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I find it's helpful to mentally replace "blockchain-based" with "experimental database" when reading these press releases (which is all this story is, really).

by Lazare 11y ago

I find it's helpful to mentally replace "blockchain-based" with "experimental database" when reading these press releases (which is all this story is, really). The first question I have is always "Oh? And why was your old database not working? And why do you think this one will work better?" Not a question answered by this article (and for good reason; of all the many issues currently facing bond trading, it's hard to see how a decentralised ledger solves any of them).

dragontamer 11y ago
Depends on the details. Consider a Credit Default Swap: where you promise to pay the interest on a Bond in the case said Bond defaults. Currently, humans enforce this promise. If a bond defaults, some human notices (probably by telephone) and then they run to the bank and start writing checks. But what if you wrote an Etherium contract to automatically enforce the agreement? And then the trust in the Etherium blockchain to enforce the contract allows you to tie real money transactions to the whole process? Look ma, no more humans!
- brighton36 11y ago
  How will the value be transferred, via Fedwire and ACH? If so - there's no efficiency here.
- wocram 11y ago
  How would a contract enforce payment without holding the maximum value of the contract in escrow?
- Lazare 11y ago
  Actual CDSs are quite a bit more complicated than that. They pay out in the case of very specifically defined credit events, and it's not uncommonly a difficult question to decide whether a credit event has occurred. The current system requires 80% of the ISDA's Credit Derivatives Determinations Committees to vote that an event has occurred. You see to think a purely mechanical system would be better, but it's not obvious to me why this would be so. It would certainly be different. > Look ma, no more humans! Yes, but why is that good? Is the role of humans in the CDS process a problem? Why? A CDS is a contract between two parties; do you believe more automation in the process would benefit the seller, the buyer, both, or society at large? And how? The main advantage of the blockchain would seem to be its distributed nature and it's ability to not need any central trusted authority. But in the cases of CDSs, we have a central trusted authority in the form of the ISDA. Again, we come back to the issue of needing to begin by defining the problem we're trying to solve, and then demonstrate how a blockchain could solve it. What problem with the existing system are you trying to solve?

by Lazare 11y ago

dragontamer 11y ago

Depends on the details. Consider a Credit Default Swap: where you promise to pay the interest on a Bond in the case said Bond defaults. Currently, humans enforce this promise. If a bond defaults, some human notices (probably by telephone) and then they run to the bank and start writing checks. But what if you wrote an Etherium contract to automatically enforce the agreement? And then the trust in the Etherium blockchain to enforce the contract allows you to tie real money transactions to the whole process? Look ma, no more humans!

brighton36 11y ago
How will the value be transferred, via Fedwire and ACH? If so - there's no efficiency here.
wocram 11y ago
How would a contract enforce payment without holding the maximum value of the contract in escrow?
Lazare 11y ago
Actual CDSs are quite a bit more complicated than that. They pay out in the case of very specifically defined credit events, and it's not uncommonly a difficult question to decide whether a credit event has occurred. The current system requires 80% of the ISDA's Credit Derivatives Determinations Committees to vote that an event has occurred. You see to think a purely mechanical system would be better, but it's not obvious to me why this would be so. It would certainly be different. > Look ma, no more humans! Yes, but why is that good? Is the role of humans in the CDS process a problem? Why? A CDS is a contract between two parties; do you believe more automation in the process would benefit the seller, the buyer, both, or society at large? And how? The main advantage of the blockchain would seem to be its distributed nature and it's ability to not need any central trusted authority. But in the cases of CDSs, we have a central trusted authority in the form of the ISDA. Again, we come back to the issue of needing to begin by defining the problem we're trying to solve, and then demonstrate how a blockchain could solve it. What problem with the existing system are you trying to solve?