7 ms·

Blockchain technology could reduce role of banks, says BIS

53 points by rakkhi 11y ago

HiLo 11y ago
OK, so, it actually says: "Basel-based BIS's Committee on Payments and Market Infrastructure (CPMI), made up of central bankers from across the world, said it could challenge banks' role - but if the technology became widespread it was unclear who would then provide credit and savings facilities." Emphasis: "but if the technology became widespread it was unclear who would then provide credit and savings facilities." Having worked at a bank, they're interested because it could reduce the large role of simply making sure everybody's shit lines up at the end of the day between counterparties. This isn't the disruption you're dreaming of... It's not changing how capital and resources are directed and allocated throughout the economy... it's changing how those decisions get confirmed across systems. It then goes on to say it could theoretically challenge the need for a central bank, as it's decentralized... this makes a huge, implicit assumption that a rule-based interest rate decision is desirable, which, I don't know, until we can have an actual way of knowing the natural interest rate and hand off analyzing the economy to algorithms, it may be best to leaving that to people who spend their lives devoted to that.
- eternalban 11y ago
  > ... as it's decentralized ... Is it? Compute resources are not free and that protocol has an inherent bias towards centralizing.
  - HiLo 11y ago
    I mean I actually agree with you, that was just what the article was suggesting.
    - eternalban 11y ago
      Well, the article is from Reuters and they are in the entertainment business, not the facts business.
- dogma1138 11y ago
  +1 Yep a closed blockchain could provide almost instant clearinghouse functionality while ensuring that the funds are both available and were delivered. Strip that on top of existing banking infrastructure like swiftnet and you get a very lucrative system for banks which reduces quite a bit of risk on pretty much every domain involved in most transactions.
  - brighton36 11y ago
    There are absolutely no efficiencies to private blockchains. Are you proposing that banks will run miners merely for the purpose of passing signed messages to one another?
    - jhallenworld 11y ago
      There is no need to run miners. They can use the "Practical Byzantine Fault Tolerance" consensus algorithm. http://forum.hyperledger.com/t/hyperledger-vs-bitcoin/20 http://forum.hyperledger.com/t/hyperledger-vs-bitcoin/20
      - brighton36 11y ago
        See my note to the other commenter. Hyperledger does not sell blockchains, they sell decades old replicated databases
        eadz 11y ago
        There is so much blockchain hype at the moment, and this is my thought too. There only rational I can come up with is Bitcoin was the kick in the pants banks needed to realise they can go from 30 year old technology to 10 year old technology. What Bitcoin solved was decentralized trust. I don't see any banks replacing their existing 'trust' network with code, they'll want to reverse transactions and mistakes, and will also want a veto over any distributed ledger.
        natrius 11y ago
bascule 11y ago
The Bitcoin blockchain, as implemented today: - Takes over 10 minutes to come to consensus - Cannot handle the transaction volume of a reasonably large retail company - Loses accepted transactions!!! (blockchain forks, orphan blocks, etc) From a distributed database perspective the Bitcoin blockchain is broken and loses data: like a decentralized MongoDB, but slower by several orders of magnitude. Articles like this are largely uninformed non-technical people responding to hype. They don't know what a replicated log is, let alone a Merkle tree. There are many interesting distributed ledger technologies, like Stellar SCP, Hyperledger, and Tendermint. The Bitcoin blockchain is ill-suited for this purpose.
- maaku 11y ago
  These banks aren't talking about _Bitcoin_ block chain.
  - bascule 11y ago
    Perhaps you'd like to define what a blockchain means outside the context of Bitcoin? Is SCP a Blockchain? Is Hyperledger? Is Tendermint? Is every database that uses a replicated log a blockchain? Are Certificate Transparency logs blockchains? Do Merkle trees count as blockchains? It's a meaningless term that was never used or defined in the Bitcoin paper.
    - lsseckman 11y ago
      What about, and this is an attempt: "A Merkle tree of transactions signed using an elliptic curve digital signature and validated using a consensus algorithm"
      - brighton36 11y ago
        You need truth to be objective in order to be a blockchain. There's no mention of pow in that definition. If every single node in the Bitcoin network went down but one, and 99% of the network were "lying" then we'd still know the "truth". That is what a blockchain does. These voting databases are silly decades old technology
austenallred 11y ago
In other news, email could reduce the role of the post office
dools 11y ago
As a side note: can we please stop using cryptocurrency and start using cryptocommodity? Bitcoin et. al. are not currency.
- knocte 11y ago
  Or rather crypto-network-for-value-transfer, which is more correct and doesn't include law-jargon on it.
- Retra 11y ago
  I can't find any interpretation of the word 'currency' that would prevent it from applying to bitcoin. As far as I can tell, it's a "commodity money" kind of currency.
  - dools 11y ago
    Currencies have their value nominally defined by a sovereign power. Some currencies in the past used precious metals in coinage, but that didn't determine it's value. Value of currency can be changed according to policy. As such gold has never been a currency, but has been a commodity used in some coinage. The discussion is "nominalism" versus "metalism". Nominalism wins by a country mile! Gold backed currencys, similarly to currencys who tie their value to a different currency (such as pegging exchange rates) only serve to reduce the capacity of the issuing body to pursue domestic policy in the interests of the populous. In that sense, a commodity can be a store of value that's not a currency, and can be used as material to represent currency, but cannot be a currency.
    - Retra 11y ago
      Where are you reading that currencies require sovereign powers?
      - dools 11y ago
        Taxation (or any other liability imposed on a population by a sovereign) is what drives the value of money. This is a good macroeconomic and historical overview http://m.youtube.com/?#/watch?v=0zEbo8PIPSc http://m.youtube.com/?#/watch?v=0zEbo8PIPSc also check out A Primer on Modern Money by Randall Wray and anything by Bill Mitchell (including his blog).
Animats 11y ago
This really has little to do with Bitcoin. A distributed ledger maintained by mutually mistrustful parties is useful for some back-end problems. The Bank for International Settlements, MERS, and Depository Trust Corporation are all candidates for replacement, because they're all just neutral parties that run clearing houses. What we've learned from Bitcoin is that blockchain technology is robust enough to strongly resist attacks. If it were profitably breakable, it would have been broken by now. That it hasn't been is quite impressive. As a settlement system, it doesn't require "mining" - just enough mutually mistrustful players that no one can tamper with logged transactions.
- dustingetz 11y ago
  My understanding is that bitcoin has been broken for quite some time as there have been multiple 51% events from mining pools, it's just more profitable (for now) for these parties to keep the status quo
  - nmj 11y ago
    Your understanding is incorrect.
- inoop 11y ago
  > What we've learned from Bitcoin is that blockchain technology is robust enough to strongly resist attacks. Bitcoin is highly vulnerable to spam attacks (as demonstrated several times), malleability, and has forked twice so far, with a double-spend demonstrated during one of them. Sure Bitcoin's crypto hasn't been broken, but how is that impressive? Bitcoin did not innovate there in any way. It's not like Satoshi invented Merkle trees (otherwise I'm sure they'd be called Satoshi trees:)

53 points by rakkhi 11y ago

HiLo 11y ago

OK, so, it actually says: "Basel-based BIS's Committee on Payments and Market Infrastructure (CPMI), made up of central bankers from across the world, said it could challenge banks' role - but if the technology became widespread it was unclear who would then provide credit and savings facilities." Emphasis: "but if the technology became widespread it was unclear who would then provide credit and savings facilities." Having worked at a bank, they're interested because it could reduce the large role of simply making sure everybody's shit lines up at the end of the day between counterparties. This isn't the disruption you're dreaming of... It's not changing how capital and resources are directed and allocated throughout the economy... it's changing how those decisions get confirmed across systems. It then goes on to say it could theoretically challenge the need for a central bank, as it's decentralized... this makes a huge, implicit assumption that a rule-based interest rate decision is desirable, which, I don't know, until we can have an actual way of knowing the natural interest rate and hand off analyzing the economy to algorithms, it may be best to leaving that to people who spend their lives devoted to that.

eternalban 11y ago
> ... as it's decentralized ... Is it? Compute resources are not free and that protocol has an inherent bias towards centralizing.
- HiLo 11y ago
  I mean I actually agree with you, that was just what the article was suggesting.
  - eternalban 11y ago
    Well, the article is from Reuters and they are in the entertainment business, not the facts business.
dogma1138 11y ago
+1 Yep a closed blockchain could provide almost instant clearinghouse functionality while ensuring that the funds are both available and were delivered. Strip that on top of existing banking infrastructure like swiftnet and you get a very lucrative system for banks which reduces quite a bit of risk on pretty much every domain involved in most transactions.
- brighton36 11y ago
  There are absolutely no efficiencies to private blockchains. Are you proposing that banks will run miners merely for the purpose of passing signed messages to one another?
  - jhallenworld 11y ago
    There is no need to run miners. They can use the "Practical Byzantine Fault Tolerance" consensus algorithm. http://forum.hyperledger.com/t/hyperledger-vs-bitcoin/20 http://forum.hyperledger.com/t/hyperledger-vs-bitcoin/20
    - brighton36 11y ago
      See my note to the other commenter. Hyperledger does not sell blockchains, they sell decades old replicated databases
      - eadz 11y ago
        There is so much blockchain hype at the moment, and this is my thought too. There only rational I can come up with is Bitcoin was the kick in the pants banks needed to realise they can go from 30 year old technology to 10 year old technology. What Bitcoin solved was decentralized trust. I don't see any banks replacing their existing 'trust' network with code, they'll want to reverse transactions and mistakes, and will also want a veto over any distributed ledger.
        natrius 11y ago

bascule 11y ago

The Bitcoin blockchain, as implemented today: - Takes over 10 minutes to come to consensus - Cannot handle the transaction volume of a reasonably large retail company - Loses accepted transactions!!! (blockchain forks, orphan blocks, etc) From a distributed database perspective the Bitcoin blockchain is broken and loses data: like a decentralized MongoDB, but slower by several orders of magnitude. Articles like this are largely uninformed non-technical people responding to hype. They don't know what a replicated log is, let alone a Merkle tree. There are many interesting distributed ledger technologies, like Stellar SCP, Hyperledger, and Tendermint. The Bitcoin blockchain is ill-suited for this purpose.

maaku 11y ago
These banks aren't talking about _Bitcoin_ block chain.
- bascule 11y ago
  Perhaps you'd like to define what a blockchain means outside the context of Bitcoin? Is SCP a Blockchain? Is Hyperledger? Is Tendermint? Is every database that uses a replicated log a blockchain? Are Certificate Transparency logs blockchains? Do Merkle trees count as blockchains? It's a meaningless term that was never used or defined in the Bitcoin paper.
  - lsseckman 11y ago
    What about, and this is an attempt: "A Merkle tree of transactions signed using an elliptic curve digital signature and validated using a consensus algorithm"
    - brighton36 11y ago
      You need truth to be objective in order to be a blockchain. There's no mention of pow in that definition. If every single node in the Bitcoin network went down but one, and 99% of the network were "lying" then we'd still know the "truth". That is what a blockchain does. These voting databases are silly decades old technology

austenallred 11y ago

In other news, email could reduce the role of the post office

dools 11y ago

As a side note: can we please stop using cryptocurrency and start using cryptocommodity? Bitcoin et. al. are not currency.

knocte 11y ago
Or rather crypto-network-for-value-transfer, which is more correct and doesn't include law-jargon on it.
Retra 11y ago
I can't find any interpretation of the word 'currency' that would prevent it from applying to bitcoin. As far as I can tell, it's a "commodity money" kind of currency.
- dools 11y ago
  Currencies have their value nominally defined by a sovereign power. Some currencies in the past used precious metals in coinage, but that didn't determine it's value. Value of currency can be changed according to policy. As such gold has never been a currency, but has been a commodity used in some coinage. The discussion is "nominalism" versus "metalism". Nominalism wins by a country mile! Gold backed currencys, similarly to currencys who tie their value to a different currency (such as pegging exchange rates) only serve to reduce the capacity of the issuing body to pursue domestic policy in the interests of the populous. In that sense, a commodity can be a store of value that's not a currency, and can be used as material to represent currency, but cannot be a currency.
  - Retra 11y ago
    Where are you reading that currencies require sovereign powers?
    - dools 11y ago
      Taxation (or any other liability imposed on a population by a sovereign) is what drives the value of money. This is a good macroeconomic and historical overview http://m.youtube.com/?#/watch?v=0zEbo8PIPSc http://m.youtube.com/?#/watch?v=0zEbo8PIPSc also check out A Primer on Modern Money by Randall Wray and anything by Bill Mitchell (including his blog).

Animats 11y ago

This really has little to do with Bitcoin. A distributed ledger maintained by mutually mistrustful parties is useful for some back-end problems. The Bank for International Settlements, MERS, and Depository Trust Corporation are all candidates for replacement, because they're all just neutral parties that run clearing houses. What we've learned from Bitcoin is that blockchain technology is robust enough to strongly resist attacks. If it were profitably breakable, it would have been broken by now. That it hasn't been is quite impressive. As a settlement system, it doesn't require "mining" - just enough mutually mistrustful players that no one can tamper with logged transactions.

dustingetz 11y ago
My understanding is that bitcoin has been broken for quite some time as there have been multiple 51% events from mining pools, it's just more profitable (for now) for these parties to keep the status quo
- nmj 11y ago
  Your understanding is incorrect.
inoop 11y ago
> What we've learned from Bitcoin is that blockchain technology is robust enough to strongly resist attacks. Bitcoin is highly vulnerable to spam attacks (as demonstrated several times), malleability, and has forked twice so far, with a double-spend demonstrated during one of them. Sure Bitcoin's crypto hasn't been broken, but how is that impressive? Bitcoin did not innovate there in any way. It's not like Satoshi invented Merkle trees (otherwise I'm sure they'd be called Satoshi trees:)