
Bitcoin Technology Piques Interest on Wall Street - jchrisa
http://www.nytimes.com/2015/08/31/business/dealbook/bitcoin-technology-piques-interest-on-wall-st.html?smid=nytcore-iphone-share&smprod=nytcore-iphone
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Animats
This has nothing to do with Bitcoin. The interest is in distributed ledgers.
It's a way to do a distributed clearing house. When twenty or so mutually
mistrustful financial firms maintain a blockchain between them, they can have
a ledger that no single party, or less than a majority of the parties, can
tamper with.

This doesn't require Bitcoins, a currency, or mining. It's a way to solve a
problem that currently requires institutions such as the Bank for
International Settlements and Depository Trust Corporation.

Bitcoin has demonstrated that the blockchain technology is resistant to
attack. Even against massive fraud attempts, and even though many of the major
figures in the Bitcoin world ended up going to jail, the blockchain held up.
That's impressive.

~~~
wyldfire
Is twenty enough parties to give them each confidence that the network is
trustworthy? Seems to easily manipulated it only takes a couple of dishonest
parties to defraud the rest.

~~~
Animats
When the ledger is public, yes. Everyone can see tampering. Right now, the top
3 Bitcoin mining pools have 52% majority control of Bitcoin. The top 6 have
80% control. Bitcoin mining hasn't been distributed for a long time now.

~~~
brighton36
"Seeing" tampering is a completely different proposition than preventing
tampering. Any good centralized architecture can demonstrate tampering. Google
docs does this all the time.

~~~
Animats
That requires trusting Google. The goal is to do this without a single trusted
party.

~~~
brighton36
If detecting tampering needs to be done without trusting a third party, then
md5sum has this figured out back in the early 80's

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mikeyouse
I can't believe that there's any possibility of banks doing anything of value
on the Bitcoin blockchain when they could easily coopt the blockchain tech and
set up trusted miners. The public immutable ledger with full transaction
history is obviously interesting to Wall St. but what are the chances any of
these banks will trust anything of value to the current ideological devs of a
~$3B commodity controlled entirely by unknown Chinese miners? The underlying
notional of anything interesting on Wall St. is measured in trillions.. Can
you imagine them suffering through the squabbling with the block size debate
or hoping that miners don't collude to roll back the last month's
transactions?

~~~
cassetti
A couple of weeks ago I talked to the CEO of startup in NYC building a
proprietary blockchain-like protocol/product for banks.

According to him if a bank interacts with the bitcoin blockchain in any way
(mining and/or posting transactions), they are violating a host of AML and KYC
regulations because they do not know the identity of other players on the
network.

Apparently the claim could be made that the bank is collaborating with all
other miners/transaction creators, and the bank must know certain information
about these people. Also if someone posted a transaction from Iran, and the
bank helped mine that transaction, that's a big problem.

I don't know if his logic is correct, but it seems many of those in the
bitcoin community are underestimating the regulation hurdle that wall street
will need to figure out.

~~~
yc1010
It seems to me that some are overstating their case and believing their
bullshit in order to sell the banks a rotten tomato when a perfectly healthy
potato exists.

Sort of how years ago some people/companies would claim that using Linux in
enterprise would cause all sorts of issues for said companies in order to sell
their own propritary and nonopen solution.....

~~~
stcredzero
Yes, but if the banks set up their own Bitcoin-like blockchain but with an
added certificate authority, then they'd be putting their money where their
mouth is, and then you'd be the one looking like you're overstating your case.

As a media skeptic, the 1st suspect is the one who is ascribing motivations to
other parties/groups with no evidence. This goes double when something
"technical" overlooks technical alternatives that would demolish one's own
argument.

~~~
yc1010
Nothing stopping them from doing so, tho the use of a blockchain in such a
"centralized" context is silly and an overkill when they can use a normal
database with better/faster results especially if they already know+trust each
other.

~~~
stcredzero
_so, tho the use of a blockchain in such a "centralized" context is silly_

As you yourself noted, if a dozen banks got together to do this, it wouldn't
be any more centralized than what we have now!

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tcbawo
This has been posted here before, but many financial firms are interested in a
block chain concept (not necessarily bitcoin) for processing settlements. I
imagine it will be the same clearing houses and broker-dealers of today,
except that counter-party risk is reduced.

~~~
brighton36
The only efficiency that blockchains offer is making KYC and regulatory
encumberances redundant. In every other way, blockchains are inferior to
incumbent systems. What will likely happen is that the regulatory hurdles that
make incumbent systems inefficient will be reduced a bit, under the pretense
that doing so is better compromise than using the alternative (bitcoin).

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reeboo
I've read many of these "The NYSE is using bitcoin!" articles and I'm still
not sure if the banks are using the wrong words, or if the journalist are?
Maybe I'm missing something?

One of the most critical parts of the Bitcoin network is the number of
competing (non-colluding) parties doing proof of work. Re-writing the ledge
would be entirely possible (and possibly easy) if there were only one or two
parties processing transactions.

If its just the NYSE "using Bitcoin technology" then haven't they effectively
encoded transactions into a linked-list with a few frivolous hashes placed
throughout? You need a lot of competing minors to produce the trusted ledger
the global Bitcoin network enjoys. If these banks are serious about using
Bitcoin (or at least what I define as Bitcoin) then how do they plan on
incentivizing a diverse set of non-colluding minors?

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1971genocide
Bitcoin's underlying problem as a monetary system is the same that exists with
commodity based currencies like gold.

Almost all economical models that exists out there always reach a point of
indeterminacy. What happens when there is massive inequality in the bitcoin
world ?

Money has one important purpose :

1) Efficient allocation of labor for society's benefit.

To achieve it we need to establish something that can be used as a source of
value.

Bitcoin solves the problem of source of value but we know from history that it
doesn't always solve the problem of efficient labor productivity.

Since by definition society requires centralization to direct its purpose. FDR
during the great depression had the same problem of a lot of people having
liquidity with no need to direct it for labor productivity.

If we lived in a bitcoin world it would be impossible for governments to
mobilize itself to direct resources to solve social problems.

"You became rich from digging oil from the ground and making computers ? Too
bad I need your money to solve Climate Change and feed the poor"

The blockchain is interesting - I think it can solve public trust issues like
when it comes to e-voting and reaching decentralized concession. But when it
comes to economics it just seems silly that a completely decentralized system
makes sense.

~~~
ilaksh
> Money has one important purpose : 1) Efficient allocation of labor for
> society's benefit.

The real numbers show that maybe around a billion are obtaining much more
benefit than they other 5/6 billion, and often because of the have-nots'
labor.

So on that basis you are wrong. But also, tevhnology is rapidly making labor
irrelevant, as more and more work is automated.

> Since by definition society requires centralization to direct its purpose.

Bitcoin is an example of a decentralized system with a common purpose. So is
bittorrent. Or see any technology for distributing work or decision making.

Centralization in economics or politics leads to stagnation, authoritarianism,
inequality. It is the primary problem that technology allows us to solve.
Ordinary money was the first technology for solving over-centralization. We
can do much better.

