
Daimler Uses Blockchain to Issue Bonds - caublestone
https://blogs.wsj.com/cfo/2017/07/12/daimler-uses-blockchain-to-issue-bonds/
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bo1024
I'm not a blockchain "expert", but this seems somewhere between misguided and
insane to me. How could this possibly better than a secure web server and http
user interface by any metric?

\- security: how could this possibly be better than a system under your own
IT's control?

\- security part 2: introduces a whole new set of vulnerabilities and ways for
things to go wrong. e.g. a miswritten "smart" contract.

\- speed: how could this be faster than a web interface and a single server?

Blockchain solves one main problem: Decentralization. The reason for
decentralization is the lack of a single trusted authority who says e.g.
whether a particular transaction has occurred or not. In this setting you
still have and need Daimler to be the trusted authority (unless I
misunderstand), so the sole raison d'etre for blockchain is gone.

When you add that to all the downsides and security risks ... let me know if
there is an easy way to bet against this.

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jjn2009
The whole point is to cryptographically be able to prove ownership of
something to the network. Given that bitcoins, litecoins and ether aren't
magically disappearing out of people's wallets I think its pretty safe to say
these systems can be designed in ways which are secure (at least secure enough
for the marketcaps of each of those cryptocurrencies which is billions).

If I get a piece of paper that says I own some asset there is offices full of
people who are dedicated to ensuring that piece of paper properly represents
some piece of land, car, security etc. Why would you not want to automate such
a system?

Not to mention once you can create such a system the chains of trust can
extend beyond just your bond issuance, you can tie actions from other trusted
systems into your bond issuing system in a fully automated way.

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bo1024
I don't quite understand your last paragraph, but for the rest:

> _The whole point is to cryptographically be able to prove ownership of
> something to the network._

I don't think that's the problem that blockchains solve. That problem can be
solved without blockchain just by using public/private key cryptography and
digital signatures, along with for instance a public ledger. But a public
ledger doesn't need to be distributed and subject to consensus protocols,
mining dynamics, etc. It can simply be hosted on a website.

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ThomPete
It is though. You cant ensure ownership if there is no third party the point
that of the blockchain is that it solves that issue by turning the entire
network into the notarius. Public/private key cryptography does not solve
that.

~~~
bo1024
You're talking about a different problem - not having a trusted third party or
authority. I agree that blockchain solves that problem (well, it tries).

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WheelsAtLarge
This is proof of concept. This changes everything. The article talks about the
company not being ready to use Blockchain to issue all it's bonds due to
regulatory questions that still need to be answered but , i suspect, it's only
going to be years not decades when this will happen. This spells out big
problems to the staff employees associated with Finance.

Anyone in the Financial Industry should start getting ready for the big
Finance disruption that's coming in the near future.

~~~
harryh
This changes nothing. It was a publicity stunt that solved no actual problems
and introduced tons of problems that didn't exist before. Except it didn't
even do that because "regulators do not yet allow issuances via blockchain
only, so we had to test it in parallel with the conventional issuance
process."

It was a no-op.

~~~
legolassexyman
It's a big deal imo, but a major blow for Bitcoin, because it's nowhere to be
seen.

Have you ever purchased a bond? Ever wanted to sell one on the secondary
market? Ever heard of the Securities Transfer Agents Medallion Program? You
will if you try to trade bonds in the conventional way, which is a huge pain
in the ass.

There is a lot of room for improvement by implementing the blockchain.

~~~
harryh
What happens when I buy a bond and then I accidentally lose my private key?

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legolassexyman
I don't think JP Morgan is going to give you the private key to your bond.
This is a slightly more decentralized version of holding securities in street
name. It's less painful than direct registration, it's publicly auditable, and
faster to settle.

~~~
harryh
What happens when JP Morgan loses my private key?

I mean, I hear you. I 100% get why people are interested. I just don't see why
it has to be a blockchain vs a centralized database that DTCC controls access
to.

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justonepost
Databases are notoriously insecure.

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harryh
Databases store all the money for basically everyone in the developed world.
They seem to be working ok.

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legolassexyman
This is the main application for Bitcoin IMO: custody and trade settlement in
securities. I have wanted to do this exact thing, issue bonds on a blockchain
for some industry or government, since I found out about Bitcoin.
Unfortunately, I do not have the kinds of connections necessary to be in the
same room as major corporate bond sellers.

Between this news and the DTCC using blockchain for CDS it seems to me that
Bitcoin is going to get left behind by the old world companies it sought to
replace. Blockstream seems too happy to sit on their hands while the
speculative value of Bitcoin increases, not realizing that the chance to
actually matter in the world of finance is slipping through their fingers.

Bad news for Bitcoin: [http://m.nasdaq.com/article/dtcc-to-launch-blockchain-
credit...](http://m.nasdaq.com/article/dtcc-to-launch-blockchain-credit-
default-swaps-reporting-in-early-2018-cm794771)

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atomical
Why wouldn't they use Ethereum?

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legolassexyman
Ethereum's main selling point is it lets you issue illegal unregistered
securities. Why would a real company want to associate with that?

Also the lead developer is some kid who believes very much in moving fast and
breaking things. This philosophy may work for a social network site but not
for other people's money.

How many terrible bugs have been discovered in Ethereums short history? Too
many. Additionally the size of its blockchain has already passed Bitcoin. It's
file size is growing so fast and will pose a serious technical problem.

~~~
atomical
Bitcoin is used for drugs, prostitution, and gambling.

That terrible bug was the DAO, but that's the nature of the blockchain and
applies to Bitcoin as well. If you want rollbacks you use a centralized
server.

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ryanlol
Where can you pay for prostitutes with bitcoin? I've only ever seen cash and
credit cards accepted.

~~~
atomical
I'm not familiar, but I know that 99% of the current startups that are using
the ICO model are not targeting what made Bitcoin popular.

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revicon
Twitter link to article to bypass paywall:
[https://twitter.com/infosblockchain/status/88594050066600345...](https://twitter.com/infosblockchain/status/885940500666003456)

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downandout
I didn't run into a paywall, perhaps because it's on the blogs subdomain. But
if anyone needs it, here is the paywall bypass code for all WSJ articles:

[http://salzeko.com/wsj](http://salzeko.com/wsj)

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asdfaoeu
> Regulators do not yet allow issuances via blockchain only, so we had to test
> it in parallel with the conventional issuance process.

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omio
Is this what they are going to use?

[https://www.hyperledger.org/projects/sawtooth/bond-case-
stud...](https://www.hyperledger.org/projects/sawtooth/bond-case-study)

~~~
jjn2009
It's hard to say which implementation will be used but the fabric project from
hyperledger seems to have the most momentum.

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cowmanjoe
How is something like this funded? Charity organizations? Is Google just
paying for it?

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harryh
It's a joint project by a bunch of major financial firms.

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empath75
Is this on ethereum?

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JumpCrisscross
> _Is this on ethereum?_

No. "In February, we joined the Hyperledger Project — a cross-industry
initiative — to drive blockchain technology and open standards in
collaboration with other firms" [1].

[1] [https://blogs.wsj.com/cfo/2017/07/12/daimler-uses-
blockchain...](https://blogs.wsj.com/cfo/2017/07/12/daimler-uses-blockchain-
to-issue-bonds/)

