
The Blockchain Revolution Gets Endorsement in Wall Street Survey - herendin
http://www.bloomberg.com/news/articles/2015-07-22/the-blockchain-revolution-gets-endorsement-in-wall-street-survey
======
patio11
The actual Bitcoin network (7 transactions per second maximum worldwide) is
insufficiently fast enough to conduct settlement of one player of a stock
market simulation trading with 5 bots in a tutorial level. Reports of Wall
Street adopting it for settlement purposes seem slightly optimistic.

~~~
rattray
> 7 transactions per second maximum worldwide

What is the reason for this? Source?

~~~
patio11
The Bitcoin "protocol" (for reasoning on the scare quotes search HN for me and
that word) allows blocks to get up to 1 MB in size, currently. A block is
mined once every ten minutes. The smallest transaction legal in the protocol
is ~224 bytes. You can do the math from here.

There's a contentious proposal in the community right now to raise the block
size and hence the implicit maximum TPS of the network. Why is that
contentious? Oh boy, long story.

~~~
TeMPOraL
I would be interested in hearing that story. Care to describe it, or point
towards some reading material? :).

~~~
nemild
Start here: [http://davidsterry.com/blog/2015/06/arguments-in-the-
bitcoin...](http://davidsterry.com/blog/2015/06/arguments-in-the-bitcoin-
block-size-debate/)

Also: [https://tradeblock.com/blog/bitcoin-network-capacity-
analysi...](https://tradeblock.com/blog/bitcoin-network-capacity-analysis-
part-1-macro-block-trends) [https://tradeblock.com/blog/bitcoin-network-
capacity-analysi...](https://tradeblock.com/blog/bitcoin-network-capacity-
analysis-part-2-macro-transaction-trends)
[https://tradeblock.com/blog/bitcoin-network-capacity-
analysi...](https://tradeblock.com/blog/bitcoin-network-capacity-analysis-
part-3-miner-incentives) [https://tradeblock.com/blog/bitcoin-network-
capacity-analysi...](https://tradeblock.com/blog/bitcoin-network-capacity-
analysis-part-4-simulating-practical-capacity)
[https://tradeblock.com/blog/bitcoin-network-capacity-
analysi...](https://tradeblock.com/blog/bitcoin-network-capacity-analysis-
part-5-stress-test-analysis)

Hit me up if you need more reading.

~~~
TeMPOraL
Thanks for the links!

------
amalcon
I'm not sure I understand the point of using a blockchain in securities
trading? I mean, it's not like it would actually have any of the advantages of
Bitcoin[1]. You'll still need to settle accounts periodically (transfer
money/stock certificates/etc). Those things aren't going to go away.

Once the parties need to trust each other for that, they might as well cut
costs by pooling money and buying a centralized order-matching system. That
is, make exactly the thing they already have today.

[1]-I don't think those advantages are all that great either, but that's
beside the point. The point is they don't even apply here!

~~~
williamcotton
[https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...](https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation#Controversy_over_naked_short_selling)

Once you look in to how we're currently able to clear and settle say stock
trades, I think you'll agree that there is some room for improvement not only
technically but from a trust perspective.

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paulsutter
Given that most Bitcoin mining is done behind the Great Firewall[1], what
happens if a midlevel bureaucrat partitions the network? (inadvertently or
not) Seems there'd be a greater partion behind the firewall, and a lesser
partition outside the firewall.

How does the protocol deal with that? Assuming it's partitioned for days,
weeks, or months?

[1] Chun Wang comment from
[http://comments.gmane.org/gmane.comp.bitcoin.devel/8001](http://comments.gmane.org/gmane.comp.bitcoin.devel/8001)

"Ignorant. You seem do not understand the current situation. We suffered from
orphans a lot when we started in 2013. It is now your turn. If Western miners
do not find a China-based VPN into China, or if Western pools do not manage to
improve their connectivity to China, or run a node in China, it would be them
to have higher orphans, not us. Because we have 50%+."

~~~
drcode
All it would take is a SINGLE bitcoin user in all of China to figure out a way
to sneak 50mb of data a day through the wall to prevent such a network
partition.

~~~
tlrobinson
Indeed, information wants to be free.

There is already talk of launching satellites to disseminate block headers
(though initially that's more to protect against Sybil attacks than to connect
miners) [https://groups.google.com/forum/#!forum/bitsat-
project](https://groups.google.com/forum/#!forum/bitsat-project)

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sjcsjc
This is obviously a trivial point, but the word blockchain seems to have lost
its definite article.

eg (from the linked article): "Last month, Symbiont, which plans to use
blockchain to make ..."

"Other firms investigating finance-related uses of blockchain ..."

~~~
philrapo
exactly. Wall Street is enamored with distributed databases, i.e. "shared
replicated ledgers". Not the specific bitcoin blockchain or cryptocurrency.

Blockchain as a term has become a bit like Kleenex. It's just a generic term
to describe a distributed database

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chollida1
> Eighty-four percent of respondents said blockchain could reduce the risk a
> trade won’t settle and the time that process takes, while 74 percent said it
> could alleviate the chance your counterparty to a trade won’t make good on
> the deal.

Karma to anyone who can explain this to me. How does the blockchain reduce
counterparty risk. The counterparty can either produce the required shares or
they can't.

And to be honest, currently cash equities settle on a T + 3 days basis and
options settle on a T + 1 day basis. Most people view that as a feature not a
bug.

If the markets wanted instantaneous settlement of cash equities they could do
it, no one does.

~~~
blockchin
Any asset can be created on top of the bitcoin with meta-layers such as
_CounterParty_ [1] (which is what Symbiont is basing their solution off of)
_Colored coins_ [2] or a hybrid approach [3] recently demoed by Deloitte

[1] [http://counterparty.io/](http://counterparty.io/) [2]
[http://coloredcoins.org/](http://coloredcoins.org/) [3]
[http://rubixbydeloitte.com/](http://rubixbydeloitte.com/)

(These platforms have received recent backing by NYSE and NASDAQ,
respectively)

Assets created through Colored coins must use a gateway in a quasi-centralized
fashion, however Assets created via counterparty can be traded p2p without a
middleman, as they can be natively escrowed by a protocol which enforces
atomic swaps and a fair deterministic order matching engine.

DTCC's status quo is T+3(days), if there are trades that can be settled on a
blockchain, that can be reduced to T+1(hr) or less.

IMO Bitcoin is a horribly inefficient _trading_ platform, (aside from the
'advantage' of HFT bots being on equal footing as retail investors) but an
ideal settlement/netting/clearing layer. As a minimum there are huge
transparency gains to be gleaned.

The introduction of Smart contracts potentially opens up the field for a whole
new paradigm of smart securities, as well. There are a whole host of
established entities researching on blockchain securitization and/or smart
contracts at the moment, a subset of them are below:

    
    
      CBW Bank
      ANZ
      Westpac
      Commonwealth Bank of Australia
      BNY MELLON
      LHV Bank
      Barclays
      UBS
      Goldman Sachs
      ABN Amro
      ING
      RoboBank
      SWIFT
      Santander
      Standard chartered
      DBS
      USAA
      BBVA
      KPMG
      InfoSys Finacle
      CitiBank
      DTCC
      Deutsche Borse
      Markit
      EuroCCP
      CME

~~~
chollida1
I appreciate the effort but I can't see how this in anyway answer's the
question I asked below.

> How does the blockchain reduce counterparty risk. The counterparty can
> either produce the required shares or they can't.

Let's simplify. I buy 100 MSFT from you. How does the blockchain help settle
this trade. At some point I still need to deliver 100 shares to you.

~~~
blockchin
In a simplified way you can use the Bitcoin scripting system to make binding
bids and offers without needing a central exchange. And you can achieve person
to person atomic swaps of currency for securities – delivery versus payment –
without needing a custodian.

Let's assume MSFT shares are represented as specially encoded satoshis.

Below you can find is examples of (fictional) MSFT shares [1] [2] being
represented on the blockchain in that way. I'll use an example of
CounterParty, which is a meta-layer on the blockchain. The Counterparty
protocol acts as an escrow service, and thereby eliminates counterparty risk
from the exchange of assets.

[1] [http://blockscan.com/assetInfo/MSFT](http://blockscan.com/assetInfo/MSFT)
[2]
[https://coindaddy.io/search?network=xcp&q=MSFT](https://coindaddy.io/search?network=xcp&q=MSFT)

Now that MSFT asset is stored on the bitcoin blockchain. Actually it is
encoded as an OP_RETURN script in the transaction, an breakdown of such an
asset you can see here:

    
    
      434e545250525459|00000000|000000000004fadf000000174876e800000000000000000000000000
           |             |          |
           |             |          └── All of this is the operation data (maximum 28 bytes)
           |             └──────────────── This is the transaction type identifier (4 bytes)
           └───────────────────────────────── The string CNTRPRTY in hexadecimal (8 bytes)
    
    

A breakdown of the sending of such an asset on the bitcoin blockchain:

    
    
      000000000004fadf|000000174876e800
           |               |
           |               └───── quantity (8 bytes)
           └────────────────── asset name (8 bytes)
    

There's some further reading in the links below in more depth than I could
hope to go into here:

[http://counterparty.io/docs/counterparty_features/#overview](http://counterparty.io/docs/counterparty_features/#overview)

[http://counterparty.io/docs/counterparty_features/#protocol-...](http://counterparty.io/docs/counterparty_features/#protocol-
based-trustless-escrow)

~~~
blockchin
Tl;DR There can be no single point of failure in the delivery of securities
nor the payment stage. Identical information is relayed to all market
participants at all times, consolidated on a single global ledger

(although the option to jump between private 'permissioned' ledgers is
possible, and being researched by certain institutions as more suitable for
their needs)

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onion2k
Saying you think something is possible is not an endorsement. When Wall Street
professionals _actually try it_ , that is an endorse.

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JohnDoe365
Speed trading automated by smart contracts

