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One of two things: I either do not understand Wall Street's obsession with blockchainesque technologies, or Wall Street's obsession with it is totally emblemati

by kolbe 11y ago

One of two things: I either do not understand Wall Street's obsession with blockchainesque technologies, or Wall Street's obsession with it is totally emblematic of their buzzword-obsessed technology-ignorant groupthink that fried the tech industry in the late 90's. I'm seeing companies like this pop up all over the place. Blythe Masters's new venture[1], which made the cover of this month's Bloomberg Business, seems to be the pinnacle. Bitcoin technologies solved some very important problems in the creation of currencies: double spending, decentralization, cost distribution, &c. These are not problems that need to be solved in securities trading. One company running on one platform doesn't have a double spendng problem. Decentralization is irrelevant. And cost is no issue. Yes, the securities trading industry is wrought with disgusting inefficiencies, and technology should play a central role in becoming more efficient, but I do not see how shoehorning in blockchain tech helps in any way. If keeping track of ownership and transfer of securities is such a cumbersome process, make a company that keeps track of ownership and transfer of securities. Use computers. Use web interfaces. Make transactions publicly viewable. Create robust contract definitions. Remove paper trails. Hire programmers. Pay AWS. But I have no clue how they think blockchain technology adds to any solution here. I don't know. Someone please explain. [1] http://www.bloomberg.com/news/features/2015-09-01/blythe-masters-tells-banks-the-blockchain-changes-everything http://www.bloomberg.com/news/features/2015-09-01/blythe-mas...

natrius 11y ago
People pay Nasdaq to make their trades reliable and safe. Reliable and safe trades can now be done by a swarm of computers running free software, and they only charge a tiny margin over the costs of bandwidth, energy and storage. How is Wall Street supposed to make money now? They're all trying to find out, and they all need to be the first. Financial profits will be much smaller, and the slow movers will have a smaller slice of a smaller pie.
- lsc 11y ago
  > People pay Nasdaq to make their trades reliable and safe. How much of the value people see in Nasdaq is the technical systems that execute the trades? I'd argue that the technical systems that reliably execute trades are important; Nasdaq would fail if they didn't work reliably, but having a reliable system to execute trades doesn't make it easy to setup a competitor to the Nasdaq, you know what I mean? The technical systems are necessary but not sufficient; the rest of what you need to set up a stock exchange is absolutely huge. I'll make the analogy of e-bay. I think most people would agree with my assertion that the technical challenges of building a competitor to ebay are trivial when compared with the effort that would be required to get the buyers and sellers to leave ebay and join your new platform.
  - jzwinck 11y ago
    > How much of the value people see in Nasdaq is the technical systems that execute the trades? Quite a bit. They do a good-sized business selling their technical systems to other markets (mostly outside the US). An example from the opposite side of the globe: http://www.world-exchanges.org/news-views/bursa-malaysia-selected-nasdaq-omxs-x-stream-inet-power-its-trading-platform http://www.world-exchanges.org/news-views/bursa-malaysia-sel... . Of course, NASDAQ has plenty of other assets, such as its ownership of not just one but three of the national exchange registrations (it bought BX and PHLX). Not to mention all the US companies which are listed on NASDAQ (there may be a bunch of places to trade them, but NASDAQ is "home" to Apple, Facebook, etc.).
    - lsc 11y ago
      >They do a good-sized business selling their technical systems to other markets that's a lot like saying that because IBM and HP, ITC and TCS do a lot of contracting of the outsourced worker variety, their value is in the technical people they hire. The value is in the connections, the name, the fact that large companies will pay a lot for my time, if they are buying that time from a company like IBM or HP, ITC or TCS, while they won't pay anything for the exact same time sold direct through prgmr.com. The value is that relationship and reputation. The value is that if you hire those companies and things go south, your boss won't blame you for taking a risk on an unknown brand.
- jzwinck 11y ago
  > Reliable and safe trades can now be done by a swarm of computers running free software, and they only charge a tiny margin over the costs of bandwidth, energy and storage. Do you have an example of such a market today? It's actually not NASDAQ that makes trades reliable and safe. Sure, they're involved in many trades, but the more relevant entity in this context might be DTCC [1]. The fact that almost no one here will have ever heard of DTCC before may help illustrate the size of the gap in understanding between the US securities markets today and "Let's use the blockchain to trade stocks for free." [1] https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...
- kolbe 11y ago
  > People pay Nasdaq to make their trades reliable and safe. People pay Nasdaq because they have to pay someone. Only SEC-registered exchanges and ATSs can confirm a transaction in publicly listed equities, then the DTC actually transfers ownership. And the amount you pay to transact stock at one of these places is the best deal you could find to transact virtually anything. I can't think of any popular good whose intermediary takes as little as exchanges like Nasdaq take (e.g. to buy $62,000 of Google stock, Nasdaq takes like 50 cents). > Reliable and safe trades can now be done by a swarm of computers running free software, and they only charge a tiny margin over the costs of bandwidth, energy and storage. When Nasdaq runs their own software, it's still free, and they pay zero margin over the cost of bandwidth, energy and storage. If you don't trust Nasdaq specifically, then you can use one of the other myriad exchanges and ATSs to trade on. And the existence of all of these trading venues have already pushed margins to an extremely competitive rate.
- TheDong 11y ago
  > only charge a tiny margin over the costs of bandwidth, energy and storage. The margin charged in terms of energy is massive. The bitcoin network can't handle many TPS because each transaction needs significant computational work to secure it. On the other hand, if I trust my database I can do the tiny work to write it, make sure I've got consensus among my DB nodes it's written, and be done with it. I'd say that bitcoin so far has neither been reliable nor safe. Hell, if you look at MtGox alone, I bet a higher percent of bitcoin users were impacted than the total number of USD users who have experienced any kind of fraud. In addition, there was the Nth "stress test" last week which crashed nodes and delayed transactions for hours... yeah, great tiny margin and reliability...
  - brighton36 11y ago
    That's not even a little true. The transaction requires little/no work whatsoever. The miners require precisely as much work as there is speculative value for bitcoin. If Bitcoin were worth $10,000 per bitcoin - the energy burned per transaction would be 40 times higher. But that is not to say that the transaction itself required this expense. Mt Gox had as much to do with bitcoin as it did to do with http. I wouldn't argue with you that centralized databases are way more efficient than blockchains (hence why some nodes went down), but you simply don't understand the basics of what's going on with bitcoin.
    - TheDong 11y ago
      The transaction has to be included in a block. That requires proof of work. As you say, the energy burned should be proportional to the value of bitcoin; if I have 100 BTC then I have a vested interest in mining outside of gaining new BTC -- I also want to protect the BTC&transactions I have from attacks. The argument that it's okay to spend that amount of money securing that amount of money, however, is nonsensical. Transactions in traditional databases do take almost no work. There's no thousands of computers computing and discarding hashes just to be able to add and subtract some numbers. I'll acknowledge that MtGox isn't a good thing to reference here, but the fact of the matter is that bitcoin is rife with things that a regular man would call "unreliability". I don't appreciate that you immediately condescend that I don't understand anything to do with bitcoin when your response has little substance. Your response is basically "transactions don't require that energy is burned but energy is burned for transactions" and you have the gall to say I don't understand anything?
- dogma1138 11y ago
  They will still make money the same way, heck they'll make much more money than before because operational costs and inherit risks will be much lower. Today it costs banks to transfer money for multiple reasons the blockchain can remove some of those reasons but it will never be accessible to you as a consumer. The blockchain can integrate allot of the stuff that for example SWIFT is currently used for but combine it with services that correspondent banking and clearinghouses provide to facilitate the actual transaction. This means that if a bank A wants to move money to bank B it will be much easier and safer (from a risk perspective) but it doesn't mean you'll enjoy those benefits just like you can't install a SWIFT gateway at home.
genericacct 11y ago
Me too mentality; Bloomberg journos have been extra gullible with regard to BTC. One of them actually had his coins stolen because he showed a QRcode on tv. Like every other journalist these days they'll just print whatever the PR agency sent them.
mwilcox 11y ago
It's not actual blockchains they're finding useful. It's the reasonably robust framework that people are building around it, where they get a whole lot for free and just need to optimise that annoying blockchain bit in the middle. Rather than do all of the crypto, security R&D they would need to do by not using 'blockchain technology' they just turn off the mining and get it all for free.
Kinnard 11y ago
>"Bitcoin technologies solved some very important problems in the creation of currencies: double spending, decentralization, cost distribution, &c. These are not problems that need to be solved in securities trading. One company running on one platform doesn't have a double spendng problem. Decentralization is irrelevant. And cost is no issue." You're thinking of the securities trading of today, which has its roots in the 16th Mercantile Revolution of Europe. Securities are still essentially pieces of paper: stock certificates. If you've started a company(assuming it was a C-Corp) you know this system is shit. While this is the case, equity markets, for all that's been developed are like rocket ships tethered to the ground. In the future you will be able to do business globally the way you can communicate globally today. That means not just transacting money, but assets as well. Bitcoin is a system of digital tokens, which can represent anything. For this, you do need the trustless transactions that the blockchain enables. Would you trust a Russian stock market? Russia has very different ethical standards and very different laws. What if you are declared a persona non grata and your assets are to be confiscated? What if Russia and the United States go to war? What about a Nigerian stock exchange? Would it be reliable? Your reluctance to engage in these markets means entrepreneurs there do not have access to capital. Math and the laws of computation are the same everywhere. This allows for new types and a level of global commerce that will change the world the same way global communication did. Bitcoin is way, way more than a currency. It allows assets to flow like email. And that is just the beginning.
- kolbe 11y ago
  Equity markets have the DTCC and registered exchanges. Even though there are some 16th century pieces of paper still around today, actual transfer of equity from one party to another is little more than an exchange notifying the DTCC that a transaction took place, and the DTCC changing a log in its own database moving the stock from one clearing firm to the other. That sounds boatloads more efficient that blockchain already. There are other security markets that do not operate as efficiently, but to me, the solution looks more similar to the DTCC model, not the blockchain model. Keep in mind, too, we still do not have any system that reasonably ties bitcoin technology back to a real-life asset. Bitcoin works because it's self-contained. In the world you described, I could have all the necessary ones and zeros to represent an ownership stake in a Nigerian oil company, but that means diddly squat if it's impossible for me to exert control on the company or receive dividends. Nigeria nationalizing the rigs has nothing to do with whether or not I have a claim on it with a piece of paper from an exchange or a cryptographic key. Those are currently real-world issues impairing investment in those regions, not the exchanging mechanisms. Though I do concede, the exchanging mechanisms aren't perfect.

by kolbe 11y ago

natrius 11y ago

People pay Nasdaq to make their trades reliable and safe. Reliable and safe trades can now be done by a swarm of computers running free software, and they only charge a tiny margin over the costs of bandwidth, energy and storage. How is Wall Street supposed to make money now? They're all trying to find out, and they all need to be the first. Financial profits will be much smaller, and the slow movers will have a smaller slice of a smaller pie.

lsc 11y ago
> People pay Nasdaq to make their trades reliable and safe. How much of the value people see in Nasdaq is the technical systems that execute the trades? I'd argue that the technical systems that reliably execute trades are important; Nasdaq would fail if they didn't work reliably, but having a reliable system to execute trades doesn't make it easy to setup a competitor to the Nasdaq, you know what I mean? The technical systems are necessary but not sufficient; the rest of what you need to set up a stock exchange is absolutely huge. I'll make the analogy of e-bay. I think most people would agree with my assertion that the technical challenges of building a competitor to ebay are trivial when compared with the effort that would be required to get the buyers and sellers to leave ebay and join your new platform.
- jzwinck 11y ago
  > How much of the value people see in Nasdaq is the technical systems that execute the trades? Quite a bit. They do a good-sized business selling their technical systems to other markets (mostly outside the US). An example from the opposite side of the globe: http://www.world-exchanges.org/news-views/bursa-malaysia-selected-nasdaq-omxs-x-stream-inet-power-its-trading-platform http://www.world-exchanges.org/news-views/bursa-malaysia-sel... . Of course, NASDAQ has plenty of other assets, such as its ownership of not just one but three of the national exchange registrations (it bought BX and PHLX). Not to mention all the US companies which are listed on NASDAQ (there may be a bunch of places to trade them, but NASDAQ is "home" to Apple, Facebook, etc.).
  - lsc 11y ago
    >They do a good-sized business selling their technical systems to other markets that's a lot like saying that because IBM and HP, ITC and TCS do a lot of contracting of the outsourced worker variety, their value is in the technical people they hire. The value is in the connections, the name, the fact that large companies will pay a lot for my time, if they are buying that time from a company like IBM or HP, ITC or TCS, while they won't pay anything for the exact same time sold direct through prgmr.com. The value is that relationship and reputation. The value is that if you hire those companies and things go south, your boss won't blame you for taking a risk on an unknown brand.
jzwinck 11y ago
> Reliable and safe trades can now be done by a swarm of computers running free software, and they only charge a tiny margin over the costs of bandwidth, energy and storage. Do you have an example of such a market today? It's actually not NASDAQ that makes trades reliable and safe. Sure, they're involved in many trades, but the more relevant entity in this context might be DTCC [1]. The fact that almost no one here will have ever heard of DTCC before may help illustrate the size of the gap in understanding between the US securities markets today and "Let's use the blockchain to trade stocks for free." [1] https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...
kolbe 11y ago
> People pay Nasdaq to make their trades reliable and safe. People pay Nasdaq because they have to pay someone. Only SEC-registered exchanges and ATSs can confirm a transaction in publicly listed equities, then the DTC actually transfers ownership. And the amount you pay to transact stock at one of these places is the best deal you could find to transact virtually anything. I can't think of any popular good whose intermediary takes as little as exchanges like Nasdaq take (e.g. to buy $62,000 of Google stock, Nasdaq takes like 50 cents). > Reliable and safe trades can now be done by a swarm of computers running free software, and they only charge a tiny margin over the costs of bandwidth, energy and storage. When Nasdaq runs their own software, it's still free, and they pay zero margin over the cost of bandwidth, energy and storage. If you don't trust Nasdaq specifically, then you can use one of the other myriad exchanges and ATSs to trade on. And the existence of all of these trading venues have already pushed margins to an extremely competitive rate.
TheDong 11y ago
> only charge a tiny margin over the costs of bandwidth, energy and storage. The margin charged in terms of energy is massive. The bitcoin network can't handle many TPS because each transaction needs significant computational work to secure it. On the other hand, if I trust my database I can do the tiny work to write it, make sure I've got consensus among my DB nodes it's written, and be done with it. I'd say that bitcoin so far has neither been reliable nor safe. Hell, if you look at MtGox alone, I bet a higher percent of bitcoin users were impacted than the total number of USD users who have experienced any kind of fraud. In addition, there was the Nth "stress test" last week which crashed nodes and delayed transactions for hours... yeah, great tiny margin and reliability...
- brighton36 11y ago
  That's not even a little true. The transaction requires little/no work whatsoever. The miners require precisely as much work as there is speculative value for bitcoin. If Bitcoin were worth $10,000 per bitcoin - the energy burned per transaction would be 40 times higher. But that is not to say that the transaction itself required this expense. Mt Gox had as much to do with bitcoin as it did to do with http. I wouldn't argue with you that centralized databases are way more efficient than blockchains (hence why some nodes went down), but you simply don't understand the basics of what's going on with bitcoin.
  - TheDong 11y ago
    The transaction has to be included in a block. That requires proof of work. As you say, the energy burned should be proportional to the value of bitcoin; if I have 100 BTC then I have a vested interest in mining outside of gaining new BTC -- I also want to protect the BTC&transactions I have from attacks. The argument that it's okay to spend that amount of money securing that amount of money, however, is nonsensical. Transactions in traditional databases do take almost no work. There's no thousands of computers computing and discarding hashes just to be able to add and subtract some numbers. I'll acknowledge that MtGox isn't a good thing to reference here, but the fact of the matter is that bitcoin is rife with things that a regular man would call "unreliability". I don't appreciate that you immediately condescend that I don't understand anything to do with bitcoin when your response has little substance. Your response is basically "transactions don't require that energy is burned but energy is burned for transactions" and you have the gall to say I don't understand anything?
dogma1138 11y ago
They will still make money the same way, heck they'll make much more money than before because operational costs and inherit risks will be much lower. Today it costs banks to transfer money for multiple reasons the blockchain can remove some of those reasons but it will never be accessible to you as a consumer. The blockchain can integrate allot of the stuff that for example SWIFT is currently used for but combine it with services that correspondent banking and clearinghouses provide to facilitate the actual transaction. This means that if a bank A wants to move money to bank B it will be much easier and safer (from a risk perspective) but it doesn't mean you'll enjoy those benefits just like you can't install a SWIFT gateway at home.

genericacct 11y ago

Me too mentality; Bloomberg journos have been extra gullible with regard to BTC. One of them actually had his coins stolen because he showed a QRcode on tv. Like every other journalist these days they'll just print whatever the PR agency sent them.

mwilcox 11y ago

It's not actual blockchains they're finding useful. It's the reasonably robust framework that people are building around it, where they get a whole lot for free and just need to optimise that annoying blockchain bit in the middle. Rather than do all of the crypto, security R&D they would need to do by not using 'blockchain technology' they just turn off the mining and get it all for free.

Kinnard 11y ago

>"Bitcoin technologies solved some very important problems in the creation of currencies: double spending, decentralization, cost distribution, &c. These are not problems that need to be solved in securities trading. One company running on one platform doesn't have a double spendng problem. Decentralization is irrelevant. And cost is no issue." You're thinking of the securities trading of today, which has its roots in the 16th Mercantile Revolution of Europe. Securities are still essentially pieces of paper: stock certificates. If you've started a company(assuming it was a C-Corp) you know this system is shit. While this is the case, equity markets, for all that's been developed are like rocket ships tethered to the ground. In the future you will be able to do business globally the way you can communicate globally today. That means not just transacting money, but assets as well. Bitcoin is a system of digital tokens, which can represent anything. For this, you do need the trustless transactions that the blockchain enables. Would you trust a Russian stock market? Russia has very different ethical standards and very different laws. What if you are declared a persona non grata and your assets are to be confiscated? What if Russia and the United States go to war? What about a Nigerian stock exchange? Would it be reliable? Your reluctance to engage in these markets means entrepreneurs there do not have access to capital. Math and the laws of computation are the same everywhere. This allows for new types and a level of global commerce that will change the world the same way global communication did. Bitcoin is way, way more than a currency. It allows assets to flow like email. And that is just the beginning.

kolbe 11y ago
Equity markets have the DTCC and registered exchanges. Even though there are some 16th century pieces of paper still around today, actual transfer of equity from one party to another is little more than an exchange notifying the DTCC that a transaction took place, and the DTCC changing a log in its own database moving the stock from one clearing firm to the other. That sounds boatloads more efficient that blockchain already. There are other security markets that do not operate as efficiently, but to me, the solution looks more similar to the DTCC model, not the blockchain model. Keep in mind, too, we still do not have any system that reasonably ties bitcoin technology back to a real-life asset. Bitcoin works because it's self-contained. In the world you described, I could have all the necessary ones and zeros to represent an ownership stake in a Nigerian oil company, but that means diddly squat if it's impossible for me to exert control on the company or receive dividends. Nigeria nationalizing the rigs has nothing to do with whether or not I have a claim on it with a piece of paper from an exchange or a cryptographic key. Those are currently real-world issues impairing investment in those regions, not the exchanging mechanisms. Though I do concede, the exchanging mechanisms aren't perfect.