
Blockchain technology could reduce role of banks, says BIS - rakkhi
http://in.reuters.com/article/2015/11/23/global-banking-blockchain-idINKBN0TC28720151123
======
HiLo
OK, so, it actually says:

"Basel-based BIS's Committee on Payments and Market Infrastructure (CPMI),
made up of central bankers from across the world, said it could challenge
banks' role - but if the technology became widespread it was unclear who would
then provide credit and savings facilities."

Emphasis: "but if the technology became widespread it was unclear who would
then provide credit and savings facilities."

Having worked at a bank, they're interested because it could reduce the large
role of simply making sure everybody's shit lines up at the end of the day
between counterparties. This isn't the disruption you're dreaming of... It's
not changing how capital and resources are directed and allocated throughout
the economy... it's changing how those decisions get confirmed across systems.

It then goes on to say it could theoretically challenge the need for a central
bank, as it's decentralized... this makes a huge, implicit assumption that a
rule-based interest rate decision is desirable, which, I don't know, until we
can have an actual way of knowing the natural interest rate and hand off
analyzing the economy to algorithms, it may be best to leaving that to people
who spend their lives devoted to that.

~~~
dogma1138
+1 Yep a closed blockchain could provide almost instant clearinghouse
functionality while ensuring that the funds are both available and were
delivered. Strip that on top of existing banking infrastructure like swiftnet
and you get a very lucrative system for banks which reduces quite a bit of
risk on pretty much every domain involved in most transactions.

~~~
brighton36
There are absolutely no efficiencies to private blockchains. Are you proposing
that banks will run miners merely for the purpose of passing signed messages
to one another?

~~~
DennisP
That is not what they're doing. When you have a known set of entities and
trust that at least 1/3 of them will be honest, you can use other consensus
systems like Byzantine Paxos. There's at least one project combining that
consensus algorithm with the Ethereum virtual machine.

Just passing signed messages around wouldn't be sufficient, you need a way of
ensuring overall consensus.

~~~
grapehut
I agree with your post, but Byzantine Paxos require at least 2/3rd to be
honest not 1/3rd

~~~
DennisP
Ah that's right, thanks.

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bascule
The Bitcoin blockchain, as implemented today:

\- Takes over 10 minutes to come to consensus

\- Cannot handle the transaction volume of a reasonably large retail company

\- Loses accepted transactions!!! (blockchain forks, orphan blocks, etc) From
a distributed database perspective the Bitcoin blockchain is broken and loses
data: like a decentralized MongoDB, but slower by several orders of magnitude.

Articles like this are largely uninformed non-technical people responding to
hype. They don't know what a replicated log is, let alone a Merkle tree.

There are many interesting distributed ledger technologies, like Stellar SCP,
Hyperledger, and Tendermint.

The Bitcoin blockchain is ill-suited for this purpose.

~~~
pilgrim689
> \- Loses accepted transactions!!! (blockchain forks, orphan blocks, etc)
> From a distributed database perspective the Bitcoin blockchain is broken and
> loses data: like a decentralized MongoDB, but slower by several orders of
> magnitude.

When a block is orphaned or when there is a fork, transactions are not lost,
they'll always be present in the main chain. Or said another way, all miners
are trying to mine the unconfirmed transactions in their mempool. If one miner
ends up finding the winning block, transactions they didn't include that were
included in an orphaned block are going to be mined in the next block.

What you may be referencing, though, is not "lost transactions", but rather
double spends? What I said above holds true assuming no one else is trying to
spend the same outputs. However, if you wait 6 confirmations (the recommended
amount before you should consider a transaction "accepted"), you won't see
double spends, either.

~~~
tveita
The memory pool is not consistent among nodes, and nodes are free to drop or
ignore transactions as they see fit. As you say, nodes may have conflicting
transactions, a.k.a. double spends. Transactions are not durable in a
meaningful way until they have been included in a block.

Waiting for six confirmations is probably enough to prevent accidental
reversions, but takes on average an hour, with a fair amount of variance.

~~~
pilgrim689
Waiting for six confirmations _is_ enough, as it's been shown both in theory
and in practice.

I was correcting the parent as saying Bitcoin loses transactions is false. The
network never loses a valid unconfirmed transaction.

------
austenallred
In other news, email could reduce the role of the post office

------
Animats
This really has little to do with Bitcoin. A distributed ledger maintained by
mutually mistrustful parties is useful for some back-end problems. The Bank
for International Settlements, MERS, and Depository Trust Corporation are all
candidates for replacement, because they're all just neutral parties that run
clearing houses.

What we've learned from Bitcoin is that blockchain technology is robust enough
to strongly resist attacks. If it were profitably breakable, it would have
been broken by now. That it hasn't been is quite impressive.

As a settlement system, it doesn't require "mining" \- just enough mutually
mistrustful players that no one can tamper with logged transactions.

~~~
dustingetz
My understanding is that bitcoin has been broken for quite some time as there
have been multiple 51% events from mining pools, it's just more profitable
(for now) for these parties to keep the status quo

~~~
nmj
Your understanding is incorrect.

------
dools
As a side note: can we please stop using cryptocurrency and start using
cryptocommodity? Bitcoin et. al. are not currency.

~~~
Retra
I can't find any interpretation of the word 'currency' that would prevent it
from applying to bitcoin. As far as I can tell, it's a "commodity money" kind
of currency.

~~~
dools
Currencies have their value nominally defined by a sovereign power. Some
currencies in the past used precious metals in coinage, but that didn't
determine it's value. Value of currency can be changed according to policy. As
such gold has never been a currency, but has been a commodity used in some
coinage. The discussion is "nominalism" versus "metalism". Nominalism wins by
a country mile! Gold backed currencys, similarly to currencys who tie their
value to a different currency (such as pegging exchange rates) only serve to
reduce the capacity of the issuing body to pursue domestic policy in the
interests of the populous. In that sense, a commodity can be a store of value
that's not a currency, and can be used as material to represent currency, but
cannot be a currency.

~~~
Retra
Where are you reading that currencies require sovereign powers?

~~~
dools
Taxation (or any other liability imposed on a population by a sovereign) is
what drives the value of money. This is a good macroeconomic and historical
overview
[http://m.youtube.com/?#/watch?v=0zEbo8PIPSc](http://m.youtube.com/?#/watch?v=0zEbo8PIPSc)
also check out A Primer on Modern Money by Randall Wray and anything by Bill
Mitchell (including his blog).

