
Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain - dankohn1
http://www.wired.com/2015/12/big-tech-joins-big-banks-to-create-alternative-to-bitcoins-blockchain/
======
roymurdock
For anyone who needs a (very simplified) primer on the blockchain and why it's
relevant for banks:

A blockchain is a ledger (piece of paper that records transactions) with
perfect memory of every single transaction that has ever occurred within a
certain network. This makes double spending within the network impossible as
you can trace every single coin in the network back to its origin, verifying
that your trading partner does, in fact, have the coin he claims to. This
removes the need for a trusted third party to oversee/verify transactions.

This is important for banks because currently they pay a 3rd party clearing
house to process transactions and transfers between them. They cannot trust
each other because their transactions are not linked together in one shared
network.

If they all agree to get on a shared blockchain (ledger), they can split the
costs of continuously verifying the validity of the blockchain (leder) between
them, rather than paying a 3rd party for the same service. This would reduce
fees within the industry and reduce time between transfers.

I used to be very excited about blockchain technology and its implications for
creating micro/private currency networks. Something about the financial
industry's interest has really turned me off the blockchain and its possible
implementations.

~~~
jon_richards
How do the banks ensure that aren't outmined? One of the key components of a
blockchain is that no one mines more than half that chain.

If you have too many blockchains, then you split the miners between the chains
and open the doors for a big player to come in and overwhelm the other miners
on that chain.

I suppose you could somehow implement private blockchains where only those
with the private key can participate, but I don't know whether this has been
done or not.

~~~
sanswork
Banks don't need mining for their chains.

>I suppose you could somehow implement private blockchains where only those
with the private key can participate, but I don't know whether this has been
done or not.

This is what everyone is talking about. They aren't talking about mined
chains.

~~~
brighton36
If there's no mining its not a blockchain. Objective truth is the innovation
that Bitcoin offered. These proposed system achieve consensus by merely voting
for truth, which is technology we've had since the 80s

~~~
sanswork
Bullshit. Nothing about the term blockchain implies there must be mining. This
whole "it's not a blockchain without mining" thing came straight from
/r/bitcoin where a bunch of people seem to think that saying something isn't a
blockchain matters so they keep trying to change the definition of it so
bitcoin is the only true blockchain.

>These proposed system achieve consensus by merely voting for truth, which is
technology we've had since the 80s

So what? What does that really change at all? Nothing.

~~~
brighton36
It means the security is non existent. Read any of the andrew poelstra papers
for details on how and why.

Subjective truth has been around for decades. No one cared about it , because
its not useful. The only reason blockchains are useful now is because they
enable value transmission between untrusted parties. (Which private chains
don't do)

The only reason blockchain is a buzzword now is so that consultants can bilk
banks for database contracts.

~~~
sanswork
No it doesn't mean that at all. Just because you are unable to think up a
system doesn't mean it's impossible. A basic and secure enough system is
trivially easy. Which paper?

It is no less truthful than bitcoin. It need not be more mutable than bitcoin.
It is just different.

>The only reason blockchains are useful now is because they enable value
transmission between untrusted parties.

Right because of how current blockchains are implemented and used.

~~~
brighton36
Search for "on stake and consensus" I'd link to it, but I'm on mobile right
now. Btw- I know you're new to blockchains because poelstra has been writing
seminalpapers for years and you haven't even heard of him.

We know things are true in a blockchain because energy went into it. If only a
single Bitcoin node were alive, and 99% of the network disagree with him - the
energy would point to the truth. This is what makes it objective. With
subjective chains there are a huge suite of problems in the form of stake
grinding and long/short range attacks. Why does this matter? Non-objective
quorum based sysetms have been around for decades. They're not more efficient
than centralized systems for many economic reasons, some of which were really
well laid out in a Isabella kaminska paper on the subject (let me know if you
need a link)

Tldr: blockchains aren't paxos or raft. Blockchains mostly suck, but do one
thing well: resist censorship

~~~
sanswork
That entire paper is about PoS and dynamic membership systems where the
participants aren't known. Relevance to the current discussion? Zero.

All those attacks are based on unknown dynamic participants which isn't an
issue. So ya argue against a system they aren't trying to implement.

~~~
brighton36
So if the trust each other - passing messages in the style of SMTP (or soap)
is drastically better than a hokey round robin "blockchain emulation"
architecture.

At least you understand now that immutability requires energy...

~~~
pyre
This discussion might be a little above my pay-grade, but you're seeming to
conflate "unknown participants" with "untrusted participants" from this
response. It's possible to know someone without trusting them. I think that
it's pretty apparent that there is a difference between an unknown anonymous
actor, and an actor that you know, but just can't 100% trust.

------
DennisP
It makes sense for the banks to do this, because they have different
requirements.

Bitcoin is great because it works with an unknown set of untrusted entities,
and there's no counterparty risk because the ledger _is_ the currency.

Banks have a known set of semi-trusted entities, and want to track off-chain
assets. They'll still have counterparty risk, but if they see a way to use
chained blocks and something like Byzantine Paxos to speed up interbank
settlement, more power to 'em.

~~~
paulhodge
Yup. The actors don't even need to trust each other _that_ much, because they
each still need to use their public key to execute a transation. The level of
trust is just that everyone will play nicely, such as not purposefully
ignoring transactions.

The Bitcoin model is good at incentivizing actors to play nicely. Banks have
no need to create this incentive, it's already in their interest. The Bitcoin
mining system also solves another problem: how to evenly distribute new money
in a fair way. Banks have no need for that either.

~~~
Mtinie
> The Bitcoin mining system also solves another problem: how to evenly
> distribute new money in a fair way.

I was going to disagree with this, but I reconsidered my initial comment and
will offer this modification:

"The Bitcoin mining system also solves another problem: how to evenly
distribute new money in a provably fair way to those with the resources to
participate."

------
logfromblammo
"Ditching" Bitcoin? Wouldn't that imply that they had previously adopted
Bitcoin to some meaningful extent?

Bitcoin is merely proof of concept for the underlying technology. I expect
that there will be many more offshoots in the future, beyond the pieces used
by the existing banking system. But I won't really care about any of them,
until one of them allows me to work, buy, and sell without being forced to
trust any third party that I find to be intrinsically untrustworthy--including
governments, banks, cartel enforcers, mobsters, miner brigades, and Anonymous.

Not there yet. This isn't even a step in that direction.

But what I do like about this is that it _may have the potential_ to simplify
mutual insurance, interbank settlement, and securities exchanges. It would be
nice if the funds from an electronic transfer to my spouse could be made
available faster than writing out a paper check and depositing it at a branch
ATM. I would also be particularly interested if it could end certain semi-
fraudulent practices, such as short positions that are not appropriately
matched against a long counterparty, or speculative phantom commodities
contracts that are never actually redeemed by delivery.

~~~
jsprogrammer
I don't see what advantage an offshoot would have. The current blockchain is
the longest; there's no reason to ditch it.

~~~
logfromblammo
No reasons?

The nature of the Bitcoin's SHA-256 POW means that individuals can no longer
meaningfully contribute to the integrity of the chain, and this responsibility
is increasingly held by fewer individuals with access to (relatively)
expensive specialized ASIC machines.

The Bitcoin system has (relatively) few legit trade opportunities yet, but is
well used by scammers and black marketeers.

The median person has little use for Bitcoin as it is now.

MtGOX showed that exchanges are a point of vulnerability.

Silk Road seizure showed that Bitcoin is vulnerable to rubber-hose
cryptanalysis and reminded everyone it is only pseudoanonymous.

Governments have already moved to attack Bitcoin or users of Bitcoin. Mostly
these are proactive attempts to defend domestic currency controls, or concerns
over money laundering.

The "dust DoS" attacks have called into question whether Bitcoin can scale
much larger than its current extent.

You can't use Bitcoin with Apple Pay or Google Wallet. You actually can't get
an app approved for Apple's App Store if it includes the ability to send
Bitcoin. Google play doesn't allow in-app purchases in Bitcoin.

There's no reason to _ditch it_ if you have already adopted it, but there's
also no particular reason to adopt it in the first place, if something better
might come along within a year or two. The banks aren't buying in. I haven't
either.

~~~
yc1010
There is not reason to use this web thing (thats fully of dirty porn and
nerds) for shopping when we have paper catalogues

There is no need to send email when you can send a fax

There is no need to carry a brick with you to make calls

There is no need for plastic cards when one can use cash

And so on, just because YOU do not grasp advantages and possibilities that
bitcoin has brought along, does mean the rest of us dont. I use Bitcoin daily
BTW it has already improved my life in ways only rivaled by the rise of the
web, mobile in last 20 years

~~~
sanswork
In all those cases they were a clear improvement. Bitcoin is almost always a
worse experience though.

What ways has Bitcoin improved your life dramatically?

~~~
logfromblammo
Plastic cards are _not_ a clear improvement over cash. And actually, Fed notes
are not even a clear improvement over gold and silver certificate U.S. notes.

They are better for certain, specific goals, but by no means a universal
improvement.

There is no bill that I receive that I can more easily pay with Bitcoin than
with an electronic bank transfer, bank check, CU draft, or money order. There
is no item I want that I can buy more easily with Bitcoin than with cash,
check, debit card, or credit card. It is not a reliable store of value. I
never need to send or receive international money transfers. I don't buy or
sell black market goods or services.

The biggest thing it has going for it is potential.

I really, really hate the giant, swinefornicating, too-big-to-fail banks.
Nothing would please me more than their rapid and well-deserved downfall, as
people start to use crypto to recapture more of the value of their own
economic contributions, and cut out some of the middlemen charging tolls and
skimming off the top. But I'll be cursed to the abyss before I replace a Bank
of America with a PayPal.

All I can buy with Bitcoin right now is a tiny FOADIAF to the banksters--which
would probably feel _really_ good. But right now I'd rather just give them the
finger for free and use my spending money to buy pancakes instead of crypto
outputs.

Still watching, though. I have been watching since 2010. I keep seeing Bitcoin
users creating and using trust-dependent services rather than designing new
transactions that remove the need for that trust. And then I see those
services fail, to the detriment of the users.

I'm not sure what, exactly, I'm looking for, but I haven't seen it yet. It
makes me wish I was even remotely qualified to write crypto at the level
required to design a worldwide digital currency system. But I'm not, so I
can't personally improve on Bitcoin, even though I want it to be better.

------
mongol
The Economist article on this I found good.

"The notion of shared public ledgers may not sound revolutionary or sexy.
Neither did double-entry book-keeping or joint-stock companies. Yet, like
them, the blockchain is an apparently mundane process that has the potential
to transform how people and businesses co-operate. Bitcoin fanatics are
enthralled by the libertarian ideal of a pure, digital currency beyond the
reach of any central bank. The real innovation is not the digital coins
themselves, but the trust machine that mints them—and which promises much more
besides."

[http://www.economist.com/news/leaders/21677198-technology-
be...](http://www.economist.com/news/leaders/21677198-technology-behind-
bitcoin-could-transform-how-economy-works-trust-machine)

~~~
brighton36
This article was a PR release for factom which is an obvious scam (they sell
checksums). Notarization for the underserved is not a real idea.

~~~
paulsnx2
Brighton36 is Factom's favorite troll. Searching brighton36 and Factom will
yield more information about our project than nearly any other you might use.

This idea of selling "checksums" is his current favorite smear, but it is of
course obvious nonsense.

------
SoyNut
entrepreneur: "About your open blockchain project, sir." IBM PR correspondent:
"Yes, what about?" entrepreneur: "Well, it's closed source. I don't see public
repositories anywhere for it." IBM PR correspondent: "No it's not closed
source! It's just not available to you or anyone who doesn't have access to
our network. Just ask our business partners if it's open." The Linux
Foundation: "Of course it's open! Open to US!"

~~~
nissimk
Here's the github link :-)

[https://github.com/hyperledger/hyperledger](https://github.com/hyperledger/hyperledger)

TLDR: there's no code in that repo.

------
malandrew
I just hope that any solution adopted doesn't aid or reinforce cartel-like
behavior. We already have a financial system where the incumbents can easily
block the entrance of a new, nimbler upstart that would disrupt existing
institutions and increase productivity.

The article even mentioned at least one existing institution that has an
incentive to preserve the problem to which they are the solution:

    
    
        "Indeed, some companies involved in the project may feel 
        threatened by existing efforts to reinvent the financial markets 
        with the blockchain. State Street bank, for instance, stands to 
        lose if companies start using Overstock’s technology to borrow 
        stock. In the US, the stock loan business is a $954 billion 
        market; State Street, known as an agent lender, is a big part of 
        that. Its future depends on getting ahead of the game.
    

Relevant: "The Shirky Principle" by Kevin Kelly

[http://kk.org/thetechnium/the-shirky-prin/](http://kk.org/thetechnium/the-
shirky-prin/)

------
macns
Reading the participants' comments below the announcement, most of them speak
of an open/distributed ledger, not Bitcoin's blockchain. So it seems they
really are _ditching_ the original blockchain.

 _IBM intends to contribute tens of thousands of lines of its existing
codebase and its corresponding intellectual property to this open source
community. Digital Asset is contributing the Hyperledger mark, which will be
used as the project name, as well as enterprise grade code and developer
resources. R3 is contributing a new financial transaction architectural
framework designed to specifically meet the requirements of its global bank
members and other financial institutions. These technical contributions, among
others from a variety of companies, will be reviewed in detail in the weeks
ahead by the formation and Technical Steering Committees._

~~~
malandrew

        "enterprise grade code"
    

What does that even mean? I read that and think to myself "cowboy generated
spaghetti code with more bugs and more technical debt".

~~~
mikekchar
Without being sarcastic, I think it means scalable so that it can be deployed
in a situation where you have tens of thousands of seats. Generally it also
means that you have some way of monitoring that it is working across the
network. Finally, it usually means that it is an integrated turnkey system
that doesn't require you to separately install and maintain a lot of third
party support systems that it depends on.

You can think of the opposite of "enterprise" software as realizing that if
you use independent packages a,b, and c and tie them together with some shell
script that it will do what you want. It's only been tested by one or two
guys, but you can't see any reason why it wouldn't work for the 10,000 people
on your site (famous last words...). You spend a week patching it together and
roll it out on the weekend with no way to roll back if it doesn't work, etc.

Still not a fan of enterprise software, but I don't work for enterprise
companies any more ;-)

------
ihsw
It should be noted that there is a far more interesting implication -- tech
and banking giants ditch SWIFT for their own blockchain.

The blockchain and SWIFT are very similar in spirit and in actuality, and it
stands to reason that there is consensus that a private blockchain network
would be more robust, fast, and secure than SWIFT.

~~~
nickpsecurity
My thoughts exactly given I've designed, but not developed, tech specifically
aiming to replace SWIFT. What they do need not cost so much or be so
difficult. I was thinking highly secure endpoints and link encryptors to
authenticate otherwise P2P traffic with optional 3rd party involvement where
extra accountability is needed.

------
nissimk
Here is the press release:

[http://www.linuxfoundation.org/news-
media/announcements/2015...](http://www.linuxfoundation.org/news-
media/announcements/2015/12/linux-foundation-unites-industry-leaders-advance-
blockchain)

And the website:

[https://blockchain.linuxfoundation.org/](https://blockchain.linuxfoundation.org/)

Please post if there is any more information.

~~~
sa5
There are some more technical details at
[https://www.ibm.com/developerworks/community/blogs/gcuomo/en...](https://www.ibm.com/developerworks/community/blogs/gcuomo/entry/The_Force_of_Blockchain_Awakens?lang=en)

------
yarrel
Jettisoning any advantage to using the blockchain rather than a centralised
database.

This is the snake oil phase of cryptocurrency. Or, more charitably, the not-
inhaling phase.

~~~
mpeg
There are a lot of misunderstandings about blockchain technology.

One of the most common is believing that everyone who uses their own chains
are not using the bitcoin Blockchain, which is usually not the case (apart
from some notable examples like Ripple or Ethereum), you can use the
Blockchain with marked bitcoins or other mechanisms to essentially "convert"
them to other currencies in a provable way.

Another is that everything that needs to be distributed should be done in
blockchains, whether there is trust between peers or not.

------
mpeg
Both Nasdaq omx [0] and Overstock t0.com [1], mentioned in the article, seem
to use the Bitcoin Blockchain to peg their internal currency against, they're
sidechains, not completely separate blockchains...

[0]: [https://coincenter.org/wp-
content/uploads/2015/06/SecondLett...](https://coincenter.org/wp-
content/uploads/2015/06/SecondLetterForRecord-AB1326.pdf)

[1]:
[http://www.sec.gov/Archives/edgar/data/1130713/0001047469150...](http://www.sec.gov/Archives/edgar/data/1130713/000104746915008523/a2226515zs-3a.htm)

~~~
kanzure
Timestamping isn't enough to make something a sidechain:
[https://blockstream.com/sidechains.pdf](https://blockstream.com/sidechains.pdf)

... unless you are using "sidechain" in a very loose, diluted sense.

~~~
mpeg
I guess you mean the t0.com chain, I do agree it's not the common case where
you can transfer btc in and out of the sidechain.

Would it be considered a completely separate chain, since it needs to publish
the timestamped hashes on the bitcoin blockchain ? (Or any other, sure, but
right now bitcoin is the one with the widest adoption)

------
ubersync
This is just a glorified DBMS.

~~~
nickpsecurity
Append-only, distributed, fault-tolerant filesystem + standard, financial
protocols anyone?

------
mkj
So this is more like a git/mercurial chained hash where the head hash proves
the existence of all previous revisions? Makes sense. And call it "blockchain"
just to keep enough buzzwords.

~~~
sanswork
So this is just a chain of blocks that each verify the existence of all
previous blocks? I can't believe they are calling it a block chain. Clearly
it's a chained hash.

------
jordigh
So what is going to replace miners? What incentive will people have to verify
the integrity of this new blockchain? Is it still vulnerable to 51% attacks?

~~~
sanswork
When you know the participants PoW is just a waste. You can use something like
round robin to determine who gets to add the next block. That means that no
it's not.

~~~
brighton36
Why do you even need blocks? If you trust each other, what's wrong with signed
messages?

~~~
sanswork
Less overhead in distribution and signed messages between individual parties
doesn't allow third party(within the system ) auditing.

I can sign a message saying I am giving you $10 of Bank B's debt but there is
no way with just signed messages for you to know I still have ownership of
that debt.

~~~
brighton36
That's not even a little true. Have you worked on finance code before?

~~~
sanswork
What part isn't true?

I've worked in ETL at Morgan Stanley. So not only finance code. But their data
systems.

~~~
brighton36
The part about downloading entire databases to view your subset of the data.
If this were an efficiency - SMTP would have blocks. Additionally, I am
doubtful of your claim because information is the product of all hedge funds
and investment banking operations - and to hand out your information to your
competitors gives them tradable information at your expense. (Which youd know
if you worked with any non-trivally finance operation)

~~~
sanswork
>The part about downloading entire databases to view your subset of the data.

You're not doing this though you're downloading the entire database to verify
the subset is true and you're using blocks because adding single transactions
at a time when you need to have known ordering amongst a lot of participants
leads to a lot of overhead that is removed by batching.

The type of information we're talking about isn't sensitive though(unless your
going down the drain and trying to hide it). And yes I just made up that I
worked in ETL at MS a department pretty much no one that hasn't worked in
knows exists.

------
Zigurd
The regulators get friendly relations with the regulated, and the regulated
get to decide how much cryptocurrency they get to skim because they started
another blockchain that's friendly to regulators. A crony cryptocurrency. The
bet is that regulators will be more comfortable with an indirectly captive
blockchain and will use it as a wedge to lever bitcoin out of banking.

------
kolanos
Ripple Labs [0] have been trying to do something like this since 2011. From
what I can tell, it has been a hard sell.

[0] [http://www.ripple.com](http://www.ripple.com)

------
rburhum
This makes sense. What bank would want to have a public ledger effectively
advertising their customer data?

------
pilatesfordogs
Does anyone have a link to a simplistic explanation of the block chain and why
it seems to be so relevant?

~~~
macns
blockchain aims to solve the "Two Generals' Problem"[0] short explanation in
video[1]

On what the article says, transactions not relying on the _first_ bitcoin
blockchain are _more_ vulnerable to 51% attacks[2]. Though if that many big
corps joined, they could achieve a well established, attack-proof consensus
relatively fast - \- this probably is bad news[3] for Bitcoins' blockchain
"ambitions" which is considered by many a solution to de-centralize the
"internet" or services depending on third parties.

[0] In computing, the Two Generals Problem, is a thought experiment meant to
illustrate the pitfalls and design challenges of attempting to coordinate an
action by communicating over an unreliable link:
[https://en.wikipedia.org/wiki/Two_Generals%27_Problem](https://en.wikipedia.org/wiki/Two_Generals%27_Problem)

[1]
[https://www.youtube.com/watch?v=sYduOfRLHq0](https://www.youtube.com/watch?v=sYduOfRLHq0)

[2]
[https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...](https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power)

EDIT: format, clarification

UPDATE: [3] just saw the linux foundation page, this might actually be a good
thing, forgive my ignorance

~~~
sanswork
>blockchain aims to solve the "Two Generals' Problem"[0] short explanation in
video[1]

PoW aims to solve that. Blockchains are just a way to store data in an agreed
format with immutability and known ordering.

>On what the article says, transactions not relying on the first bitcoin
blockchain are more vulnerable to 51% attacks

51% attacks are an issue for PoW systems. Private chains don't need PoW so
aren't vulnerable to them.

~~~
brighton36
Private chains are also trivially compromised. Much more so than a traditional
database

~~~
sanswork
Please share with the class how?

~~~
brighton36
Look into nxt, peercoin, a few of the other pos chains. They all failed due to
stake grinding. _read the poelstra_ papers for why pos is untenable

~~~
sanswork
When you know every participant you don't need PoS or PoW you can us RR.

Like I've said elsewhere you are arguing from ignorance and because you've
bought into the religion of bitcoin.

~~~
brighton36
Round robin is trivially DOS'd . also, sharing your private finance data with
your competitors is not an economic efficiency.

Bitcoin isnt good for very much, it's mostly just useful for value
transmission and censorship resistance. You're new to blockchains and don't
know that, so you intend to blockchain all the things. Which is a way more
extreme view.

~~~
sanswork
How is it trivially DOS'd? You don't need to share all your private data just
the data about transfers using the system which isn't going to be particularly
sensitive unless you are in a bad way financially and will be worth it to
minimize the amount of settlements required of your business.

I'm new to blockchains? I'm pretty sure I'm not.

~~~
brighton36
Look into paxos and raft attacks. You don't know enough about this science to
promote it as the cure for what ails you.

As for sharing information - youre right... _if you don 't use blocks_

~~~
sanswork
"RR is trivial to DOS look at these two other schemes and the fact you didn't
means you don't know what you're talking about".

I think we're done here. You're not doing anything but saying Nu uh! and
calling me a liar.

~~~
brighton36
So you're telling this forum that the innovation here is round robin signing
of network state.(not even a decent trusted consensus system like raft) I
can't imagine that any halfway competant programmer in here will buy this as
anything more than a trivial code construction.

Here's what will happen to your database: it'll drop the blocks and revert to
a message passing infrastructure. Which is fine and good - but not in any way
related to a blockchain.

