spinners - they have only got started!

In debating this point with a bitcoin 'bore' I was told that there was no
innovation in the internet after the dot-com crash until 'ajax came along' and
no 'new innovation' came along after that until the iphone came along. I
didn't see it that way, but was it?

~~~
roymurdock
Bitcoin is useful for evading currency controls, semi-anonymous digital
payments, and speculation

Blockchain is a new type of database that has larger applications that involve
the tradeoff between efficiency and trust

To answer your bigger question you have to ask yourself what you define as
"progress" \- is Bitcoin/blockchain new? Yes. Is either useful? Sure, for
people who are looking to move money around semi anonymously, enforce more
expensive supply chain tracking solutions, or make money selling new financial
products. Is that progress?

If you, like me, don't see new database/financial engineering that benefits a
small group of technologists and financiers as potentially equal in value to
the raise in standard of living across huge sections of the world brought by
electrification, refrigeration, antibiotics, internal combustion engines,
public roads, and white goods, then you may be interested in this thesis:
[https://www.nber.org/papers/w19895](https://www.nber.org/papers/w19895)

"While no forecast of a future slowdown of innovation is needed, skepticism is
offered here, particularly about the techno-optimists who currently believe
that we are at a point of inflection leading to faster technological change.
The paper offers several historical examples showing that the future of
technology can be forecast 50 or even 100 years in advance and assesses widely
discussed innovations anticipated to occur over the next few decades,
including medical research, small robots, 3-D printing, big data, driverless
vehicles, and oil-gas fracking."

~~~
village-idiot
Blockchains aren’t new, they’re over a decade old at this point.

And in what applications are blockchains superior to centralized applications?

~~~
seibelj
Keeping track of an asset without a centralized authority? That’s the point of
a blockchain - a sliding scale where increasing decentralization causes a
decrease in efficiency, where the trade off makes sense.

~~~
beefield
> Keeping track of an asset without a centralized authority?

Question was:

"And in what applications are blockchains superior to centralized
applications?"

You really did not answer the question. What is the application where it is
superior to track the asset without central authority? (I come up with
criminal money transfers. I hope someone comes up with something else because
I do not think that is too solid a foundation to build a sustainable
technology...)

~~~
seibelj
No fees to middlemen, enabling micro-payments at scale (obviously need to
drastically reduce blockchain fees, but that is an area of active
development). Elimination of charge-backs and a huge amount of fraud,
especially in industries that have an abnormally high level of fraud.
Borderless payments. The highest density of wealth storage ever invented.
Completely different threat model for theft with its own pros and cons.

Everyone immediately jumps to the criminal aspects. The existing financial
system has absolutely no problem handling all the crime, the blockchain did
not invent money laundering.[0]

[0] [https://www.theguardian.com/business/2018/sep/19/danske-
bank...](https://www.theguardian.com/business/2018/sep/19/danske-bank-chief-
resigns-over-money-laundering-scandal)

~~~
roymurdock
There are fees with bitcoin - the transactions that leave higher fees for the
miners get processed quicker. If you don't include fees with your transaction
it could take hours to be bundled into a verified block.

People, myself included, jump to the criminal aspects because those are the
only real world applications that are currently creating value for Bitcoin
"users" (vs. speculators). Getting around borders/currency controls is
valuable because it's hard to do/illegal, and Bitcoin makes it easier.

The rest of the things you listed such as "highest density of wealth storage
every invented" and "completely different threat model" are not use cases, and
are not inherently good/bad, just different (and actually usually bad when
optimizing for verification speed/efficiency and transaction clearance over
chargebacks/fraud)

PS did you get hired into the crypto/blockchain world, or just more optimistic
after doing research? I remember us being in agreement / you being skeptical
about it before

~~~
seibelj
> There are fees with bitcoin - the transactions that leave higher fees for
> the miners get processed quicker. If you don't include fees with your
> transaction it could take hours to be bundled into a verified block.

As I said, the fee issue is being worked on (scaling, layer 2 networks) but
that's a potential of the technology.

> People, myself included, jump to the criminal aspects because those are the
> only real world applications that are currently creating value for Bitcoin
> "users"

I simply disagree, if you want me to enumerate all the use cases that aren't
criminal I can, but google can help.

> The rest of the things you listed such as "highest density of wealth storage
> every invented" and "completely different threat model" are not use cases,
> and are not inherently good/bad, just different (and actually usually bad
> when optimizing for verification speed/efficiency and transaction clearance
> over chargebacks/fraud)

Yes, it is a different sort of tradeoff, that may be useful in some cases.
It's novel.

> PS did you get hired into the crypto/blockchain world, or just more
> optimistic after doing research? I remember us being in agreement / you
> being skeptical about it before

I have posted a lot on cryptocurrency, I have been in the industry for a
while, but I am not universally optimistic about all things crypto. But
overall I am bullish.

~~~
beefield
>if you want me to enumerate all the use cases that aren't criminal I can.

Could you start with one? And I mean one that is obviously superior to
centralized solutions? What are the measures that make blockchain superior in
this use case and why a centralized solution can't achieve those measures? Why
the tradeoffs in other measures are insignificant? Let's further assume that
decentralization itself is not an acceptable measure.

~~~
stale2002
Do you think that TOR is useless then?

Do you not see the value of censorship resistance?

There are billions of people in the world currently living under repressive
governments. The world does not revolve around the western world with all of
our privileged freedoms.

~~~
beefield
I already accepted that blockchain offers value in criminal money transfers.
Obviously censorship resistance is criminal in repressive regimes. It just is
a bit difficult in western world to sell a product whose only actual value
proposition is criminal money transfer.

~~~
icelancer
I think if you were the target (or initiator) of legal actions that don't
involve criminality on your end but do involve discovery, you would think a
lot differently about pseudonymous payments, and potentially encrypted
communications. Speaking as someone involved in three active civil lawsuits,
trust me when I say criminality is not the only reason to hide things. Being
subjected to the discovery process where adversaries can uncover things about
your personal life is an experience that will change most peoples' feelings
about all things privacy.

------
omegaworks
More capital wasted to entrench a fairly useless commodity[1] that requires
electrical energy expenditure that rivals entire nations' usages[2]. We are
bounding toward climate catastrophe and our largest institutions are taking
stakes in actively destructive tulips.

1\.
[https://www.tik.ee.ethz.ch/file/74bc987e6ab4a8478c0495061661...](https://www.tik.ee.ethz.ch/file/74bc987e6ab4a8478c04950616612f69/main.pdf)
[pdf]

2\. [https://www.wired.co.uk/article/how-much-energy-does-
bitcoin...](https://www.wired.co.uk/article/how-much-energy-does-bitcoin-
mining-really-use)

~~~
seibelj
The energy is available on the free market. Or acquired for the express
purpose of blockchain mining (I.e. new geothermal energy created specifically
for this industry and impractical to transmit other places).

If you want to ban bitcoin mining because it “wastes” energy, there is an
argument to be made for banning any industry not absolutely necessary for
society because it destroys the planet. Why do we have sports stadiums? Rock
concerts? Car racing?

The other argument is that what bitcoin achieves through mining is only
possible with financial institutions, the court system, and so on. What power
does that system use?

And finally, new innovations will likely end PoW mining for some major block
chains like Ethereum, but it is extremely doubtful bitcoin will ever switch.

Also, your first link is a white paper on scaling unrelated to the statement
that bitcoin is a “useless commodity”, so I’m not sure why you are using it to
back up your assertion.

~~~
omegaworks
The paper describes the problems inherent to bitcoin. I think blockchain might
be a good fit for some things, but bitcoin makes a terrible currency.

The relevant section:

>Today’s representative blockchain such as Bitcoin takes 10 min or longer to
confirm transactions, achieves 7 transactions/sec maximum throughput. In
comparison, a mainstream payment processor such as Visa credit card confirms a
transaction within seconds, and processes 2000 transactions/sec on average,
with a peak rate of 56,000 transactions/secnsactions/sec on average, with a
peak rate of 56,000 transactions/sec

~~~
seibelj
That doesn't mean it's useless, it's just that the current state of the
technology does not have the same throughput as other technologies in regards
to payment processing. Bitcoin has many other aspects that make it more than a
"useless commodity", which wasn't implied by the linked article or the fact
you quoted.

~~~
omegaworks
>it's just that the current state of the technology does not have the same
throughput as other technologies in regards to payment processing.

This makes it an extremely poor currency. It is also an extremely poor
distributed linked list with that throughput. If you use the energy resources
of a small country just to get 7 transactions per second _max_ recorded in a
ledger, you've failed as a system designer.

If the intent was to create a currency, Satoshi failed. If the intent was to
create a white elephant, Satoshi succeeded beyond their wildest dreams. If our
largest institutions are buying in, we will be collectively saddled with the
maintenance of the network for the foreseeable future.

------
pastor_elm
great time to get in on the dip

------
Immortalin
Time to add crypto support to KloudTrader :)

[https://kloudtrader.com/narwhal](https://kloudtrader.com/narwhal)

