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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

by 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.

by natrius 11y ago

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.