
JP Morgan Unveils USD-Backed Cryptocurrency for B2B Payments - timcc50
https://decryptmedia.com/5173/jp-morgan-coin-cryptocurrency
======
simias
>The coin will be issued on the Quorum blockchain which was developed by JP
Morgan over the last year and is a private blockchain inspired by Ethereum.
This means only selected miners will be able to process transactions, unlike
public cryptocurrencies where anyone can.

[...]

>The purpose of the JPM Coin is to allow businesses to make near-instantaneous
transactions of value across the internet without having to move fiat money in
the background.

I genuinely don't understand what the blockchain does here that couldn't be
implemented by any random database system. I mean the euros that I have in my
bank account are also just a number that could be moved "across the internet"
instantly if they so desired.

The big innovation with Bitcoin-like blockchains is that transactions can be
done trustlessly but the whole "private blockchain with accredited miners"
turns it into basically a slow inefficient database with extra steps.

Is it just a buzzword to generate interest or is there an aspect of this I'm
missing?

~~~
darawk
I think it may be that the decentralized control structure makes organizations
who would normally be in competition with JPMorgan more willing to be on board
with using something that they developed. For instance, if you are say,
Goldman Sachs, would you want to use a private database at JPMorgan for you
and your clients funds? Or would you prefer to use a semi-private blockchain,
where although it's not open to the public, each participant in the network
has equal stature to one another? I think that is the true innovation here,
and I do think that it is important. It solves some of the corporate
cooperation issues that prevent certain types of value from being created,
because nobody wants to let their competitor control the space.

~~~
koolba
This already exists. It’s called the DTCC and _everybody_ uses it.

[https://en.m.wikipedia.org/wiki/Depository_Trust_%26_Clearin...](https://en.m.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation)

~~~
darawk
And that company is exactly what this tech. replaces. That company does not
provide its services for free. This blockchain product does.

~~~
0xffff2
How does this product operate for free? Who's paying for the miners?

~~~
scottlocklin
You don't mine in a permissioned system like quorum. The CPU load is minimal,
and when running the quorum clients, you are basically just checking to make
sure everyone in the system agrees on the transactions. If someone tries to
cheat (or spam or whatever), you kick them out.

~~~
simias
But then we're back to square one, aren't you basically describing a
distributed (but still perfetly "trustful") database? Isn't that effectively
what this DTCC provides?

What in this allows JPMorgan to provide the same service for free? Is it
really technical innovation or is it just a different business model? Wouldn't
they be able to do the same thing without using anything
cryptocurrency/blockchain related?

I feel like I'm missing something obvious but I don't see what it is.

~~~
scottlocklin
A blockchain is a distributed non trustful database with a method for
resolving disputes built in. Roughly speaking in something like quorum,
everyone checks everyone else's work, and the majority consensus is ground
truth. DTCC requires a trusted third party to administer the database. Quorum
doesn't. Quorum could presumably also replace intra-bank transactions as well
(instead of maintaining some other kind of database).

I guess the missing piece that seems to break people's brains; the ledger in
the distributed database represents a dollar amount (in the case of quorum's
dollar thing) and it has money-like rules, unlike, say, postgres which
ultimately relies on some other piece of software to make ledger like
transactions.

------
rayvy
It's pretty well known that these BigCorp crypto/blockchain plays are just
smoke and mirrors. There is no actual differential value gained here (unless
as @dwiel says,they get some sort of loophole crypto tax break). It's a bit
saddening to see that the tech has been picked up by the _exact
institution(s)_ that the tech was meant to combat. But if anything that just
proves that there's meaning behind the concept (regardless of a f'ing coin
price).

I look forward to the day where the JPM's and the like are put out of business
for this sort of thing due superior, user-friendly technology.

~~~
verdverm
How / when will public blockchains achieve better UX / friendliness than say
Venmo, Robbinhood, or debit cards?

~~~
rayvy
I wouldn't say its so much the UX. The UX even on some crypto projects is just
fine (see some EOS projects, apps, and dApps). The problem I see is that what
incentive do end users have to use crypto/privacy/blockchain/whatever apps vs
the centralized alternatives? Currently? None, because no one gives a damn
about their privacy/data. I don't think it will be my generation (millennial)
that picks this tech up, I think it will be later generations that have seen
our missteps when it comes to digital privacy.

~~~
verdverm
Doesn't EOS suffer from the same subpar UX around secret keys?

As compared to losing a debit/credit card

~~~
rayvy
Keep in mind that the EOS ecosystem extends far beyond downloading a CLI
client/etc. EOS Lynx[1] is a wonderful example of a decentralized wallet that
has abstracted layers away to the point where it looks/feels/acts like a
"regular people" iOS app

[1] [https://eoslynx.com/](https://eoslynx.com/)

------
dkoston
I’m going to try to distill this down to it’s easiest form.

\- JPMC will now create a digital signature (token) for every dollar that
enters its network.

\- Those digital signatures can be exchanged by any trusted authority

\- JPMC will exchange a single dollar to those trusted authorities for a
single digital signature

Using the blockchain allows JPMC to trust each dollar that goes through both
their network and partner networks as they cryptographically trust that
forgery is almost impossible. They also can trust that when a “wire” comes in
that the funds are actually available.

This is purely an accounting system backed by cryptography that allows much
more trust.

~~~
tylersmith
This could be very useful, but it doesn't require blockchains in any way.

~~~
dkoston
edit: didn’t like my analogy

I’d prefer you posted something constructive rather than just saying “doesn’t
need blockchain”. Of course it doesn’t. Storing data doesn’t require a
relational database, or a key value store either. All have pros and cons.

Saying “doesn’t require blockchain” is obvious and adds no value. It’s like
coming into a workshop explain what a saw is and saying “other cutting tools
also exist”.

You seem to be making the leap that because I’m explaining what something is
without saying whether or not I think it’s the right move that I think it is.

I don’t know whether or not it was cheaper and more effective for JPMC to fork
ethereum or to build their own accounting system from scratch and I doubt you
have the correct information to make that assumption either. Maybe JPMC
doesn’t have a team capable of writing accounting software (seems unlikely).
What’s more likely is they are looking for headlines because they know
blockchain is hyped technology. It would have probably not made the news if
they announced they were adding another settlement system beyond Zelle, ACH,
and wire. So, they probably chose this because they think it will reduce costs
and move their stock price while building a bespoke software accounting system
would have been more costly and wouldn’t have provided as much hype.

Businesses don’t make decisions about technology completely based on its
technical merits.

Many times they choose technology because someone recommended to them, or it’s
cheap, or they can’t build it themselves, or that’s not their primary
business, etc.

~~~
thaumasiotes
> I don’t know whether or not it was cheaper and more effective for JPMC to
> fork ethereum or to build their own accounting system from scratch and I
> doubt you have the correct information to make that assumption either.

We can make a good guess -- they're already a bank, so they're already running
the same accounting system this project requires.

~~~
dkoston
This system is both accounting and transfers. All their other transfer systems
(ACH, wire, Zelle) are run by third parties. As mentioned, we don’t know what
the cost of building their own transfer system would be.

In the long term, using someone else’s code for your bespoke project typically
means you run up against “square peg round hole” issues so it’s likely they
are just deferring engineering costs.

~~~
thaumasiotes
> All their other transfer systems (ACH, wire, Zelle) are run by third
> parties.

Those are systems for transferring money from JP Morgan to another bank. This
system doesn't do that; it can only transfer money from JP Morgan to JP
Morgan. That is much easier for JP Morgan to do, and they already have their
own system for it.

~~~
dkoston
That is wrong. Please re-read the article.

~~~
thaumasiotes
OK, I read the article. It says

> the coin is only available to JP Morgan’s institutional clients

without really expanding on anything.

But, JP Morgan has an official announcement out about this, which is much more
informative than this article is. It says:

> How does it work?

> In step 1, a J.P. Morgan client commits deposits to a designated account and
> receives an equivalent number of JPM Coins. In step 2, these JPM Coins are
> used for transactions over a blockchain network with other J.P. Morgan
> clients (e.g., money movement, payments in securities transactions). Finally
> in step 3, holders of JPM Coins redeem them for USD at J.P. Morgan.

and it says:

> Only institutional customers passing J.P. Morgan KYC can transact with these
> coins

So, in order to make any transaction using JPM Coins, you need to be a JP
Morgan customer who's passed their KYC checks. Parties who are not clients of
JP Morgan cannot purchase, receive, or redeem coins. What part of what I said
was wrong? What language from the article were you thinking of?

~~~
dkoston
> Those are systems for transferring money from JP Morgan to another bank.
> This system doesn't do that; it can only transfer money from JP Morgan to JP
> Morgan.

In theory, anyone who passes KYC can transfer money in token format to anyone
else on the network.

There is a major issue with the network which is that it seems as if only JPMC
can actually redeem the tokens for dollars.

~~~
thaumasiotes
> JPM Coins are used for transactions over a blockchain network with _other
> J.P. Morgan clients_

Moving your JP-Morgan-client-only coins from your JPMcoin account held with JP
Morgan to someone else's JPMcoin account held with JP Morgan is not
conceptually different from moving USD from your JP Morgan dollar-denominated
account to someone else's JP Morgan dollar-denominated account. In both cases,
participating in the system in any way at all requires you to hold an account
with JP Morgan, and the transfer that takes place "moves" currency from JP
Morgan to JP Morgan.

And, no surprise, JP Morgan already has all of the infrastructure in place to
do transfers from one JP Morgan account to another JP Morgan account.

> There is a major issue with the network which is that it seems as if only
> [J. P. Morgan] can actually redeem the tokens for dollars.

That's not an issue. In theory, you hope for the cryptocurrency to be valid
currency in its own right; you don't want people to think they need to redeem
it.

The issue is that you can't receive these coins unless you hold an account
with JP Morgan. (You can't spend them either, but that's moot unless there's a
way to get them in the first place.)

~~~
dkoston
I think we are talking about the same issue in different ways.

What’s clear is that this is either about internal efficiency at JPMC or
marketing hype. This has no benefits for retail banking customers, unless JPMC
provides new benefits (cheaper transfers). It certainly is not transformative
to retail clients.

------
root_axis
This is pointless. The gatekeeper to the private network _is_ a centralized
authority.

~~~
treis
After the initial selection by JP Morgan new members would (presumably) be
added by a consensus of the existing members. That would remove JPM as the
sole gatekeeper.

~~~
root_axis
Well you can presume whatever you like, the bottom line is that it's a JPM
controlled network subject to the whims of JPM (including token insurance).

------
SI_Rob
I predict this will be abandoned (or the blockchain figleaf dropped in favor
of an explicitly centralized and far simpler/cheaper store) in 2, maybe 3
years.

Or about as long as it takes for the fundamentally unsolvable problems of
decentralized governance to become pathological to group integrity. If you are
a junior stakeholder in this nominally decentralized system you eventually
have to accept that you have no influence over the direction of the protocol's
development, or get together with a group of similarly disadvantaged peers and
fork your own implementation where your relative influence is more comparable.

Until _that_ consortium, too, falls apart due to leverage-seeking behavior by
individuals within it, or ossifies into a de facto centralized network, but
one saddled with a bunch of expensive and now superfluous blockchain game-
theory casino infrastructure.

~~~
lioeters
Those are strong words, "fundamentally unsolvable problems of decentralized
governance".

I'm not dis/agreeing with your scenario: I also think it's quite likely that
this JPMorgan crypto would ossify into a de facto centralized network.

But the phrase "fundamentally unsolvable" feels like it needs some harder
proof or logical explanation. There are many instances of (and variations on)
"decentralized governance", like open-source projects, technical or social
organizations, etc. Would you say all those attempts are doomed to failure?
(Or maybe that they could continue to operate despite being potentially
unstable/flawed based on fundamentally unsolvable problems. Or perhaps that
they all tend to become centralized.)

Thinking of attempts at decentralized governance in a larger sense (including
but beyond specific applications in the crypto sphere), it does seem that most
of them are failing due to some inherent structural issues. I wonder whether
it can be demonstrated that all such decentralized governance systems are
fundamentally flawed (similar to Gödel's incompleteness theorem..?).

------
b_tterc_p
Ignoring the lack of positives, can JP Morgan reverse erroneous transactions
on this? This is an important part of the financial system. Are they just
going to hard fork all the time? Send the money back?

------
75dvtwin
If I am reading this right (and I am a newb at e currencies), JP coin is
basically a payment processor, where balance is kept on blockchain.

The coin value itself is linked with almost no flux to USD.

But then, I do not see how it is different than

[https://www.bitrail.io/](https://www.bitrail.io/) (and its new freedom coin:
[https://freedomcoin.cc/#more](https://freedomcoin.cc/#more) )

or

tether with 2bln market cap
[https://coinmarketcap.com/currencies/tether/](https://coinmarketcap.com/currencies/tether/)

what makes JP's offer more useful to B2B transactions than the above two
examples ?

~~~
roywiggins
At a guess:

JPMorgan is more reputable than either of those outfits

JPMorgan has existing relationships with businesses

JPMorgan understands business needs and can tailor their currency to them

JPMorgan is a bank.

~~~
jdmichal
Or, in other words, current coin offerings build workaround of such entities
into their value proposition. But there's also a class of potential consumers
for whom that might be an anti-value. JPMorgan seems like they're willing to
test that potential market.

------
Hongwei
Wasn't Jamie Dimon (JP Morgan CEO) a vocal skeptic of bitcoin and
crytocurrencies a year ago?

[https://www.bloomberg.com/news/articles/2017-09-12/jpmorgan-...](https://www.bloomberg.com/news/articles/2017-09-12/jpmorgan-
s-ceo-says-he-d-fire-traders-who-bet-on-fraud-bitcoin)

~~~
52-6F-62
Yes. Multiple times. I always found it pretty funny as I'd known they were
developing their own right alongside it.

Granted, I think his criticisms are more specific than being about the
technology in general.

I think he was more critical of it being penned as some replacement for
existing currencies and monetary systems, and the whole use as an investment.

But don't quote me there.

------
WrtCdEvrydy
Wasn't their CEO the one most proponent critic of cryptocurrencies.

~~~
raiyu
Still not bullish on Bitcoin but he likes blockchain - is the official by-line

~~~
jandrese
Basically, he likes blockchain as long as he controls the chain. The problem
with Bitcoin was that it was decentralized.

------
monkeydust
Can someone provide a before and after example on how this technology saves
money, reduces transaction failure risk or time taken for transaction to occur
(either or all of these)?

~~~
dkoston
Before:

\- you want to transfer $100,000 to another bank

\- you do a wire or ACH

\- that’s risky so someone has to verify that you actually have $100,000

After:

\- each of your dollars are digitally signed using cryptography

\- to transfer them, you share the hashes

\- the recipient validates the digital signatures to verify those $100,000 in
tokens are legit

It’s all about a system of accounting to reduce risk. With less risk,
transfers are faster. Think of it like an api to verify account balances that
can only be hacked if the SSL cert for the API is hacked by figuring out the
private key

~~~
lordnacho
If you lose your private key, you lose your JPM dollars. How many people want
to have $100K in notes? Because that's similar and a lot harder to lose than
something stored on a computer.

Or, if you send the £100K to a valid address that nonetheless is the wrong
one. Money in a black hole.

If you screwed up the note to send $100K via ACH, something could still be
done about it.

~~~
dkoston
Nope. JPMC doesn’t give you actual token access. This system doesn’t work like
public crypto. It’s all behind the scenes.

As such, it’s mostly marketing hype and adds value only for JPMC, not the
consumer

------
ErikAugust
No ads, JavaScript, etc:
[https://beta.trimread.com/articles/45](https://beta.trimread.com/articles/45)

------
dkoston
Another point I want to make that I think a lot of people on HN miss is that
you cannot do this with a database alone.

This is the equivalent of a token table where the token is a cryptographic
hash. However, it’s the cryptography that you are trusting, not the database.

The simple analogy is that you are using PGP to sign a message where the
contents are a dollar. Only the person who can decrypt that message gets the
dollar so you only give the hash to the person you want to have the dollar.

If there are actually dollars involved, this is a real thing.

~~~
drcode
That's not true, you are definitely trusting the database: In order to spend
money, you need the cryptography to work but you ALSO need the canonical
chain/database to record your transaction... you can't just send your signed
message to another person to perform a transaction, the central entity mining
the chain needs to still cooperate.

~~~
dkoston
maybe there was ambiguity in my post but I’m saying that this adds an
additional layer of trust outside the database which is the signed token

In this case you’re trusting JPMC, the database, their engineers, the
cryptography, etc.

For this use case, there is a major issue. Since you have no access to the
token yourself, it’s just marketing hype

------
andy_ppp
I'm sure the governance and reasoning seem _just fine_ right now but are we to
trust being locked in to JP Morgan forever? It's certainly the same way I feel
about Google AMP polluting the web.

Seems very buzzword friendly but I really cannot see why transfers (B2B)
aren't perfectly trivial and should be instant, free and totally secure and at
the tick rate of the market if in a different FX. What is stopping the banks
doing this now with just normal encryption?

~~~
colechristensen
Money transfers happen like Person -> Bank -> Clearinghouse -> Bank -> Person

They aren't free and instant because people and systems are involved in making
them happen. Funds have to be verified, systems to make sure the money is
there, fraud monitoring, regulations, mistake handling, etc etc. A lot of
stuff goes on in the middle during the transaction and mechanisms need to be
in place to prevent crime and fix mistakes.

Blockchains make this process a little better because instead of code setting
rules and interacting with APIs, the mathematical characteristics of the
blockchain end up doing a lot of the "work" involved and are simply more
convenient for everyone.

I'm guessing that eventually central banks (like the Federal Reserve) will
issue their own cryptocurrencies for banks to facilitate transfers.

It's not sexy or rebelling against the man, distributed crypto ledgers just
have better properties than crusty databases and APIs.

------
jackfoxy
Does this in any way address the issue of coin theft / key loss?

For instance, can I keep these coins on deposit with JPM, grant them access to
my keys, conduct all the transactions through JPM's more traditional security
infrastructure, and be assured JPM will make me whole if something bad happens
I did not authorize, with a transparent and fair arbitration methodology.

Or does this invalidate the whole purpose of crypto-coin?

~~~
colechristensen
Since JP Morgan is the one backing the coins with USD, and controlling who
mines, they can do whatever they want to fix errors or crime. If something
goes wrong they can just mark the "bad" coins as tainted and refuse to
exchange them for USD and give you new coins to fix the problem.

Paper money was created because it was more convenient than lugging around
precious metals, this is just the same. It has no value on the market by
itself, it's just a way for a bank to account for stored value.

------
inscionent
This is Hawala but controlled by one entity. Where is the value and why does
it need to be done in tokens controlled by JPM?

------
TACIXAT
The thing that bothers me about this is that banks have a monopoly on this
type of business. Outside of being a bank you need to register as a money
service business which is extremely cumbersome.

------
httpz
So basically a B2B Venmo on a blockchain?

------
GrumpyNl
Nice, they are in control , so they can generate money out of air.

------
tracker1
I'm not sure why they would use the USD as the backing for such a thing over
say Gold/Silver, etc. Say 1oz gold at X level purity for every coin. Bringing
back the Fort Knox currency backing would imho be much stronger than any fiat
currency.

~~~
aristophenes
Right because gold is much more stable than the US Dollar /s

~~~
tracker1
It isn't?

------
philwelch
A lot of people are missing the point and arguing past each other here.

Bitcoin and the like couple two distinct things:

1\. A distributed ledger of transactions with no single point of failure that
can cryptographically prove possession of the currency itself.

2\. An anarchic monetary system that serves the needs of illicit commerce and
inspires the imaginations of libertarians and erstwhile goldbugs.

JPM has decoupled these two aspects. And I think it’s an interesting move.
Most people either love or hate cryptocurrency because of the second aspect,
but the first may very well still be a good technical solution to the problem
of electronically shifting money around—even if you’re just shifting around
USD.

------
opportune
pointy haired boss who read a couple forbes articles about blockchain succeeds
in missing the entire point

------
kuroguro
Tether 2.0? :3

~~~
roywiggins
At least JPMorgan is regulated like a bank because it is one.

~~~
randaouser
The uptake will be great however, what doesnt sit well is the 2008 12Billion
bailout. As the same actors will be the nodes that are privileged to write to
and maintain the ledger, it has yet to be seen how immutable these
transactions will be.

------
pylus
Is that stable coin?

------
czbond
E Corp!

------
jpmattia
Repeat after me: A blockchain without decentralization is just a database.

~~~
colechristensen
That's the point!

JP Morgan is using the blockchain instead of mysql and a pile of code. To them
and their customers it has nicer properties. It doesn't at all change the
details that a bank is facilitating money flow, just how it is done, and at
that a little more efficiently.

~~~
thaumasiotes
But it doesn't do it more efficiently (or, really, change how it's done). The
coin is only available to JP Morgan customers, those who already have bank
accounts with JP Morgan. It can only be transferred to other JP Morgan
customers. It does the same thing they already do, but _less_ efficiently.

