
Big Banks Are All Over Blockchain - olivermarks
https://wolfstreet.com/2017/12/21/banks-disparage-bitcoin-but-love-the-technology-that-enables-it/
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thisisit
It's basically this kind of confused, bullshit reporting which gives false
hope to the FOMO crowd or draws ire from bitcoin naysayers.

One, the confusing narrative around blockchain. Settlements don't require any
kind of "proof of work" mechanism. It's basically a shared ledger where only
permissioned parties can access/write. Some are calling it "Distributed
Ledger".

Surely, someone is going to point out that "proof of work" is not the
definition/requirement for blockchain. But, using it interchangeably and
confusing the bank "blockchain" with the cryptocurrencies "blockchain" is
causing the confusion and euphoria.

Second, settlements don't even need "coins". Cryptocurrencies use "coins" as
an incentive mechanism. In PoW, you earn coins for securing the network. In
PoS, you stake your coins to secure the network and earn fees.

But, if you have a permissioned, private blockchain there is no need of
"coins" because there is no incentive structure. Will DBS earn extra coins for
each transaction in the blockchain because of staking or something? If not,
then these "coins" are just numbers to enumerate position sizes. In which
case, why even call them "coins" and not "settlement amount in x currency"?

~~~
JumpCrisscross
> _some are calling it "Distributed Ledger"_

Friend runs settlement infrastructure for a large bank. It's not sexy work. He
has to fight for his budget. His TL; DR with a lot of this is it has made
getting necessary infrastructure upgrade approvals easier.

Been needing to unify wire confirmations with some esoteric trade settlement
system? Talk about Ripple. Adding real-time functionality to a net settlement
system? It's a "distributed ledger". Boss gets a press release and maybe a
glowing write-up, IT gets its kit.

~~~
un_montagnard
This. McKinsey/BCG/others makes presentations to banks executive boards saying
Distributed Ledgers are the future and you need to get onboard if you want to
survive. Now every IT department head will try to do nonsense distributer
ledger stuff for his promotion/bonus and business department heads will be OK
because they don't want to be blamed for missed opportunities.

~~~
JumpCrisscross
> _because they don 't want to be blamed for missed opportunities_

It sounds more rational than that. Blockchain announcements make headlines.
And blockchain headlines _are_ driving stock prices [1]. There are numpties in
the mix, but I don't think it's them.

[1] [https://www.bloomberg.com/news/articles/2017-12-21/crypto-
cr...](https://www.bloomberg.com/news/articles/2017-12-21/crypto-craze-sees-
long-island-iced-tea-rename-as-long-blockchain)

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ucaetano
_On the contrary. They’re pouring money into developing their own “digital
currencies,” as they call them. Just don’t call them “cryptocurrencies.”_

Blockchain is to (some) cryptocurrencies as security paper is to paper money.
Nobody calls your Passport "paper money", even if it is made of security paper
just like your $10 bill.

 _Settlements could be executed almost instantaneously on a bank-by-bank basis
rather than having to be netted at the end of each working day by the
respective central bank_

Guess the author isn't aware about how bank transfers happen around the world.
Many places aren't locked in banking pre-history like the US. EU, Brazil,
India, all have "almost instantaneously on a bank-by-bank basis" transfers.

 _But perhaps the biggest area of interest for commercial banks is in the
field of customer and counterparty identification and verification._

This is where blockchain actually matters. All the currency stuff is BS.

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tzakrajs
I love this mass delusion that banks in the US have been seeking a
technological solution for speeding up interbank transfers when the issue is
bureaucratic.

~~~
indemnity
Interbank transfers in my country take about 2 hours during business hours.

No sexy blockchain.

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viraptor
It's an interesting article, finally listing some specific use cases. But I'm
curious - why now? What makes blockchain better than using other possibilities
between each pair of banks? I don't expect bank A to care about transactions
between banks B and C, so the distributed blockchain doesn't sound very
useful. On the other hand, I expect banks to care about guaranteed atomic
transactions rather than consensus.

(Transfers between many banks in the UK were instantaneous for a decade or so,
so apparently it can be done without a blockchain ;-) )

~~~
shepardrtc
Each bank/financial institution will probably have its own blockchain for its
own purposes. But if they need to make a transaction to another bank's
blockchain, they can use the Interledger protocol [1] to do so.

[1] [https://interledger.org/](https://interledger.org/)

~~~
viraptor
Here's the point though: if you want to do this, why not have a standard
relational database at each bank and a standard for authorised endpoints in
each paired bank? This tech was available for decades. Why interledger and
blockchains to complicate it?

~~~
DennisP
You wouldn't. You use a blockchain when you want one common ledger across
multiple companies, and you don't want to pay/trust a single company to manage
it.

Assuming you know who everyone is, you can use traditional consensus
mechanisms like Byzantine Paxos and get much higher transaction rates than
public blockchains can do right now.

~~~
ucaetano
_You use a blockchain when you want one common ledger across multiple
companies, and you don 't want to pay/trust a single company to manage it._

Not really, you can have a blockchain managed by a single company. In the most
basic definition, a blockchain is simple an authenticated linked sequence of
records. It can be public or not, it can be processed centrally, distributed
across a single organization, or distributed in a peer-to-peer fashion.

~~~
DennisP
I guess so but usually people mean something that includes a distributed
consensus algorithm.

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arnon
I've been talking to some banking innovators, and they're not really sure what
it is they're doing with Blockchain.

There's promise in the concept, but not in the current iteration. It's not
suited for actual banking requirements at this time. Perhaps the successor
will see actual adoption, and not purely marketing-jargon adoption.

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module0000
Dear author..

"blockchain"... you keep using that word, I do not think it means what you
think it means.

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hanklazard
Exactly. This is the point I make when people start talking about how Ripple
coin is going to revolutionize banking. Blockchain will definitely be useful
for banking, but i’ve been able to come up with no reason to involve a
cryptocurrency.

Edit: iPhone thumbs

~~~
sanmon3186
Ripple coin can [potentially] provide single currency for banks operating
across the globe, if it is able to get wider acceptance and ensure low
volatility. I too have my doubts but this[1] post explains it well.

[1] [https://medium.com/@AlexCarrithers/xrp-vs-ious-on-ripple-
wha...](https://medium.com/@AlexCarrithers/xrp-vs-ious-on-ripple-what-are-
they-and-which-are-banks-using-257023fc578e)

~~~
aiCeivi9
Except it doesn't give a single reason for banks to use ripple ( or any other
crypto) at all.

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NicoJuicy
Ugh, I know a guy who thinks Bitcoin > blockchain.

Although he is very smart, I really don't understand his reasoning

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nikolay
PSA: Any piece of news having "blockchain" in its title is bearish toward
"Bitcoin".

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down
they are just trying to make it like blockchain is not a big deal, hey we all
have blockchain, saw it in an interview too.

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shepardrtc
Ripple can connect all the banks, blockchains, and currencies together.

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astrodust
Gasoline on the fire. What could possibly go wrong?

