
Forty Big Banks Test Blockchain-Based Bond Trading System - jackgavigan
http://www.nytimes.com/reuters/2016/03/02/business/02reuters-banking-blockchain-bonds.html
======
sktrdie
But how are the tokens distributed? Mining is really why bitcoin is
revolutionary, not the blockchain. In fact, "blockchain" is not even mentioned
in Satoshi's paper. So I don't understand all the hype around this term. Banks
using their own blockchain simply means they have a data-structure that
resembles blocks linked together similar to a linked list. What matters is
_how_ the consensus is kept for the chain and that is done using PoW mining.

~~~
jaekwon
Eris Industries is built on Tendermint. Tendermint doesn't use PoW mining, but
it can secure a distributed ledger.

[https://github.com/tendermint/tendermint/wiki/Byzantine-
Cons...](https://github.com/tendermint/tendermint/wiki/Byzantine-Consensus-
Algorithm)

There's a lot of great innovations in Bitcoin. One of the primary reasons why
it's exciting, is that it's the first widely deployed BFT ledger. Tendermint
uses a different BFT algorithm that doesn't use mining.

Raft and Paxos aren't BFT, btw. As of 2012 there still weren't good
implementations of PBFT/BFT middleware.
[http://cgi.di.uoa.gr/~mema/publications/middleware-2012.pdf](http://cgi.di.uoa.gr/~mema/publications/middleware-2012.pdf)
. Tendermint is that middleware.

Here's a post on why Tendermint ledgers should be called blockchains:

[https://news.ycombinator.com/item?id=10847136](https://news.ycombinator.com/item?id=10847136)

A lot of people say that blockchains aren't blockchains without PoW. It's not
surprising that people are saying this... there's been a ton of phony
consensus algorithms that purport to not use PoW mining. Tendermint is
different.

~~~
sktrdie
What exactly is BFT? Proof-of-stake doesn't reach consensus
([https://download.wpsoftware.net/bitcoin/pos.pdf](https://download.wpsoftware.net/bitcoin/pos.pdf))
and it's unclear what this Tendermint is using? Do you have any data to back
your claims up?

~~~
jaekwon
A consensus algorithm is one that ensures that multiple independent actors
come to agreement about anything. In a blockchain, multiple independent miners
or validators need to come to agreement about which blocks have been
committed.

A fault-tolerant consensus algorithm is a consensus algorithm that can
tolerate failure of any nodes (e.g. miners or validators). By failure, I'm
referring to fail-stop failures, where a miner or validator crashes or goes
offline. The key metric for fault-tolerant consensus algorithms is the
threshold for how many failures the system can tolerate. For example, Raft is
a fault-tolerant consensus algorithm can tolerate up to 49.99% of node
failures.

A Byzantine fault-tolerant consensus algorithm is a fault-tolerant consensus
algorithm that can tolerate not just fail-stop failures, but arbitrary
failures. For example, one or more nodes that get hacked by a malicious hacker
might be coordinated to subvert consensus from within. Bitcoin is exciting
because it can tolerate such attacks from within (e.g. any miner) to a
significant degree. Tendermint is similar, except it doesn't require
significant energy expenditure for its security.

Proof-of-Stake was a family of early consensus algorithms from cryptocurrency
projects that don't use PoW mining. A lot of them are terrible and suffered
from the "nothing at stake" problem. For a while, the Tendermint project had
been using collateral bonds to ensure that there is actually "something at
stake". But Tendermit is more general than that. You can have stake with
collateral posted on-or-off-chain, or, you don't need to use collateral at
all. It all depends on what you're trying to build.

If you want a standalone cryptocurrency blockchain, you'll want in-chain
collateral with bond deposits. But different blockchains have different
requirements, so posting collateral to put something at stake may not be one
of them.

Personally I think we should just avoid the term "proof of stake".

See ErisIndustries using Tendermint for ErisDB: [https://github.com/eris-
ltd/eris-db/blob/master/erisdb/serve...](https://github.com/eris-ltd/eris-
db/blob/master/erisdb/serve.go)

Actually, we wrote the Ethereum virtual machine implementation that they're
using. We're moving away from the EVM though, because the TMSP architecture
allows for easier native-application development.

[http://github.com/tendermint/tmsp](http://github.com/tendermint/tmsp)

If you want proof on the security of the Tendermint consensus algorithm, it's
in the Github wiki.

~~~
fsiefken
Is that a reference to the Illuminatus trilogy in the Eris name and Tendermint
logo?

------
Lazare
I find it's helpful to mentally replace "blockchain-based" with "experimental
database" when reading these press releases (which is all this story is,
really).

The first question I have is always "Oh? And why was your old database not
working? And why do you think this one will work better?" Not a question
answered by this article (and for good reason; of all the many issues
currently facing bond trading, it's hard to see how a decentralised ledger
solves _any_ of them).

~~~
dragontamer
Depends on the details.

Consider a Credit Default Swap: where you promise to pay the interest on a
Bond in the case said Bond defaults. Currently, humans enforce this promise.
If a bond defaults, some human notices (probably by telephone) and then they
run to the bank and start writing checks.

But what if you wrote an Etherium contract to automatically enforce the
agreement? And then the trust in the Etherium blockchain to enforce the
contract allows you to tie real money transactions to the whole process? Look
ma, no more humans!

~~~
Lazare
Actual CDSs are quite a bit more complicated than that. They pay out in the
case of very specifically defined credit events, and it's not uncommonly a
difficult question to decide whether a credit event has occurred.

The current system requires 80% of the ISDA's Credit Derivatives
Determinations Committees to vote that an event has occurred. You see to think
a purely mechanical system would be better, but it's not obvious to me why
this would be so. It would certainly be _different_.

> Look ma, no more humans!

Yes, but why is that good? Is the role of humans in the CDS process a problem?
Why? A CDS is a contract between two parties; do you believe more automation
in the process would benefit the seller, the buyer, both, or society at large?
And how?

The main advantage of the blockchain would seem to be its distributed nature
and it's ability to not need any central trusted authority. But in the cases
of CDSs, we _have_ a central trusted authority in the form of the ISDA.

Again, we come back to the issue of needing to begin by defining the problem
we're trying to solve, and then demonstrate how a blockchain could solve it.
What problem with the existing system are you trying to solve?

------
kushti
Call to arms: while big guys are doing proprietary systems, I invite to
contribute to Scorex, modular blockchain framework under CC0 license:
[https://github.com/ScorexProject/Scorex-
Lagonaki](https://github.com/ScorexProject/Scorex-Lagonaki) . Maillist is
[https://groups.io/g/scorex-dev](https://groups.io/g/scorex-dev), we'll start
discussions there on 2 more members. Testnet is alive, plans for few
experimental modules are exist.

------
brighton36
This project is a massive scam. These non-work based systems aren't
blockchains. They're just (bad) message passing systems. When this blockchain
hype-cycle ends, I'm hoping there's some accountability here (though there
probably won't be)

