>The purpose of the JPM Coin is to allow businesses to make near-instantaneous transactions of value across the internet without having to move fiat money in the background.
I genuinely don't understand what the blockchain does here that couldn't be implemented by any random database system. I mean the euros that I have in my bank account are also just a number that could be moved "across the internet" instantly if they so desired.
The big innovation with Bitcoin-like blockchains is that transactions can be done trustlessly but the whole "private blockchain with accredited miners" turns it into basically a slow inefficient database with extra steps.
Is it just a buzzword to generate interest or is there an aspect of this I'm missing?
Doesn't sound that trustless to me. With a decentralized setup as in Quorum at least everybody can calculate how much they have to trust the miners.
If your company has miners of their own, you are part of the whole system and not just using a third party service.
The main point still stands though, the different consensus algorithm allow you more insight than a simple centralized DB that is just a black box.
There’s no such thing as “free”. You’re either paying directly or indirectly. The DTCC is owned by its member organizations so it does not have a direct profit incentive anyway.
I highly suggest reading more on the topic and the problems it’s meant to solve before pitching “But blockchain!” as a solution.
The private sector is not magically superior to a state bureaucracy, without any competition or political pressure to reform it can act even worse.
A blockchain does not get rid of those things.
Only for the initial group of banks invited to participate. After that it would be up to the consensus algorithm to decide if a prospective member can join.
A large business "has" a lot of things. Why bring up board of directors specifically? I'm sorry but this sounds more like fumbling to grasp a point rather than an actual example of something useful.
While you show clear ridicule for some sort of "blockchain fad", I don't see anyone pitching a solution here.
I see JPM literally implementing one, and I would assume there is a cost reduction they've calculated.
What in this allows JPMorgan to provide the same service for free? Is it really technical innovation or is it just a different business model? Wouldn't they be able to do the same thing without using anything cryptocurrency/blockchain related?
I feel like I'm missing something obvious but I don't see what it is.
I guess the missing piece that seems to break people's brains; the ledger in the distributed database represents a dollar amount (in the case of quorum's dollar thing) and it has money-like rules, unlike, say, postgres which ultimately relies on some other piece of software to make ledger like transactions.
Also, DTCC only handles securities not currency so this doesn’t exist at all.
What actually you should be arguing is that the JP coin and the DTCC need to be combined as they each only provide trust in a certain part of the ecosystem.
Blockchain doesn’t allow anyone to circumvent anything.
Unless it’s a perfectly spherical blockchain operating in a vacuum.
Or, if someone doesn't pay for access, you kick them out? Or if someone is your competitor, you kick them out?
If you want a chain that doesn't allow transaction censorship, you need something else, like a proof of stake or proof of work blockchain.
Many people are trying to solve this problem (see: Corda, XRP)
>The fiat money that you hold is being constantly diluted without your knowledge
I think most people here are aware of inflation
Most popular Blockchains haven't had any major issues in years. Some projects have had bugs which lead to the network stopping for a few minutes but no lost funds.
>> I think most people here are aware of inflation
How much new money did the Fed inject into the US economy in the last decade?
According to some sources, at least 9 trillion. https://money.cnn.com/2016/09/08/news/economy/central-banks-...
Based on the constantly growing corporate sector, we know who ended up with most of that money: Big corporations and their shareholders.
They got most of that money by locking other people out of opportunities. That is the primary business of corporations today; monopolizing financial channels where the money flows easily and letting hard working individuals fight for the scraps.
I'm not a part of the US economy though.
I submit "charm bracelet".
> The Quorum blockchain has been tested with other major companies including Goldman Sachs and the National Bank of Canada
It is sort of decentralized. but the access is not open to everyone. Most banks aren't comfortable with putting all their eggs in the basket that could end up under someone else's control. Decentralized doesn't really make the bank feel at ease when they back up their coin by trillions of their own money. They'll want some guaranteed form of control.
The purpose is actually to bypass SWIFT and their network with a network that is completely under the bank's control.
A good example could be a construction project where the general and all the subs collaborate on a database, but no one company owns it.
The smart part of JP Morgan's plan here is scalability. It might be centralized now, but it can be trivially extended into becoming decentralized at the flick of a switch, without a redesign.
Microsoft already has pushed for a non-public-anonymous-participant private blockchain that has throughput of around 1600 transactions per second.
Doesn't seem like a viable consensus algorithm.
Whether or not the validation will be public could mean you still have to trust JPMC but now you essentially get an API to validate my account balance which you didn’t have before
A blockchain is not needed for this
What would have been a more constructive response was:
This looks like JPMC is trying to profit off hype by building a new accounting and settlement system on blockchain. Since they control all aspects of their network and ultimately are the only one redeeming tokens for dollars, they could have used something simpler. However, I bet they did it this way because they think forking ethereum is cheaper than building a new system from scratch and also they might get a bump in stock price from the hype. If they built and announced the same system using bespoke tech (that likely solves the problem more effectively), no one would have probably cared.
JPMC still controls who is allowed to exchange tokens. Which means that you still have to transact through JPMC to exchange tokens as JPMC controls the blockchain.
If somehow they don’t retain majority control of the blockchain, then you technically don’t have to transact through JPMC but I don’t see that happening.
The important thing to understand here is that JP Morgan thinks about blockchain technology completely differently than libertarian futurists. Blockchain is not a movement for them - it's a technology that reduces friction for things they are already doing.
And there lies the rub, because as far as I can tell, this particular (and no particular) blockchain implementation does not in fact reduce any friction for things they are already doing.
Does TPS increase non-trivially in a private chain vs a public chain? If not, will a private chain's TPS at least substantially outpace the TPS of, say, Ethereum within 3-5 years? That is, will JPM's private chain reach 100, or 1k, 10k, 100k, etc TPS?
Assuming TPS reaches a sufficiently high-level (whatever that could be), would a private chain require fewer sysadmin/engineering/etc. folk, compared to what the DTCC model requires?
Does a semi-private chain (where JPM allows other partners or competitors to plug-in) have a faster on-ramp? That is, would it be faster to plug players in than a traditional solution?
Is there a cost reduction somewhere within the audit process? Other processes?
I have these types of questions, but it is difficult to find much substantive discussion on them. Typically, answers are Yes or No, but with little to no detailed explanation as to why.
Another difference is that Liquid allows 2-way pegging to BTC, but allows other (for example fiat based) tokens to issued as well (but not part of Blockstream's business model), and the transaction types and values are encrypted.
It says "blockchain" on it, so it can be sold to some uniquely gullible investors?
More likely it can be used to circumvent regulations by trading digital goods and investing in futures, instead of liquid assets.
Even if it is eventually regulated, the upside potential (no matter how temporary) is an upside.
In JPMorgan's case, using linkedlogs/dcash/cryptokeysasidentity might end up working out really well. They can distribute the tech to other banks, and the killer feature, besides being distributed ends up being cryptokeysasidentity, from a security standpoint. In my book, what they are doing is still "crypto" but it isnt the genius innovation the whole sum of all bitcoin was. (You might argue that its the proof of work that makes something a crypto, and thats fine.) What made bitcoin different was APPLYING a bunch of academic knowledge to a useful to solve problem. https://queue.acm.org/detail.cfm?id=3136559
If you look up the definition of TECHNOLOGY, its "the application of knowledge." Bitcoin is a PERFECT EXAMPLE of a technology, not because its digital, electronic, and computery, but because its taking a ton of knowledge from academia and APPLYING it. This new coin is more a reapplication of technology, than any sort of creation.
Sometimes this can be a good thing, and I think it's what kind of led to the internet being such an interesting place with things like BitTorrent, but often businesses will see it as a quick loophole.
The law isn't a computer program, it is a human process.
I think there is still value in Blockchain networks like Stellar that are not fully decentralized, but are federated and diverse. If this is a first step towards them issuing a stable coin on a network like that then I welcome it.
Something pegged to the US dollar is inherently going to be unstable, because the dollar is unstable. The dollar is not priced in terms of dollars. One dollar today might not be a dollar tomorrow. The instability is mostly due to the conditions of the market, but then those effects are compounded by the whimsical economists printing it for fun.
OTOH, Bitcoin is a closed system. At any point in time, you can measure the amount of Bitcoin you have as a fraction of the total amount of Bitcoin which exists, and you can even directly predict how that will change due to inflation for the next 100+ years.
I personally prefer the term "fiat coin" or just "shitcoin" is sufficient.
That doesn't mean they're completely useless though. If Bitcoin eventually inspires some real innovation in fintech, then great.
A blockchain is...well... a database system itself!
There are many different types of database systems, eg. Relational, Graph, Object orientated, document (eg elastic search) and so on.
Generally you want to pick one that fits your problem area well, so picking a random database system would not be a good idea.
One of the most important data structures they need is a tree for the Merkle proofs to confirm that the data hasn't been tampered and contract execution happened correctly. Tree structures are notoriously difficult to implement in a relational db for example.
(BTW, I'm also skeptical of the hype around 'blockchain' just as before when the 'noSQL' hype came around. You will surely have some devs pick the blockchain as their database system for the wrong reasons, just like back in the day when you had devs pick noSQL because it was cool.)
The only required data fields in each row are the parent row ID and a hash, no?
> make near-instantaneous transactions of value across the internet
the definition of what wire transfer does? And why not doing it in "fiat money" (it's an additional level of hilarity for a major bank to use this term, for those who understands) has any value?
The value of blockchain transfers is lack of intermediaries and gatekeepers - which advantage the private chain owned by JP Morgan takes away. This is like advertising "we sell gold coins, only instead of hassle of owning heavy metal pieces, we provide you with little pieces of green paper that could be exchanges for gold coins at any gold dealer" - totally missing the point of the whole exercise.
Everything a cryptocurrency can do be done much more efficiently, faster, cheaper, safer, better UX, etc, except for censorship resistance. If you don't want your coin/token to be censorship resistant then you can have a system that's a million times better by just building a web app that uses regular cryptography.
Im not sure people really understand the implications of a team of companies that collaborate often banding together, and eliminating the need for 3rd party audits and 3rd party fund settlement.
I think it is more that people don't understand what existing technologies there are already, but they've heard of this "blockchain" thing, and the black and white view is one where you either need a blockchain or you don't need anything.
There are some other interesting technologies and research areas. One example is SMPC. In 2008 (pre-dating Bitcoin), a secure auction with sealed bids was conducted in Denmark for the purchase of beets from independent farmers. This kind of research get drowned out by the blockchain hype because nobody is interested in something which doesn't print their own money.
There are also more well understood distributed databases and consensus algorithms which work when you have semi-cooperative parties. I think a lot of these "blockchains" really just want a merkle-tree, and they could probably get by with a database like noms
When you have a bunch of cooperating parties, they either need to assume that the parties are cooperative, or you need an arbitration process. The arbitration process is what the blockchain is about (with the record keeping in the blockchain being a kind of toxic waste which is kept around to support that). What do you do when the parties are being uncooperative? If there are only a few parties, then PoW is not a viable solution because one party could outpace others if they have more computing power. If you pick something like Proof-of-stake, then several parties could collude to swindle others. If you have a centralized system, you've not gained anything. Ultimately, the companies involved are always going to take any quarrels to a legal court and have a human decide the outcome - meaning their blockchain is going to have to be "fixed" by manual intervention anyway.
If you build a web with a private, centrally controlled database, then you might be messing with the database behind the scenes.
A Blockchain makes that database transparent, and makes any secret funny business immediately apparent.
Honestly though, if the chain isn’t public, JPMC can update the code behind-the-scenes so there’s not as much trust as there would be on a public network.
"What can be achieved by HTTP that can't be achieved by any random binary protocol?"
Plasma could facilitate this for Ethereum-compatible chains, including Quorum.
Who would own this database?
There is a DB based solution for financial transfers today in SWIFT. It has numerous flaws that a block chain based solution legitimately solves.
This is false. It solves nothing. If you disagree please detail a specific example instead of vaguely claiming it solves lots of problems.
> For them to use a DB solution requires both parties to the transaction to be customers of JP Morgan
JP controls the network, so they must already have a prearranged agreement with JP in order for any of this to be possible anyway, at that point, the blockchain doesn't give you anything that couldn't be done faster and cheaper with public/private keys and digital signatures.
A private database is not public to the customers. Customers have to trust that the database isn't being changed behind the scenes.
A Blockchain makes it transparent to all parties in the network, so you don't have to trust that nothing wierd is going on where you wont be able to see it.
The article describes a private blockchain which is not public to customers, so your example does not work here. I'm willing to consider any other specific examples you can think of.
"Customers" in this instance is in reference to the banks and businesses that would be apart of this Blockchain.
The "private" Blockchain is not private to the participants. IE, other banks.
This is bank to bank technology that is meant to replace the current settlement layer that banks currently use, but is quite slow.
IE, wire transfers between banks, that can be made much faster, and require less trust the current methods that banks transfer money between each other.
Right now settlement times between banks are high, or require that they trust some centralized, non transparent database.
This, on the other hand, reduces the trust necessary between banks.
If a bank's SWIFT credentials are compromised the attackers can transfer all the funds a bank controls. With a blockchain coin it would require the private key of the customer to send the coins.
There are no "customers", this is a private blockchain where only banks participate.
Replace "SWIFT credentials" with "private key" and you have exactly the same scenario.
Needless petty snark.
> Compromising SWIFT credentials allows you to send money from any account. Compromising a customer's private key would only allow you to send money that's in that one account.
If the "customers" are "banks" as you stated, then there is a 1:1 relationship between SWIFT credentials and private keys which allow one to sign transactions on behalf of the "customer" (bank).
Once again, this is a blockchain controlled by BANKS. Customer's of the bank do not participate in this. What are you not understanding?
> It's unfortunate you took it as snark and not advice
More needless petty snark. I'm done with this conversation.
By doing this, they are gaining access to the greater crypto ecosystem while still maintaining centralized control when they need it.
Here's a little example of how this might work in practice:
1. You hold $100k in your JPM money market account
2. You convert $25k of that to JPM's stablecoin on their Quorum chain
3. You withdraw this $25k JPM-coin to the public Ethereum blockchain
4. You use it in Ethereum's burgeoning "Decentralized Finance" or "Open Finance" protocols.. some examples: https://www.dharmalever.com, https://compound.finance, https://www.augur.net/
5. You finish what you're doing, and transfer it back to your JPM account
I look forward to the day where the JPM's and the like are put out of business for this sort of thing due superior, user-friendly technology.
That seems like a good thing for cryptocurrency fans to start working on. Part of that would be looking at the big problems which have prevented it so far, which aren’t really technical as much as philosophical: practical reasons to switch (which is to say being competitive on pricing), barriers to adoption (i.e. until most people you know use a system its benefits are mostly hypothetical), and not having a fraud story other than “we’ll say you should have had better opsec”.
As compared to losing a debit/credit card
Or perhaps outlawing targeted advertising?
- JPMC will now create a digital signature (token) for every dollar that enters its network.
- Those digital signatures can be exchanged by any trusted authority
- JPMC will exchange a single dollar to those trusted authorities for a single digital signature
Using the blockchain allows JPMC to trust each dollar that goes through both their network and partner networks as they cryptographically trust that forgery is almost impossible. They also can trust that when a “wire” comes in that the funds are actually available.
This is purely an accounting system backed by cryptography that allows much more trust.
I probably don’t. This is an internal accounting system used by JPMC and potentially other banks. I don’t give a crap about what they use for accounting unless it works well and provides consumer benefits. I don’t care if it’s MySQL and PGP or a person with punch cards.
Whether or not I support this depends on if JPMC:
1. Gets adoption so this works with a bunch of banks and people and businesses can send me or I can send them money
2. Results in a reduction in settlement times versus ACH and wire
3. Comes at a lower cost to the consumer than wire or ACH
4. Comes with the same guarantees
I’m pretty skeptical as services like Zelle and Venmo provide way less guarantees than wire and ACH
I’d prefer you posted something constructive rather than just saying “doesn’t need blockchain”. Of course it doesn’t. Storing data doesn’t require a relational database, or a key value store either. All have pros and cons.
Saying “doesn’t require blockchain” is obvious and adds no value. It’s like coming into a workshop explain what a saw is and saying “other cutting tools also exist”.
You seem to be making the leap that because I’m explaining what something is without saying whether or not I think it’s the right move that I think it is.
I don’t know whether or not it was cheaper and more effective for JPMC to fork ethereum or to build their own accounting system from scratch and I doubt you have the correct information to make that assumption either. Maybe JPMC doesn’t have a team capable of writing accounting software (seems unlikely). What’s more likely is they are looking for headlines because they know blockchain is hyped technology. It would have probably not made the news if they announced they were adding another settlement system beyond Zelle, ACH, and wire. So, they probably chose this because they think it will reduce costs and move their stock price while building a bespoke software accounting system would have been more costly and wouldn’t have provided as much hype.
Businesses don’t make decisions about technology completely based on its technical merits.
Many times they choose technology because someone recommended to them, or it’s cheap, or they can’t build it themselves, or that’s not their primary business, etc.
We can make a good guess -- they're already a bank, so they're already running the same accounting system this project requires.
In the long term, using someone else’s code for your bespoke project typically means you run up against “square peg round hole” issues so it’s likely they are just deferring engineering costs.
Those are systems for transferring money from JP Morgan to another bank. This system doesn't do that; it can only transfer money from JP Morgan to JP Morgan. That is much easier for JP Morgan to do, and they already have their own system for it.
> the coin is only available to JP Morgan’s institutional clients
without really expanding on anything.
But, JP Morgan has an official announcement out about this, which is much more informative than this article is. It says:
> How does it work?
> In step 1, a J.P. Morgan client commits deposits to a designated account and receives an equivalent number of JPM Coins. In step 2, these JPM Coins are used for transactions over a blockchain network with other J.P. Morgan clients (e.g., money movement, payments in securities transactions). Finally in step 3, holders of JPM Coins redeem them for USD at J.P. Morgan.
and it says:
> Only institutional customers passing J.P. Morgan KYC can transact with these coins
So, in order to make any transaction using JPM Coins, you need to be a JP Morgan customer who's passed their KYC checks. Parties who are not clients of JP Morgan cannot purchase, receive, or redeem coins. What part of what I said was wrong? What language from the article were you thinking of?
In theory, anyone who passes KYC can transfer money in token format to anyone else on the network.
There is a major issue with the network which is that it seems as if only JPMC can actually redeem the tokens for dollars.
Moving your JP-Morgan-client-only coins from your JPMcoin account held with JP Morgan to someone else's JPMcoin account held with JP Morgan is not conceptually different from moving USD from your JP Morgan dollar-denominated account to someone else's JP Morgan dollar-denominated account. In both cases, participating in the system in any way at all requires you to hold an account with JP Morgan, and the transfer that takes place "moves" currency from JP Morgan to JP Morgan.
And, no surprise, JP Morgan already has all of the infrastructure in place to do transfers from one JP Morgan account to another JP Morgan account.
> There is a major issue with the network which is that it seems as if only [J. P. Morgan] can actually redeem the tokens for dollars.
That's not an issue. In theory, you hope for the cryptocurrency to be valid currency in its own right; you don't want people to think they need to redeem it.
The issue is that you can't receive these coins unless you hold an account with JP Morgan. (You can't spend them either, but that's moot unless there's a way to get them in the first place.)
What’s clear is that this is either about internal efficiency at JPMC or marketing hype. This has no benefits for retail banking customers, unless JPMC provides new benefits (cheaper transfers). It certainly is not transformative to retail clients.
For a centralized service, Blockchains are still useful for things like transparency.
I can't speak to how feasible this is because I'm not familiar with the tech, but I don't think anyone needs to adopt the politics of the original paper if they have found some other use.
The point of a blockchain is trust. If it is controlled by a single party, its sole value collapses.
Except marketing value.
Or about as long as it takes for the fundamentally unsolvable problems of decentralized governance to become pathological to group integrity. If you are a junior stakeholder in this nominally decentralized system you eventually have to accept that you have no influence over the direction of the protocol's development, or get together with a group of similarly disadvantaged peers and fork your own implementation where your relative influence is more comparable.
Until that consortium, too, falls apart due to leverage-seeking behavior by individuals within it, or ossifies into a de facto centralized network, but one saddled with a bunch of expensive and now superfluous blockchain game-theory casino infrastructure.
I'm not dis/agreeing with your scenario: I also think it's quite likely that this JPMorgan crypto would ossify into a de facto centralized network.
But the phrase "fundamentally unsolvable" feels like it needs some harder proof or logical explanation. There are many instances of (and variations on) "decentralized governance", like open-source projects, technical or social organizations, etc. Would you say all those attempts are doomed to failure? (Or maybe that they could continue to operate despite being potentially unstable/flawed based on fundamentally unsolvable problems. Or perhaps that they all tend to become centralized.)
Thinking of attempts at decentralized governance in a larger sense (including but beyond specific applications in the crypto sphere), it does seem that most of them are failing due to some inherent structural issues. I wonder whether it can be demonstrated that all such decentralized governance systems are fundamentally flawed (similar to Gödel's incompleteness theorem..?).
The coin value itself is linked with almost no flux to USD.
But then, I do not see how it is different than
https://www.bitrail.io/ (and its new freedom coin: https://freedomcoin.cc/#more )
tether with 2bln market cap
what makes JP's offer more useful to B2B transactions than the above two examples ?
JPMorgan is more reputable than either of those outfits
JPMorgan has existing relationships with businesses
JPMorgan understands business needs and can tailor their currency to them
JPMorgan is a bank.
Granted, I think his criticisms are more specific than being about the technology in general.
I think he was more critical of it being penned as some replacement for existing currencies and monetary systems, and the whole use as an investment.
But don't quote me there.
- you want to transfer $100,000 to another bank
- you do a wire or ACH
- that’s risky so someone has to verify that you actually have $100,000
- each of your dollars are digitally signed using cryptography
- to transfer them, you share the hashes
- the recipient validates the digital signatures to verify those $100,000 in tokens are legit
It’s all about a system of accounting to reduce risk. With less risk, transfers are faster. Think of it like an api to verify account balances that can only be hacked if the SSL cert for the API is hacked by figuring out the private key
Or, if you send the £100K to a valid address that nonetheless is the wrong one. Money in a black hole.
If you screwed up the note to send $100K via ACH, something could still be done about it.
As such, it’s mostly marketing hype and adds value only for JPMC, not the consumer
This is the equivalent of a token table where the token is a cryptographic hash. However, it’s the cryptography that you are trusting, not the database.
The simple analogy is that you are using PGP to sign a message where the contents are a dollar. Only the person who can decrypt that message gets the dollar so you only give the hash to the person you want to have the dollar.
If there are actually dollars involved, this is a real thing.
In this case you’re trusting JPMC, the database, their engineers, the cryptography, etc.
For this use case, there is a major issue. Since you have no access to the token yourself, it’s just marketing hype
Seems very buzzword friendly but I really cannot see why transfers (B2B) aren't perfectly trivial and should be instant, free and totally secure and at the tick rate of the market if in a different FX. What is stopping the banks doing this now with just normal encryption?
They aren't free and instant because people and systems are involved in making them happen. Funds have to be verified, systems to make sure the money is there, fraud monitoring, regulations, mistake handling, etc etc. A lot of stuff goes on in the middle during the transaction and mechanisms need to be in place to prevent crime and fix mistakes.
Blockchains make this process a little better because instead of code setting rules and interacting with APIs, the mathematical characteristics of the blockchain end up doing a lot of the "work" involved and are simply more convenient for everyone.
I'm guessing that eventually central banks (like the Federal Reserve) will issue their own cryptocurrencies for banks to facilitate transfers.
It's not sexy or rebelling against the man, distributed crypto ledgers just have better properties than crusty databases and APIs.
For instance, can I keep these coins on deposit with JPM, grant them access to my keys, conduct all the transactions through JPM's more traditional security infrastructure, and be assured JPM will make me whole if something bad happens I did not authorize, with a transparent and fair arbitration methodology.
Or does this invalidate the whole purpose of crypto-coin?
Paper money was created because it was more convenient than lugging around precious metals, this is just the same. It has no value on the market by itself, it's just a way for a bank to account for stored value.
Bitcoin and the like couple two distinct things:
1. A distributed ledger of transactions with no single point of failure that can cryptographically prove possession of the currency itself.
2. An anarchic monetary system that serves the needs of illicit commerce and inspires the imaginations of libertarians and erstwhile goldbugs.
JPM has decoupled these two aspects. And I think it’s an interesting move. Most people either love or hate cryptocurrency because of the second aspect, but the first may very well still be a good technical solution to the problem of electronically shifting money around—even if you’re just shifting around USD.
JP Morgan is using the blockchain instead of mysql and a pile of code. To them and their customers it has nicer properties. It doesn't at all change the details that a bank is facilitating money flow, just how it is done, and at that a little more efficiently.