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Nine of the World’s Biggest Banks Form Blockchain Partnership

460 points by uptown 11y ago

phkahler 11y ago
Doesn't some of the blockchains security come from having a large number of players maintaining the chain? Isn't there a vulnerability that depends on someone taking over a large enough percentage of the infrastructure? Wouldn't having a handful of entities doing the majority of the transactions allow them to commit fraud, or alter the ledger?
- gleenn 11y ago
  If they do end up using something like Ethereum, the network would be the same network that everyone uses, so the number of users would hopefully be much larger than, i.e. the 5 banks listed or whatever.
- this_user 11y ago
  If only trustworthy entities are part of the network, this isn't much of a problem. No large financial institution will launch an attack against their own network.
  - csomar 11y ago
    Maybe the attack will be external then? (Thieves, Hackers, Foreign govs...)
  - dogecoinbase 11y ago
    No large financial institution will launch an attack against their own network. Hayes's LIBOR rigging scheme would seem to indicate otherwise.
    - icebraining 11y ago
      I think there's a difference between rigging numbers and launching an attack on the network. All that it would happen is that the other peers would detect the increase on hashing power and shut down the nodes. The problem with a public blockchain is that you don't know who is hashing. On a private network, you can tell each node to only hash at a certain rate, and monitor the total rate to detect cheats.
  - aianus 11y ago
    > If only trustworthy entities are part of the network Then you don't need a blockchain at all, just use a centralized ledger.
    - eru 11y ago
      Or even decentralized.
  - elektromekatron 11y ago
    They will if they think they can make money from doing so.
- Obi_Juan_Kenobi 11y ago
  This is basically the path you go down when you start to consider 'non-bitcoin' blockchains. Sure, you can do it, but if you want security, you go where the hashing power is. Network effect = one blockchain to rule them all Well, at least you'll have to connect in with the 'one blockchain'. Sidechains would be a great way to address this. It's important to remember how early days Bitcoin is, and cryptography and blockchains in general. They're still well within a research phase; it's hard to say what sort of solution they'll come up with.
  - kang 11y ago
    I was talking to one of the bitcoin core devs and his opinion was that purely in terms of power consumed, litecoin could be more secure than bitcoin. Bitcoin certainly has the network effect in terms of usage going for it.
  - icebraining 11y ago
    Maximizing hashing power is only needed in a public blockchain. If the pool is closed, you can force each node to provide a fixed power, and monitor the total power. If it increases over nodes*power-per-node, all nodes shut down automatically.
    - natrius 11y ago
      No hashpower is required. If you have a fixed pool of validators, just rotate through the validators to pick who creates the next block.
      - woah 11y ago
        At that point, why do you need blocks? Couldn't each transaction just be signed by a certain percentage of validators?
  - maaku 11y ago
    Bitcoin's security is not due to hash power alone, it is due to the decentralization of that hash power.
samstave 11y ago
While I am actually ignorant on the mechanics and architecture of blockchain, for the most part... I'm wary of anything a conglomerate of banks are doing... Just look at the LIBOR debacle as one datapoint. I have zero trust in big banks colluding on things that have the potential to affect finances for centuries to come. Change my view? Edit: anyone who down voted me hasn't been paying attention to the financial history of banks. Just because YC is tied to finance as an investment POV - you'd be deluded to think that banks aren't corrupt to the core. Do I really need to provide you with evidence, how about look at the last fifteen years for simplicity. Then look into BCCI which I doubt many HNers are even aware of... HSBC? Wachovia? Jesus, do any of you know how fucking corrupt banks are??
- Kalium 11y ago
  The article leaves me with the impression that this is more like a standards body than anything else. Who would you prefer to have designing and selecting standards for exchanging financial information?
  - hellbanner 11y ago
    After reading http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393338827 http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393..., I'm not sure anyone is competent for that..
  - samstave 11y ago
    That's not quite what I mean... Sure, banks ideally should do such things... I'm just saying given they centuries long track records... I still don't trust any of them. "Secure" to banks means, only secure enough for them... I just believe that the future (think 25 years, minimum) is that every single activity of every single person will be tracked in detail to a level which we can't even understand now. Wait until all your activity is then predicted and compared to actual to refine the tracking. And banks will be doing HFT based on the actual and projected minute-by-minute actions of billions of people... What if a stock will fluctuate based on lunch time buying surges and after work happy hour, and birthday ties to kids having a birthday on Saturday and their social networks socioeconomic propensity to buy stuff for them last minute at stores r us?
dmihal 11y ago
Although the article doesn't really specify, it sounds like these banks plan on making their own blockchain instead of using the Bitcoin blockchain. I'm curious to see how the blockchain will preform without the Bitcoin network backing it.
- toomim 11y ago
  The article DOES specify that they don't know: > Rutter said the initial focus would be to agree on an underlying architecture, but it had not yet been decided whether that would be underpinned by bitcoin’s blockchain or another one, such as one being built by Ethereum, which offers more features than the original bitcoin technology. If you're curious, look at Ethereum. It's a blockchain without the Bitcoin network backing it.
  - giancarlostoro 11y ago
    Wouldn't the other bitcoin forks be examples? I wouldn't imagine they're part of the exact same network?
    - Obi_Juan_Kenobi 11y ago
      Ethereum is a good example because it's proof of stake vs. proof of work. Other proof of work blockchains (e.g. Litecoin and Dogecoin) are very similar to Bitcoin. Proof of stake makes a lot of sense for these organizations if they want to run their own blockchain.
      - tromp 11y ago
        It's definitely proof of work (ethash), although the plan is to transition to proof of stake in the future. Their most recent blog entry on this: https://blog.ethereum.org/2015/08/01/introducing-casper-friendly-ghost/ https://blog.ethereum.org/2015/08/01/introducing-casper-frie...
- Animats 11y ago
  From the article: “I think that these technologies will probably be post-trade,” he said. “I think savings are in the settlement side, in post-trade, in issuance, but not in exchange trading or OTC trading any time in the near future.” He added that R3 will soon announce a few more banks joining the project." That makes sense. This replaces the need for a single trusted clearinghouse with a redundant, shared ledger. Confirmation occurs when a majority of the banks have put a new transaction into a block. Because the parties are not anonymous and new ones can only be added by mutual agreement, it's like a "proof of stake" system. There's no need for "mining". Bitcoin has done a good job of validating a blockchain system as being secure against attack. No one has broken it yet. None of this, of course, does anything for Bitcoin as a currency/investment.
roymurdock 11y ago
Rutter said the initial focus would be to agree on an underlying architecture, but it had not yet been decided whether that would be underpinned by bitcoin’s blockchain or another one, such as one being built by Ethereum, which offers more features than the original bitcoin technology. Once that has been agreed on, Rutter said, the first use of the technology might be the issuance of commercial paper on the blockchain. Can anyone speculate on why they would begin to issue commercial paper?
- murbard2 11y ago
  Straightforward cash based product without too many complications. Stock split, merge, spin off, for instance.
- aggronn 11y ago
  Probably because they're very short term forms of debt, so if the system has issues it doesn't exist in for 10 years or however long the instrument lasts.
hellbanner 11y ago
Banks don't always act in citizen's best interest. Don't forget about the cartel money laundering: http://www.theguardian.com/commentisfree/2015/feb/15/hsbc-has-form-mexico-laundered-drug-money http://www.theguardian.com/commentisfree/2015/feb/15/hsbc-ha...
- civilian 11y ago
  The Drug War doesn't have a sound moral basis, so I'm okay that the banks were undermining western governments in the interest of free trade.
  - chimeracoder 11y ago
    > so I'm okay that the banks were undermining western governments in the interest of free trade. I say this as someone who used to work in drug policy reform and strongly opposes the drug war: Providing money to cartels isn't exactly a noble proposition either. Banks that do that really do have blood on their hands. Between 2006-2012, over 100,000 people died incredibly gruesome deaths in Mexico alone since 2010 at the hands of these cartels[0]. I'm not going to defend the drug war, but I'm not going to defend banks that willingly funnel money to them either. And I'm not going to claim that providing money to cartels actually undermines the drug war, in any meaningful sense. The cartels are, ironically, the largest profiteers of the drug war, right alongside the LEOs and correctional facilities that enforce drug laws. Pumping money into the pockets of the drug cartels only further entrenches the current system; it does not provide pressure to dismantle it. There are plenty of great ways to work actively to end the drug war. Funding drug cartels (or enabling their business operations) is not one of them. [0] The number of deaths in Mexico have dropped slightly since then, but only because the violence has moved further south in Central America
    - aianus 11y ago
      > Pumping money into the pockets of the drug cartels only further entrenches the current system; it does not provide pressure to dismantle it. I would disagree with this sentiment. There is plenty of pressure in Mexico to decriminalize/legalize drugs as a result of cartel violence.
giancarlostoro 11y ago
As long as they start their own blockchain I think it would be interesting. Otherwise it's a bit of a hassle to use the current blockchain, I would use the same codebase and not start from scratch though since the code's been tried and tested, and as they said you can send messages through bitcoin as well already.
- colordrops 11y ago
  Could you expound a bit on why you think it makes more sense to use their own blockchain?
  - darkr 11y ago
    Means they can run a closed pool on a secure network - reduces/eliminates (depending on implementation) risk of forking due to Chinese ASIC farms etc. My understanding is that the first usage of blockchain would just be an inter-bank shared ledger.
    - colordrops 11y ago
      So what's the incentivization scheme for banks to run their own mining operations? And is there any real threat of a fork?
- samstave 11y ago
  Being ignorant of blockchain per se... What is best resource to grok it?
  - aianus 11y ago
    Khan Academy has a whole series on it: https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/bitcoin https://www.khanacademy.org/economics-finance-domain/core-fi...
- fluidcruft 11y ago
  Maybe they would go for being cooperatively-mined with bitcoin (like namecoin etc). Otherwise they need a different proof of work. It's pretty dangerous to be an SHA2-alt and not be incorporated into bitcoin's hashing power.
civilian 11y ago
Here's the press release (pdf): http://static1.squarespace.com/static/55f73743e4b051cfcc0b02cf/t/55f8119ce4b0550fcc16d156/1442320796627/PRESS+RELEASE+Global+banks+form+partnership+with+R3+-+FINAL.pdf http://static1.squarespace.com/static/55f73743e4b051cfcc0b02... This sounds exciting. My gut reaction was that the banks aren't going to use it for actually transferring money, but as a way to notarize transactions that will be acknowledged by the whole group. It does sound like a cool way to verify everything going on among a network of players. And there's a lot of weird hate towards bank on HN. I know they're not great, but it's really not helping the conversation to just say things like "woooo banks are scary!" //edit: A key quote from the press release: > The group will collaborate on research, experimentation, design, and engineering to help advance state-of-the-art enterprise-scale shared ledger solutions to meet banking requirements for security, reliability, performance, scalability, and audit. It's a shared ledger system! So, really no need to have it be bitcoin. It does make sense. It'll be great to see the confused looks on lawyer's faces when they try to lobby to change the blockchain history.
- gleenn 11y ago
  The irony about the hate is that having a decentralized way to do things like this is actually going to help unseat some of the banks' powers.
  - Animats 11y ago
    No, what this does is reduce the need for clearinghouse entities, such as Depository Trust Company, National Securities Clearing Corporation, the Fixed Income Clearing Corporation, and The Options Clearing Corporation. There's a back-end bookkeeping system in finance which tracks who owns what. That's where blockchain technology applies. Banks can't do this themselves, because there's a mutual mistrust problem. So there are all those clearinghouse companies, which maintain the databases.
    - civilian 11y ago
      This is a great observation, I didn't realize that clearinghouses were a thing. John, have you thought about what other backend bookkeeping systems could benefit from using blockchains?
vessenes 11y ago
One very interesting difficulty for these guys is going to be deciding on mining, weighing costs and benefits and threat models.. Ethereum's current mining rates look like they would take a few thousand GPUs to fork the chain. Bitcoin's costs would be in the $hundred million+ range for a secret attack. Edit: Most alt-mining proposals for enterprises do away with any ability to cost out mining attack vectors at all with some sort of trusted server, keys, etc.
im3w1l 11y ago
Mining is only needed to prevent sybil attacks, so could be dispensed with if they code it from scratch.
4684499 11y ago
I guess this basically made fsociety's approach meaningless ;-)
- otisfunkmeyer 11y ago
  and right when we were finally awake...
yid 11y ago
Interesting. Another way to read this is that trust between banks has deteriorated to the point where they feel that they need a blockchain -- a decentralized shared ledger -- to verify certain transactions with each other. Because otherwise a nice centralized, shared ledger is much easier to build, analyze, maintain, and secure.
- cbhl 11y ago
  Banks don't operate on trust -- they operate on checks and balances and intermediaries. For example, when you spend your money using a Visa or MasterCard, the payment processor (intermediary between your bank and the merchant's bank) takes a cut for helping remove the need for trust from the transaction.
  - RockyMcNuts 11y ago
    More to the point, they act on the basis of contracts enforced by state authority.
  - throwaway1967 11y ago
    > Banks don't operate on trust Can you spell LIBOR? Banks do operate on trust, which is what allowed the LIBOR conspiracy to take place. Unless you can list here the "checks and balances and intermediaries" that failed during all that fake setting of LIBOR rates.
    - wickes 11y ago
      LIBOR doesn't demonstrate that banks rely on trust. None of the involved banks or brokers trusted that anyone else was actually being honest about LIBOR submissions or predictions. Even if there were any system safeguarding LIBOR whatsoever, a blockchain wouldn't have helped. The reason it was so easy to falsify your bank's LIBOR submission was because they were essentially made up. Submitters produced the number by talking to brokers and then making a decision. A blockchain wouldn't have made any difference. You'd put your submission on the blockchain, and you wouldn't be able to change it later if things didn't turn out how you liked, but you had made up the submission anyway. Nobody would ever be able to point to some number on the blockchain and say definitively that your reported LIBOR figure for today should have been X but in fact it was Y and therefore you're a crook, because the figures were never verified. They'd only be able to say "There's no record, so you could easily have just made up the number," and you'd say "I did make it up, that's how you do it, everyone else made theirs up too," and that would pretty much be it. The only way to catch someone being dishonest was to find records of employees talking about it; the Hayes case and others like it are based on the fact that bankers incriminated themselves by discussing the manipulation with each other. By contrast, when banks transfer specific quantities of money, they absolutely are not relying on a trust-based system. I owed you X, I sent you X, and I swear to God if you come to me later and say I only sent Y and I owe you more dosh there will be a fight. If you produce internal records kept by your accountants that say I totally only sent Y, no bank would take your word for it under any circumstances. Similarly, if there was a mixup and some of my assets ended up with you by accident, my chances of convincing you that I should get them back are nonexistent if I don't have some outside system demonstrating that I'm not lying. In real life, financial institutions rely on third-party businesses to be that "outside system." A blockchain would help solve our problem without those businesses. I wouldn't need to trust you, the transaction would be recorded on our blockchain, and if either of us thought the other could falsify the blockchain we wouldn't have agreed to use it. If the blockchain says I really didn't send enough money, I'll probably say something about a technical glitch and give you the cash while I grumble about how much I hate technology. Neither of us have to trust each other any more than we already don't, and we don't have to involve some kind of trust or clearing business.
gtrubetskoy 11y ago
I read this as "we, the banks, want our own blockchain which we control and you should trust". Only you shouldn't trust it because the whole idea of a blockchain is that it cannot be influenced/controlled.
- Afforess 11y ago
  No. It is unlikely private citizens will even have access to mine on the banking blockchain. Banks are looking at using it for intra-banking ledgers and commercial transactions. Longer term, it may replace the outdated ACH clearing house.
- roymurdock 11y ago
  It's not about trust...it's about efficiency. In any blockchain network, users implicitly trust the developers of the software. If you use Bitcoin, you trust that Gavin Andresen & the core developers are making changes to the client software in the best interest of the network. If you disagree with any implemented changes (say they decide to increase the hard limit) then you can either refuse to update your client or move to another currency. Refusing to update only works if you have enough other users to stay on the same client version as you. In this case, assuming each bank has equal representation on designing/maintaining the blockchain, the developers are the users, so there is no need for implicit trust. It'll just make it easier to do transfers between banks without a 3rd party.
misterbishop 11y ago
This could make it a lot easier to implement/audit a Tobin Tax. I like it.
sam_lowry_ 11y ago
Think of the carbon footprint these banks will have if they invest into mining.
- scott_karana 11y ago
  Think of their current carbon footprint, which requires reams of paper to be printed and shipped offsite every single day. How many forests per day are consumed internationally? Now, switch that to hydroelectrically powered mining datacentres. Net win? I suspect so.
danbruc 11y ago
Banks don't require pseudonymity. If you remove pseudonymity from the list of requirements you no longer need mining, you can just run any consensus protocol to agree on and cryptographically link pieces of information.
- scott_karana 11y ago
  That's a great point. Whoever these R3 people are, I'm sure they'll rake in some good cash irrespective of whatever benefits are provided... ;)
- natrius 11y ago
  Sure, but if you're reaching consensus on a cryptographic chain of transactions, that's exactly what a blockchain is. Mining is not an integral feature.
  - danbruc 11y ago
    Mining is the core feature that allows Bitcoin to work without knowing all the parties. Reaching consensus and cryptographically protecting information is not a very hard problem if you know the parties.
    - natrius 11y ago
      These banks clearly disagree with you. It's not cryptographic protection of data. It's the cryptographic audit trail that's useful. No one can break the rules of the system except for validators, and everyone instantly knows when a validator breaks the rules so they can stop trusting them.
      - danbruc 11y ago
        I meant integrity protection, i.e. ensuring that no one can unilaterally modify the information afterwards. Hash chains and trees are at least 35 years old.
        11y ago
lorddoig 11y ago
Banks working together is a scary idea. This was the notion atop which the recently disbanded Payments Council (UK) was based - an organisation that failed to deprecate BACS/CHAPS, had to be told to implement Faster Payments, came up with the 'innovative' pay-by-mobile-number scheme, and replaced swipe & sign card payments with a JavaCard that knows it's own 4-digit PIN. Feast your eyes, ladies and gents. What you are witnessing is the formation of a cartel.
- Kalium 11y ago
  How would you prefer technical standards be established?
  - lorddoig 11y ago
    It's not just technical though. BACS/CHAPS (payment systems that take days to move money and cost about £30 a go) would never die while banks had control of common technical standards. They're absurd. These standards mandate that each network hop include a holding delay measured in tens of hours. From light speed to days and why? Because it's a cash cow they'd be insane to mess with.
  - NeutronBoy 11y ago
    Bike-shedding on mailing lists has produced some... interesting protocol decisions in the past.
  - deleted 11y ago
    [deleted]
- wut42 11y ago
  Banks are already working together in a lot of fields. Before it's IPO, Mastercard was owned by 25k+ banks; Visa is still owned by 21k+ banks; SWIFT, the network behind transactions, is owned by banks too. That's just three examples I know but i'm sure you can find a lot of them.
  - weavie 11y ago
powera 11y ago
I think this is great. For Bitcoin to really be a useful currency, it needs 1) full faith and credit of something; 2) mostly not proof-of-work; 3) sub-chains. Right now it is what I might call an "ur-currency". Paying for everything with the equivalent of a wheelbarrow of pennies. Right now Bitcoin only has the backing of Bitcoin enthusiasts, which is a terrible way to start a currency. No sane person would invest their money in something that could become worthless if people decide that instead of Dogecoin, they want Kittycoin. Until there is some way beyond "it's Bitcoin" to know that Bitcoin will stay valuable (and "9 banks say it will have value" IS a bona fide reason here), I don't think it will ever have mass appeal. Also, right now any actual economic value Bitcoin creates will be burned by mining CPUs. I think it's obvious that the steady state is that Bitcoin miners make zero economic profit, and all the transaction fees and blockchain rewards are simply turned into electricity bills (and thus, more indirectly, turned into needlessly lighting coal on fire). Finally, from a more technical point of view, all this talk about "the size of the blockchain" is absurd. There's no reason that there needs to be a limit on the transactions. But when every transaction needs to be in a single chain, that's the only way. If we have some smart way of doing sub-chains, this becomes less of a problem. (I know some altcoins use this now, but the popular concept of Bitcoin is of a single definitive chain).
godisdad 11y ago
Did they have any choice?
acd 11y ago
But with some engineering, do you need Banks at all? Can you do crypto currency loans and payments p2p without the intermediary?
- lukasm 11y ago
  Sadly, not right now. We need accountability, liability, network of trust, security to decentralize capital - full distribution is really hard. We need deregulation in the sector to build future banks to reduce "too big to fail" factor.
  - acd 11y ago
    Thanks for answering. Here is article on the network of global corporate control http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf
- maaku 11y ago
  > Can you do crypto currency loans and payments p2p without the intermediary? Absolutely yes. Classic Ripple was an attempt to do just this: https://classic.ripplepay.com/essay/ https://classic.ripplepay.com/essay/ Although sadly no decentrazlied implementation has been made yet, there is no reason why one couldn't be made.
PedroBatista 11y ago
World’s Biggest Banks Form [______] Partnership What could possibly go wrong?
joeyspn 11y ago
Barclays and UBS have been both recently giving the eye to Ethereum. My bet is that they are going to go for Ethereum, maybe with a fork a la IBM, and put it behind a firewall.
davidgerard 11y ago
So is this actually a blockchain in the Bitcoin sense, or just a cryptographically-verifiable ledger, e.g. something based on a Merkle tree? They're not running competitive proof-of-work or anything. Or is it "blockchain" only in the buzzword sense of the term?
therealmarv 11y ago
Is this really something all banks want? Well I don't want a blockchain for my private transactions where people can see what I pay for. I'm ok for it with larger interbanking transactions but not every company or bank wants to reveal every granular transaction. Or do I understand it wrong?
- petra 11y ago
  Its easy to aggregeate transactions in order to hide most of the detail.
- Johnie 11y ago
  This is useful for trading settlements between the banks. A lot of what investment banks (as opposed to commercial banks) do is trading OTC securities. BlockChain reduces the amount of paper work needed to manage these securities.
- kuschku 11y ago
  Banks don’t even process those large transactions directly – they just use the Giro system, meaning each bank tracks how much money they have in debt to every other bank, and every month, they actually send that money over. So these inter-bank transactions won’t actually contain stuff like personal transfers.
dnautics 11y ago
Part of the interesting thing about Bitcoin specifically is that the incentive to participate and contribute to verification is itself baked into the protocol. This also enables distributedness. Is there some idea of how this will work in a more limited setting? What incentive will Charlie's bank have to validate a transaction between Alice's bank and Bob's bank?
Havoc 11y ago
That could be interesting. Won't the blockchain get very large very fast on that scale though? (If I remember my BC theory right the chain remembers all past transactions, correct?). Also - I'm assuming they'll essentially start a new system independent of BC. How will the initial blocks be divided?
- woah 11y ago
  http://www.tik.ee.ethz.ch/file/716b955c130e6c703fac336ea17b1670/duplex-micropayment-channels.pdf http://www.tik.ee.ethz.ch/file/716b955c130e6c703fac336ea17b1...
maesho 11y ago
Very related. For those who don't know Szabo is as close to the anonymous founder of Bitcoin as it is possible to get. Nick Szabo: If banks want benefits of blockchains they must go permissionless https://uk.news.yahoo.com/nick-szabo-banks-want-benefits-085631141.html#Sgnss1N https://uk.news.yahoo.com/nick-szabo-banks-want-benefits-085... "So they keep trying to re-inject points of control, and thus points of vulnerability, into blockchains, e.g. through 'permissioning'; but this nullifies their main benefits, which come from removing points of vulnerability."
- joeyspn 11y ago
  It makes sense what Sa.... (cough) Szabo says in that article... If the big guys really want to build a true "Internet of Money/Assets" two basic things will be required: 1. A common standard 2. Global openness Surely they can build their own walled garden, but I think they're missing the point with this. With a walled garden you're just taking 1/100000 of the HUGE pie, improving current financial processes but not coming up with new radical innovations. A simple payment/monetisation standard embedded in objects (IoT) would be an example of a bigger piece of pie. IMO they should just push for an open standard and use private ledger contracts on top of Ethereum, but I doubt they'll go this way. Most likely they'll just fork and run with it.
  - woah 11y ago
    What's the iot reference for? How does putting Bitcoin implementations into random pieces of plastic (like a "smart cup") figure into your analysis at all?
    - joeyspn 11y ago
      If you've been following the crypto 2.0 space you'll know that a lot of ideas have popped up for IoT and embedded smart contracts. For instance, washing machines or fridges that detect that are running low on X and automatically place an order for delivery. IBM and Samsung have been exploring this kind of IoT applications with Ethereum's blockchain [0]. A private blockchain (like the one the banking industry presumably would deploy) can do 1 of 1000000 possible applications for the technology, but a global and open blockchain could channel all under the same protocol (something like TCP/IP), maximising interoperation among player in several industries. I'm just trying to reflect that these 9 big guys could be making a short-termed shortsightedness mistake trying to protect their business placing a fence. As Szabo said, it's the moment to be more open. [0] https://www.youtube.com/watch?v=U1XOPIqyP7A https://www.youtube.com/watch?v=U1XOPIqyP7A
s_q_b 11y ago
Thus, with great fanfare, did they begin their own obsolescence...
malandrew 11y ago
I suspect that this could be an effort to do something like the Financial Services Roundtable. 1) Form an organization 2) get dinosaur market peers to join 3) establish a standard 4) collude on how things get done 5) lobby for regulation around how things get done 6) make it impossible for new entrants to disrupt the new system with technology and alternative business models. 7) profit.
gadders 11y ago
The CTO of R3 CEV is the same guy that wrote the article mentioned previously on HN here: https://news.ycombinator.com/item?id=9351277 https://news.ycombinator.com/item?id=9351277 Seems like they have the right people on board.
rgawdzik 11y ago
https://twitter.com/pmarca/status/641807034292260864 https://twitter.com/pmarca/status/641807034292260864

460 points by uptown 11y ago

Doesn't some of the blockchains security come from having a large number of players maintaining the chain? Isn't there a vulnerability that depends on someone taking over a large enough percentage of the infrastructure? Wouldn't having a handful of entities doing the majority of the transactions allow them to commit fraud, or alter the ledger?

gleenn 11y ago
If they do end up using something like Ethereum, the network would be the same network that everyone uses, so the number of users would hopefully be much larger than, i.e. the 5 banks listed or whatever.
this_user 11y ago
If only trustworthy entities are part of the network, this isn't much of a problem. No large financial institution will launch an attack against their own network.
- csomar 11y ago
  Maybe the attack will be external then? (Thieves, Hackers, Foreign govs...)
- dogecoinbase 11y ago
  No large financial institution will launch an attack against their own network. Hayes's LIBOR rigging scheme would seem to indicate otherwise.
  - icebraining 11y ago
    I think there's a difference between rigging numbers and launching an attack on the network. All that it would happen is that the other peers would detect the increase on hashing power and shut down the nodes. The problem with a public blockchain is that you don't know who is hashing. On a private network, you can tell each node to only hash at a certain rate, and monitor the total rate to detect cheats.
- aianus 11y ago
  > If only trustworthy entities are part of the network Then you don't need a blockchain at all, just use a centralized ledger.
  - eru 11y ago
    Or even decentralized.
- elektromekatron 11y ago
  They will if they think they can make money from doing so.
Obi_Juan_Kenobi 11y ago
This is basically the path you go down when you start to consider 'non-bitcoin' blockchains. Sure, you can do it, but if you want security, you go where the hashing power is. Network effect = one blockchain to rule them all Well, at least you'll have to connect in with the 'one blockchain'. Sidechains would be a great way to address this. It's important to remember how early days Bitcoin is, and cryptography and blockchains in general. They're still well within a research phase; it's hard to say what sort of solution they'll come up with.
- kang 11y ago
  I was talking to one of the bitcoin core devs and his opinion was that purely in terms of power consumed, litecoin could be more secure than bitcoin. Bitcoin certainly has the network effect in terms of usage going for it.
- icebraining 11y ago
  Maximizing hashing power is only needed in a public blockchain. If the pool is closed, you can force each node to provide a fixed power, and monitor the total power. If it increases over nodes*power-per-node, all nodes shut down automatically.
  - natrius 11y ago
    No hashpower is required. If you have a fixed pool of validators, just rotate through the validators to pick who creates the next block.
    - woah 11y ago
      At that point, why do you need blocks? Couldn't each transaction just be signed by a certain percentage of validators?
- maaku 11y ago
  Bitcoin's security is not due to hash power alone, it is due to the decentralization of that hash power.

samstave 11y ago

While I am actually ignorant on the mechanics and architecture of blockchain, for the most part... I'm wary of anything a conglomerate of banks are doing... Just look at the LIBOR debacle as one datapoint. I have zero trust in big banks colluding on things that have the potential to affect finances for centuries to come. Change my view? Edit: anyone who down voted me hasn't been paying attention to the financial history of banks. Just because YC is tied to finance as an investment POV - you'd be deluded to think that banks aren't corrupt to the core. Do I really need to provide you with evidence, how about look at the last fifteen years for simplicity. Then look into BCCI which I doubt many HNers are even aware of... HSBC? Wachovia? Jesus, do any of you know how fucking corrupt banks are??

Kalium 11y ago
The article leaves me with the impression that this is more like a standards body than anything else. Who would you prefer to have designing and selecting standards for exchanging financial information?
- hellbanner 11y ago
  After reading http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393338827 http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393..., I'm not sure anyone is competent for that..
- samstave 11y ago
  That's not quite what I mean... Sure, banks ideally should do such things... I'm just saying given they centuries long track records... I still don't trust any of them. "Secure" to banks means, only secure enough for them... I just believe that the future (think 25 years, minimum) is that every single activity of every single person will be tracked in detail to a level which we can't even understand now. Wait until all your activity is then predicted and compared to actual to refine the tracking. And banks will be doing HFT based on the actual and projected minute-by-minute actions of billions of people... What if a stock will fluctuate based on lunch time buying surges and after work happy hour, and birthday ties to kids having a birthday on Saturday and their social networks socioeconomic propensity to buy stuff for them last minute at stores r us?

dmihal 11y ago

Although the article doesn't really specify, it sounds like these banks plan on making their own blockchain instead of using the Bitcoin blockchain. I'm curious to see how the blockchain will preform without the Bitcoin network backing it.

toomim 11y ago
The article DOES specify that they don't know: > Rutter said the initial focus would be to agree on an underlying architecture, but it had not yet been decided whether that would be underpinned by bitcoin’s blockchain or another one, such as one being built by Ethereum, which offers more features than the original bitcoin technology. If you're curious, look at Ethereum. It's a blockchain without the Bitcoin network backing it.
- giancarlostoro 11y ago
  Wouldn't the other bitcoin forks be examples? I wouldn't imagine they're part of the exact same network?
  - Obi_Juan_Kenobi 11y ago
    Ethereum is a good example because it's proof of stake vs. proof of work. Other proof of work blockchains (e.g. Litecoin and Dogecoin) are very similar to Bitcoin. Proof of stake makes a lot of sense for these organizations if they want to run their own blockchain.
    - tromp 11y ago
      It's definitely proof of work (ethash), although the plan is to transition to proof of stake in the future. Their most recent blog entry on this: https://blog.ethereum.org/2015/08/01/introducing-casper-friendly-ghost/ https://blog.ethereum.org/2015/08/01/introducing-casper-frie...
Animats 11y ago
From the article: “I think that these technologies will probably be post-trade,” he said. “I think savings are in the settlement side, in post-trade, in issuance, but not in exchange trading or OTC trading any time in the near future.” He added that R3 will soon announce a few more banks joining the project." That makes sense. This replaces the need for a single trusted clearinghouse with a redundant, shared ledger. Confirmation occurs when a majority of the banks have put a new transaction into a block. Because the parties are not anonymous and new ones can only be added by mutual agreement, it's like a "proof of stake" system. There's no need for "mining". Bitcoin has done a good job of validating a blockchain system as being secure against attack. No one has broken it yet. None of this, of course, does anything for Bitcoin as a currency/investment.

roymurdock 11y ago

Rutter said the initial focus would be to agree on an underlying architecture, but it had not yet been decided whether that would be underpinned by bitcoin’s blockchain or another one, such as one being built by Ethereum, which offers more features than the original bitcoin technology. Once that has been agreed on, Rutter said, the first use of the technology might be the issuance of commercial paper on the blockchain. Can anyone speculate on why they would begin to issue commercial paper?

murbard2 11y ago
Straightforward cash based product without too many complications. Stock split, merge, spin off, for instance.
aggronn 11y ago
Probably because they're very short term forms of debt, so if the system has issues it doesn't exist in for 10 years or however long the instrument lasts.

hellbanner 11y ago

Banks don't always act in citizen's best interest. Don't forget about the cartel money laundering: http://www.theguardian.com/commentisfree/2015/feb/15/hsbc-has-form-mexico-laundered-drug-money http://www.theguardian.com/commentisfree/2015/feb/15/hsbc-ha...

civilian 11y ago
The Drug War doesn't have a sound moral basis, so I'm okay that the banks were undermining western governments in the interest of free trade.
- chimeracoder 11y ago
  > so I'm okay that the banks were undermining western governments in the interest of free trade. I say this as someone who used to work in drug policy reform and strongly opposes the drug war: Providing money to cartels isn't exactly a noble proposition either. Banks that do that really do have blood on their hands. Between 2006-2012, over 100,000 people died incredibly gruesome deaths in Mexico alone since 2010 at the hands of these cartels[0]. I'm not going to defend the drug war, but I'm not going to defend banks that willingly funnel money to them either. And I'm not going to claim that providing money to cartels actually undermines the drug war, in any meaningful sense. The cartels are, ironically, the largest profiteers of the drug war, right alongside the LEOs and correctional facilities that enforce drug laws. Pumping money into the pockets of the drug cartels only further entrenches the current system; it does not provide pressure to dismantle it. There are plenty of great ways to work actively to end the drug war. Funding drug cartels (or enabling their business operations) is not one of them. [0] The number of deaths in Mexico have dropped slightly since then, but only because the violence has moved further south in Central America
  - aianus 11y ago
    > Pumping money into the pockets of the drug cartels only further entrenches the current system; it does not provide pressure to dismantle it. I would disagree with this sentiment. There is plenty of pressure in Mexico to decriminalize/legalize drugs as a result of cartel violence.

giancarlostoro 11y ago

As long as they start their own blockchain I think it would be interesting. Otherwise it's a bit of a hassle to use the current blockchain, I would use the same codebase and not start from scratch though since the code's been tried and tested, and as they said you can send messages through bitcoin as well already.

colordrops 11y ago
Could you expound a bit on why you think it makes more sense to use their own blockchain?
- darkr 11y ago
  Means they can run a closed pool on a secure network - reduces/eliminates (depending on implementation) risk of forking due to Chinese ASIC farms etc. My understanding is that the first usage of blockchain would just be an inter-bank shared ledger.
  - colordrops 11y ago
    So what's the incentivization scheme for banks to run their own mining operations? And is there any real threat of a fork?
samstave 11y ago
Being ignorant of blockchain per se... What is best resource to grok it?
- aianus 11y ago
  Khan Academy has a whole series on it: https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/bitcoin https://www.khanacademy.org/economics-finance-domain/core-fi...
fluidcruft 11y ago
Maybe they would go for being cooperatively-mined with bitcoin (like namecoin etc). Otherwise they need a different proof of work. It's pretty dangerous to be an SHA2-alt and not be incorporated into bitcoin's hashing power.

civilian 11y ago

Here's the press release (pdf): http://static1.squarespace.com/static/55f73743e4b051cfcc0b02cf/t/55f8119ce4b0550fcc16d156/1442320796627/PRESS+RELEASE+Global+banks+form+partnership+with+R3+-+FINAL.pdf http://static1.squarespace.com/static/55f73743e4b051cfcc0b02... This sounds exciting. My gut reaction was that the banks aren't going to use it for actually transferring money, but as a way to notarize transactions that will be acknowledged by the whole group. It does sound like a cool way to verify everything going on among a network of players. And there's a lot of weird hate towards bank on HN. I know they're not great, but it's really not helping the conversation to just say things like "woooo banks are scary!" //edit: A key quote from the press release: > The group will collaborate on research, experimentation, design, and engineering to help advance state-of-the-art enterprise-scale shared ledger solutions to meet banking requirements for security, reliability, performance, scalability, and audit. It's a shared ledger system! So, really no need to have it be bitcoin. It does make sense. It'll be great to see the confused looks on lawyer's faces when they try to lobby to change the blockchain history.

gleenn 11y ago
The irony about the hate is that having a decentralized way to do things like this is actually going to help unseat some of the banks' powers.
- Animats 11y ago
  No, what this does is reduce the need for clearinghouse entities, such as Depository Trust Company, National Securities Clearing Corporation, the Fixed Income Clearing Corporation, and The Options Clearing Corporation. There's a back-end bookkeeping system in finance which tracks who owns what. That's where blockchain technology applies. Banks can't do this themselves, because there's a mutual mistrust problem. So there are all those clearinghouse companies, which maintain the databases.
  - civilian 11y ago
    This is a great observation, I didn't realize that clearinghouses were a thing. John, have you thought about what other backend bookkeeping systems could benefit from using blockchains?

vessenes 11y ago

One very interesting difficulty for these guys is going to be deciding on mining, weighing costs and benefits and threat models.. Ethereum's current mining rates look like they would take a few thousand GPUs to fork the chain. Bitcoin's costs would be in the $hundred million+ range for a secret attack. Edit: Most alt-mining proposals for enterprises do away with any ability to cost out mining attack vectors at all with some sort of trusted server, keys, etc.

im3w1l 11y ago

Mining is only needed to prevent sybil attacks, so could be dispensed with if they code it from scratch.

4684499 11y ago

I guess this basically made fsociety's approach meaningless ;-)

otisfunkmeyer 11y ago
and right when we were finally awake...

yid 11y ago

Interesting. Another way to read this is that trust between banks has deteriorated to the point where they feel that they need a blockchain -- a decentralized shared ledger -- to verify certain transactions with each other. Because otherwise a nice centralized, shared ledger is much easier to build, analyze, maintain, and secure.

cbhl 11y ago
Banks don't operate on trust -- they operate on checks and balances and intermediaries. For example, when you spend your money using a Visa or MasterCard, the payment processor (intermediary between your bank and the merchant's bank) takes a cut for helping remove the need for trust from the transaction.
- RockyMcNuts 11y ago
  More to the point, they act on the basis of contracts enforced by state authority.
- throwaway1967 11y ago
  > Banks don't operate on trust Can you spell LIBOR? Banks do operate on trust, which is what allowed the LIBOR conspiracy to take place. Unless you can list here the "checks and balances and intermediaries" that failed during all that fake setting of LIBOR rates.
  - wickes 11y ago
    LIBOR doesn't demonstrate that banks rely on trust. None of the involved banks or brokers trusted that anyone else was actually being honest about LIBOR submissions or predictions. Even if there were any system safeguarding LIBOR whatsoever, a blockchain wouldn't have helped. The reason it was so easy to falsify your bank's LIBOR submission was because they were essentially made up. Submitters produced the number by talking to brokers and then making a decision. A blockchain wouldn't have made any difference. You'd put your submission on the blockchain, and you wouldn't be able to change it later if things didn't turn out how you liked, but you had made up the submission anyway. Nobody would ever be able to point to some number on the blockchain and say definitively that your reported LIBOR figure for today should have been X but in fact it was Y and therefore you're a crook, because the figures were never verified. They'd only be able to say "There's no record, so you could easily have just made up the number," and you'd say "I did make it up, that's how you do it, everyone else made theirs up too," and that would pretty much be it. The only way to catch someone being dishonest was to find records of employees talking about it; the Hayes case and others like it are based on the fact that bankers incriminated themselves by discussing the manipulation with each other. By contrast, when banks transfer specific quantities of money, they absolutely are not relying on a trust-based system. I owed you X, I sent you X, and I swear to God if you come to me later and say I only sent Y and I owe you more dosh there will be a fight. If you produce internal records kept by your accountants that say I totally only sent Y, no bank would take your word for it under any circumstances. Similarly, if there was a mixup and some of my assets ended up with you by accident, my chances of convincing you that I should get them back are nonexistent if I don't have some outside system demonstrating that I'm not lying. In real life, financial institutions rely on third-party businesses to be that "outside system." A blockchain would help solve our problem without those businesses. I wouldn't need to trust you, the transaction would be recorded on our blockchain, and if either of us thought the other could falsify the blockchain we wouldn't have agreed to use it. If the blockchain says I really didn't send enough money, I'll probably say something about a technical glitch and give you the cash while I grumble about how much I hate technology. Neither of us have to trust each other any more than we already don't, and we don't have to involve some kind of trust or clearing business.

gtrubetskoy 11y ago

I read this as "we, the banks, want our own blockchain which we control and you should trust". Only you shouldn't trust it because the whole idea of a blockchain is that it cannot be influenced/controlled.

Afforess 11y ago
No. It is unlikely private citizens will even have access to mine on the banking blockchain. Banks are looking at using it for intra-banking ledgers and commercial transactions. Longer term, it may replace the outdated ACH clearing house.
roymurdock 11y ago
It's not about trust...it's about efficiency. In any blockchain network, users implicitly trust the developers of the software. If you use Bitcoin, you trust that Gavin Andresen & the core developers are making changes to the client software in the best interest of the network. If you disagree with any implemented changes (say they decide to increase the hard limit) then you can either refuse to update your client or move to another currency. Refusing to update only works if you have enough other users to stay on the same client version as you. In this case, assuming each bank has equal representation on designing/maintaining the blockchain, the developers are the users, so there is no need for implicit trust. It'll just make it easier to do transfers between banks without a 3rd party.

misterbishop 11y ago

This could make it a lot easier to implement/audit a Tobin Tax. I like it.

sam_lowry_ 11y ago

Think of the carbon footprint these banks will have if they invest into mining.

scott_karana 11y ago
Think of their current carbon footprint, which requires reams of paper to be printed and shipped offsite every single day. How many forests per day are consumed internationally? Now, switch that to hydroelectrically powered mining datacentres. Net win? I suspect so.

danbruc 11y ago

Banks don't require pseudonymity. If you remove pseudonymity from the list of requirements you no longer need mining, you can just run any consensus protocol to agree on and cryptographically link pieces of information.

scott_karana 11y ago
That's a great point. Whoever these R3 people are, I'm sure they'll rake in some good cash irrespective of whatever benefits are provided... ;)
natrius 11y ago
Sure, but if you're reaching consensus on a cryptographic chain of transactions, that's exactly what a blockchain is. Mining is not an integral feature.
- danbruc 11y ago
  Mining is the core feature that allows Bitcoin to work without knowing all the parties. Reaching consensus and cryptographically protecting information is not a very hard problem if you know the parties.
  - natrius 11y ago
    These banks clearly disagree with you. It's not cryptographic protection of data. It's the cryptographic audit trail that's useful. No one can break the rules of the system except for validators, and everyone instantly knows when a validator breaks the rules so they can stop trusting them.
    - danbruc 11y ago
      I meant integrity protection, i.e. ensuring that no one can unilaterally modify the information afterwards. Hash chains and trees are at least 35 years old.
      - 11y ago

lorddoig 11y ago

Banks working together is a scary idea. This was the notion atop which the recently disbanded Payments Council (UK) was based - an organisation that failed to deprecate BACS/CHAPS, had to be told to implement Faster Payments, came up with the 'innovative' pay-by-mobile-number scheme, and replaced swipe & sign card payments with a JavaCard that knows it's own 4-digit PIN. Feast your eyes, ladies and gents. What you are witnessing is the formation of a cartel.

Kalium 11y ago
How would you prefer technical standards be established?
- lorddoig 11y ago
  It's not just technical though. BACS/CHAPS (payment systems that take days to move money and cost about £30 a go) would never die while banks had control of common technical standards. They're absurd. These standards mandate that each network hop include a holding delay measured in tens of hours. From light speed to days and why? Because it's a cash cow they'd be insane to mess with.
- NeutronBoy 11y ago
  Bike-shedding on mailing lists has produced some... interesting protocol decisions in the past.
- deleted 11y ago
  [deleted]
wut42 11y ago
Banks are already working together in a lot of fields. Before it's IPO, Mastercard was owned by 25k+ banks; Visa is still owned by 21k+ banks; SWIFT, the network behind transactions, is owned by banks too. That's just three examples I know but i'm sure you can find a lot of them.
- weavie 11y ago

powera 11y ago

I think this is great. For Bitcoin to really be a useful currency, it needs 1) full faith and credit of something; 2) mostly not proof-of-work; 3) sub-chains. Right now it is what I might call an "ur-currency". Paying for everything with the equivalent of a wheelbarrow of pennies. Right now Bitcoin only has the backing of Bitcoin enthusiasts, which is a terrible way to start a currency. No sane person would invest their money in something that could become worthless if people decide that instead of Dogecoin, they want Kittycoin. Until there is some way beyond "it's Bitcoin" to know that Bitcoin will stay valuable (and "9 banks say it will have value" IS a bona fide reason here), I don't think it will ever have mass appeal. Also, right now any actual economic value Bitcoin creates will be burned by mining CPUs. I think it's obvious that the steady state is that Bitcoin miners make zero economic profit, and all the transaction fees and blockchain rewards are simply turned into electricity bills (and thus, more indirectly, turned into needlessly lighting coal on fire). Finally, from a more technical point of view, all this talk about "the size of the blockchain" is absurd. There's no reason that there needs to be a limit on the transactions. But when every transaction needs to be in a single chain, that's the only way. If we have some smart way of doing sub-chains, this becomes less of a problem. (I know some altcoins use this now, but the popular concept of Bitcoin is of a single definitive chain).

godisdad 11y ago

Did they have any choice?

acd 11y ago

But with some engineering, do you need Banks at all? Can you do crypto currency loans and payments p2p without the intermediary?

lukasm 11y ago
Sadly, not right now. We need accountability, liability, network of trust, security to decentralize capital - full distribution is really hard. We need deregulation in the sector to build future banks to reduce "too big to fail" factor.
- acd 11y ago
  Thanks for answering. Here is article on the network of global corporate control http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf
maaku 11y ago
> Can you do crypto currency loans and payments p2p without the intermediary? Absolutely yes. Classic Ripple was an attempt to do just this: https://classic.ripplepay.com/essay/ https://classic.ripplepay.com/essay/ Although sadly no decentrazlied implementation has been made yet, there is no reason why one couldn't be made.

PedroBatista 11y ago

World’s Biggest Banks Form [______] Partnership What could possibly go wrong?

joeyspn 11y ago

Barclays and UBS have been both recently giving the eye to Ethereum. My bet is that they are going to go for Ethereum, maybe with a fork a la IBM, and put it behind a firewall.

davidgerard 11y ago

So is this actually a blockchain in the Bitcoin sense, or just a cryptographically-verifiable ledger, e.g. something based on a Merkle tree? They're not running competitive proof-of-work or anything. Or is it "blockchain" only in the buzzword sense of the term?

therealmarv 11y ago

Is this really something all banks want? Well I don't want a blockchain for my private transactions where people can see what I pay for. I'm ok for it with larger interbanking transactions but not every company or bank wants to reveal every granular transaction. Or do I understand it wrong?

petra 11y ago
Its easy to aggregeate transactions in order to hide most of the detail.
Johnie 11y ago
This is useful for trading settlements between the banks. A lot of what investment banks (as opposed to commercial banks) do is trading OTC securities. BlockChain reduces the amount of paper work needed to manage these securities.
kuschku 11y ago
Banks don’t even process those large transactions directly – they just use the Giro system, meaning each bank tracks how much money they have in debt to every other bank, and every month, they actually send that money over. So these inter-bank transactions won’t actually contain stuff like personal transfers.

dnautics 11y ago

Part of the interesting thing about Bitcoin specifically is that the incentive to participate and contribute to verification is itself baked into the protocol. This also enables distributedness. Is there some idea of how this will work in a more limited setting? What incentive will Charlie's bank have to validate a transaction between Alice's bank and Bob's bank?

Havoc 11y ago

That could be interesting. Won't the blockchain get very large very fast on that scale though? (If I remember my BC theory right the chain remembers all past transactions, correct?). Also - I'm assuming they'll essentially start a new system independent of BC. How will the initial blocks be divided?

woah 11y ago
http://www.tik.ee.ethz.ch/file/716b955c130e6c703fac336ea17b1670/duplex-micropayment-channels.pdf http://www.tik.ee.ethz.ch/file/716b955c130e6c703fac336ea17b1...

maesho 11y ago

Very related. For those who don't know Szabo is as close to the anonymous founder of Bitcoin as it is possible to get. Nick Szabo: If banks want benefits of blockchains they must go permissionless https://uk.news.yahoo.com/nick-szabo-banks-want-benefits-085631141.html#Sgnss1N https://uk.news.yahoo.com/nick-szabo-banks-want-benefits-085... "So they keep trying to re-inject points of control, and thus points of vulnerability, into blockchains, e.g. through 'permissioning'; but this nullifies their main benefits, which come from removing points of vulnerability."

joeyspn 11y ago
It makes sense what Sa.... (cough) Szabo says in that article... If the big guys really want to build a true "Internet of Money/Assets" two basic things will be required: 1. A common standard 2. Global openness Surely they can build their own walled garden, but I think they're missing the point with this. With a walled garden you're just taking 1/100000 of the HUGE pie, improving current financial processes but not coming up with new radical innovations. A simple payment/monetisation standard embedded in objects (IoT) would be an example of a bigger piece of pie. IMO they should just push for an open standard and use private ledger contracts on top of Ethereum, but I doubt they'll go this way. Most likely they'll just fork and run with it.
- woah 11y ago
  What's the iot reference for? How does putting Bitcoin implementations into random pieces of plastic (like a "smart cup") figure into your analysis at all?
  - joeyspn 11y ago
    If you've been following the crypto 2.0 space you'll know that a lot of ideas have popped up for IoT and embedded smart contracts. For instance, washing machines or fridges that detect that are running low on X and automatically place an order for delivery. IBM and Samsung have been exploring this kind of IoT applications with Ethereum's blockchain [0]. A private blockchain (like the one the banking industry presumably would deploy) can do 1 of 1000000 possible applications for the technology, but a global and open blockchain could channel all under the same protocol (something like TCP/IP), maximising interoperation among player in several industries. I'm just trying to reflect that these 9 big guys could be making a short-termed shortsightedness mistake trying to protect their business placing a fence. As Szabo said, it's the moment to be more open. [0] https://www.youtube.com/watch?v=U1XOPIqyP7A https://www.youtube.com/watch?v=U1XOPIqyP7A

s_q_b 11y ago

Thus, with great fanfare, did they begin their own obsolescence...

malandrew 11y ago

I suspect that this could be an effort to do something like the Financial Services Roundtable. 1) Form an organization 2) get dinosaur market peers to join 3) establish a standard 4) collude on how things get done 5) lobby for regulation around how things get done 6) make it impossible for new entrants to disrupt the new system with technology and alternative business models. 7) profit.

gadders 11y ago

The CTO of R3 CEV is the same guy that wrote the article mentioned previously on HN here: https://news.ycombinator.com/item?id=9351277 https://news.ycombinator.com/item?id=9351277 Seems like they have the right people on board.

rgawdzik 11y ago

https://twitter.com/pmarca/status/641807034292260864 https://twitter.com/pmarca/status/641807034292260864