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Four Big Banks to Create a New Digital Currency for Inter-Bank Transactions

97 points by minamisan 10y ago

throwaway1974 10y ago
Just don't call it "Ecoin" please, do not want to upset Evil corp
Retr0spectrum 10y ago
This isn't a Bitcoin alternative. It's just a blockchain based currency.
- lgas 10y ago
  Considering Bitcoin is a blockchain based currency, and this is a blockchain based currency that isn't Bitcoin, it sure seems like a Bitcoin alternative to me. Perhaps you can elaborate on why you feel otherwise.
  - Retr0spectrum 10y ago
    IMHO, the most important aspect of the bitcoin blockchain, is that it's a public ledger of all transactions, that anyone can use. If this is just between 4 banks (which was my impression from reading the article), then it misses the point of bitcoin, and isn't really an alternative.
  - kbody 10y ago
    Bitcoin's core mission is enabling people to do payments. It's "consumer"-targeted, cash alternative. USC looks like more of a settlement layer that could be used for more than just moving monetary amounts around. I think it will just end up being used as a more reliable contract agreement between banks, not that it won't be useful to them. It's pretty obvious that they need something like that, but in no way it's an alternative to Bitcoin.
steveraffner 10y ago
So a centralised decentralised coin ?
- pzone 10y ago
  A distributed ledger is only "decentralized" among the users of the ledger. We're talking about a consortium of banks making up both the developers and the users of this ledger. There is no mismatch in how "centralized" it is.
proyb2 10y ago
Acronis is the first customer to adopt blockchain.
- tobias3 10y ago
  They are using MD5 to hash the data: http://notarystorage.acronis.com/certificate/eebb9edc63a06c588dbeafbbff88a0709d99afc03cd1955cddfe38b475716553 http://notarystorage.acronis.com/certificate/eebb9edc63a06c5... Ouch.
rahimnathwani 10y ago
This article references a paywalled FT article: https://www.ft.com/content/1a962c16-6952-11e6-ae5b-a7cc5dd5a28c https://www.ft.com/content/1a962c16-6952-11e6-ae5b-a7cc5dd5a... From that FT article: "The coins, each convertible into different currencies". This suggests that they're using blockchain as a distributed ledger, and that the 'coins' are just fungible IOUs for existing government-backed fiat currencies. So, it's a Bitcoin alternative in the sense that it can move money quickly. But they're not creating a new currency. They're just creating new paperless non-interest-bearing bearer bonds.
- freeone3000 10y ago
  How does this differ from a currency?
  - rahimnathwani 10y ago
    Two things which make me see it as something other than a currency: 1) The 'coin' will not be the unit of account. The underlying currency (e.g. US$) will be the unit of account. 2) If the underlying currency (e.g. US$) ceased to exist, the 'coin' would have zero value. Consider how the above two points compare with: A) Bitcoin (which I say _is_ a currency) B) Zero-coupon government bonds (which I say are _not_ currency)
the_duke 10y ago
The title is a bit misleading. This new "USC" (utility settlement coin) is for inter-bank transactions only, not for the general public. It apparently is backed by a blockchain as a distributed ledger. Details are a bit sparse across the web, but apparently it is intended as a way for fast money transfer between and within central banks and regular banks. The coins act as a proxy for 'real' money issued by central banks.
- pzone 10y ago
  Yes, this is extremely misleading. If a few banks want to replace their current transaction settlements with a blockchain protocol tailored to their needs, that's great, I hope it works out for them. Worrying that this blockchain isn't "open" or "democratic" like Bitcoin is just silly. It's like worrying about the fact the NYSE hasn't open sourced its internal code.
  - dogma1138 10y ago
    Bitcoin isn't exactly "democratic" also, the size of the blockchain the the difficulty of the mining pretty much means that anyone who wants to get into the business would have to invest huge sums of capital to get into the game. The rest of us would have to use intermediate parties that would handle everything for us.
    - pzone 10y ago
      Right. I use my credit cards and simply trust Chase/Citi/etc to provide the services they've promised. I use a website to do Bitcoin transactions and simply trust they are not going to run away with my money. So there's even less of a justification to complain that this system is controlled only by powerful players.
    - repomies691 10y ago
      Hmm, currently the block size seems still manageable to me (80GB). Also you can turn on pruning so you need to store only the amount you want, and you can still use all the major use cases. You don't need to mine bitcoin to use it. It is still very cheap to use bitcoin still as an independent node. You can use those gateways to make your life a bit easier, but from cost perspective I think they are not needed.
andr 10y ago
Sounds more like a digital currency than a blockchain currency. When this is just between a few banks, which inherently trust each other, there's no need to build a sophisticated P2P blockchain for a job that can be done with a couple of SQL tables.
- pzone 10y ago
  Err.... no, banks definitely do not "inherently trust each other." Not when the incentive to misrepresent your position is so high. They use very expensive record keeping and clearinghouse arrangements (often involving quite a lot of physical paper) that in theory could be cheaper to do with a distributed ledger.
  - robzyb 10y ago
    > They use very expensive record keeping and clearinghouse arrangements (often involving quite a lot of physical paper) that in theory could be cheaper to do with a distributed ledger. Do you have some quantifiable facts or sources to back this up? If I'm going to repeat it I want to be certain of it.
    - pzone 10y ago
      Here is a report by Santander with a rough estimate of $15-20 billion in savings per year by switching from conventional records to distributed ledgers. Scroll to the end of the pdf. http://santanderinnoventures.com/fintech2/ http://santanderinnoventures.com/fintech2/
      - dogma1138 10y ago
        If blockchains can reduce the non-fractional funds that banks have to fully reserve and keep at other various banks to facilitate and settle transfers by even a few % the savings might be even higher, especially once you actually start getting ROI on that money that you can invest now. That's not even taking into account the ransom banks pay for correspondent / agency banking and for SWIFT and the likes. As well as the cost of liability of invalid/bad transfers, and banks oddly enough still "lose" money all the time, some of it is later recovered but virtually every time banks do account consolidation the books don't add up.
simonswords82 10y ago
If you can't beat them join them?
- pzone 10y ago
  Bitcoin isn't in direct competition with the financial industry in any meaningful way. It's basically just another currency like all the others in the world. The financial industry doesn't suffer from servicing new currencies. Bitcoin is more in competition to fiat money, since it is not issued by any government and is extremely hard to control or track. But even if it's not in competition,the ideas behind Bitcoin are very useful for making banking more efficient and cost effective.
dsr_ 10y ago
I'm reminded of the US currency situation prior to 1863, when any bank could print its own money and you needed to figure exchange rates on every transaction. The status of 'unlimited legal tender' which the USD enjoys today is a major factor in the growth of the US economy.
codingmyway 10y ago
Isn't this just a shared ledger to encourage more trust, with the other banks all keeping a copy so that if UBS say they settled with Santander but there's disagreement then they can ask the others to verify?
tjic 10y ago
The more things change, the more they stay the same. Back in 1994 I worked at startup created by a consortium of banks that was intended to deliver tools for intra-bank settlement, B2C, etc. https://en.wikipedia.org/wiki/Certco_(financial_services) https://en.wikipedia.org/wiki/Certco_(financial_services) It was plagued by being ahead of its time, having technology in search of a use case, having predatory and venal business folks (and I like most biz folks!), a high burn rate, development split across two locations (long before this was a solved problem), issues with corporate culture, dysfunctional technical management that saw testing as a problem to be routed around, etc. Hope this newest spin on the idea has better success. (It would be hard not to - Certco was a perfect storm. That said, some great people worked there, and after a certain point I was a dysfunctional employee with a bad attitude myself. )
- mywittyname 10y ago
  It's hard to envision how a new technology can change your business operations until you see how other businesses are using it.
eclipse31 10y ago
When I read the title originally, it reminded me of when Microsoft wanted MSN to replace the Internet, seemed like the exact same scenario.
zoenolan 10y ago
and just to point out we (clearmatics) are hiring https://clearmatics.workable.com/ https://clearmatics.workable.com/
cloudjacker 10y ago
If big banks re-released Tether, that would work decently well The proof of concept is already there.
20yrs_no_equity 10y ago
The devil is in the details. Banks have been talking about "permissioned blockchains" for awhile, and whether this is really a bitcoin alternative, or just using the blockchain as a jumpstart for interbank transaction software remains to be seen. (The article is very light on details.) If it is a bitcoin alternative then it will be distributed and tustless. Those are some of bitcoins key innovations. Being distributed means that no central authority can rewrite history by changing balances. Being trustless means that the system keeps accurate records even if participants are compromised (assuming less than %51 are compromised.) Banks are unlikely to want to give up that level of control and probably will make it centralized (eg: a few banks run the miners) and trusted (eg: only authorized transactions and probably they will put in a way to rewrite history.) Which means, if those assumptions are true, this isn't an alternative to bitcoin, but simply banks jumping on the blockchain hype to create a centralized system of fast settlement.
gjolund 10y ago
Bitcoin is dead and the blockchain has been coopted.

97 points by minamisan 10y ago

throwaway1974 10y ago

Just don't call it "Ecoin" please, do not want to upset Evil corp

Retr0spectrum 10y ago

This isn't a Bitcoin alternative. It's just a blockchain based currency.

lgas 10y ago
Considering Bitcoin is a blockchain based currency, and this is a blockchain based currency that isn't Bitcoin, it sure seems like a Bitcoin alternative to me. Perhaps you can elaborate on why you feel otherwise.
- Retr0spectrum 10y ago
  IMHO, the most important aspect of the bitcoin blockchain, is that it's a public ledger of all transactions, that anyone can use. If this is just between 4 banks (which was my impression from reading the article), then it misses the point of bitcoin, and isn't really an alternative.
- kbody 10y ago
  Bitcoin's core mission is enabling people to do payments. It's "consumer"-targeted, cash alternative. USC looks like more of a settlement layer that could be used for more than just moving monetary amounts around. I think it will just end up being used as a more reliable contract agreement between banks, not that it won't be useful to them. It's pretty obvious that they need something like that, but in no way it's an alternative to Bitcoin.

steveraffner 10y ago

So a centralised decentralised coin ?

pzone 10y ago
A distributed ledger is only "decentralized" among the users of the ledger. We're talking about a consortium of banks making up both the developers and the users of this ledger. There is no mismatch in how "centralized" it is.

proyb2 10y ago

Acronis is the first customer to adopt blockchain.

tobias3 10y ago
They are using MD5 to hash the data: http://notarystorage.acronis.com/certificate/eebb9edc63a06c588dbeafbbff88a0709d99afc03cd1955cddfe38b475716553 http://notarystorage.acronis.com/certificate/eebb9edc63a06c5... Ouch.

rahimnathwani 10y ago

This article references a paywalled FT article: https://www.ft.com/content/1a962c16-6952-11e6-ae5b-a7cc5dd5a28c https://www.ft.com/content/1a962c16-6952-11e6-ae5b-a7cc5dd5a... From that FT article: "The coins, each convertible into different currencies". This suggests that they're using blockchain as a distributed ledger, and that the 'coins' are just fungible IOUs for existing government-backed fiat currencies. So, it's a Bitcoin alternative in the sense that it can move money quickly. But they're not creating a new currency. They're just creating new paperless non-interest-bearing bearer bonds.

freeone3000 10y ago
How does this differ from a currency?
- rahimnathwani 10y ago
  Two things which make me see it as something other than a currency: 1) The 'coin' will not be the unit of account. The underlying currency (e.g. US$) will be the unit of account. 2) If the underlying currency (e.g. US$) ceased to exist, the 'coin' would have zero value. Consider how the above two points compare with: A) Bitcoin (which I say _is_ a currency) B) Zero-coupon government bonds (which I say are _not_ currency)

the_duke 10y ago

The title is a bit misleading. This new "USC" (utility settlement coin) is for inter-bank transactions only, not for the general public. It apparently is backed by a blockchain as a distributed ledger. Details are a bit sparse across the web, but apparently it is intended as a way for fast money transfer between and within central banks and regular banks. The coins act as a proxy for 'real' money issued by central banks.

pzone 10y ago
Yes, this is extremely misleading. If a few banks want to replace their current transaction settlements with a blockchain protocol tailored to their needs, that's great, I hope it works out for them. Worrying that this blockchain isn't "open" or "democratic" like Bitcoin is just silly. It's like worrying about the fact the NYSE hasn't open sourced its internal code.
- dogma1138 10y ago
  Bitcoin isn't exactly "democratic" also, the size of the blockchain the the difficulty of the mining pretty much means that anyone who wants to get into the business would have to invest huge sums of capital to get into the game. The rest of us would have to use intermediate parties that would handle everything for us.
  - pzone 10y ago
    Right. I use my credit cards and simply trust Chase/Citi/etc to provide the services they've promised. I use a website to do Bitcoin transactions and simply trust they are not going to run away with my money. So there's even less of a justification to complain that this system is controlled only by powerful players.
  - repomies691 10y ago
    Hmm, currently the block size seems still manageable to me (80GB). Also you can turn on pruning so you need to store only the amount you want, and you can still use all the major use cases. You don't need to mine bitcoin to use it. It is still very cheap to use bitcoin still as an independent node. You can use those gateways to make your life a bit easier, but from cost perspective I think they are not needed.

andr 10y ago

Sounds more like a digital currency than a blockchain currency. When this is just between a few banks, which inherently trust each other, there's no need to build a sophisticated P2P blockchain for a job that can be done with a couple of SQL tables.

pzone 10y ago
Err.... no, banks definitely do not "inherently trust each other." Not when the incentive to misrepresent your position is so high. They use very expensive record keeping and clearinghouse arrangements (often involving quite a lot of physical paper) that in theory could be cheaper to do with a distributed ledger.
- robzyb 10y ago
  > They use very expensive record keeping and clearinghouse arrangements (often involving quite a lot of physical paper) that in theory could be cheaper to do with a distributed ledger. Do you have some quantifiable facts or sources to back this up? If I'm going to repeat it I want to be certain of it.
  - pzone 10y ago
    Here is a report by Santander with a rough estimate of $15-20 billion in savings per year by switching from conventional records to distributed ledgers. Scroll to the end of the pdf. http://santanderinnoventures.com/fintech2/ http://santanderinnoventures.com/fintech2/
    - dogma1138 10y ago
      If blockchains can reduce the non-fractional funds that banks have to fully reserve and keep at other various banks to facilitate and settle transfers by even a few % the savings might be even higher, especially once you actually start getting ROI on that money that you can invest now. That's not even taking into account the ransom banks pay for correspondent / agency banking and for SWIFT and the likes. As well as the cost of liability of invalid/bad transfers, and banks oddly enough still "lose" money all the time, some of it is later recovered but virtually every time banks do account consolidation the books don't add up.

simonswords82 10y ago

If you can't beat them join them?

pzone 10y ago
Bitcoin isn't in direct competition with the financial industry in any meaningful way. It's basically just another currency like all the others in the world. The financial industry doesn't suffer from servicing new currencies. Bitcoin is more in competition to fiat money, since it is not issued by any government and is extremely hard to control or track. But even if it's not in competition,the ideas behind Bitcoin are very useful for making banking more efficient and cost effective.

dsr_ 10y ago

I'm reminded of the US currency situation prior to 1863, when any bank could print its own money and you needed to figure exchange rates on every transaction. The status of 'unlimited legal tender' which the USD enjoys today is a major factor in the growth of the US economy.

codingmyway 10y ago

Isn't this just a shared ledger to encourage more trust, with the other banks all keeping a copy so that if UBS say they settled with Santander but there's disagreement then they can ask the others to verify?

tjic 10y ago

The more things change, the more they stay the same. Back in 1994 I worked at startup created by a consortium of banks that was intended to deliver tools for intra-bank settlement, B2C, etc. https://en.wikipedia.org/wiki/Certco_(financial_services) https://en.wikipedia.org/wiki/Certco_(financial_services) It was plagued by being ahead of its time, having technology in search of a use case, having predatory and venal business folks (and I like most biz folks!), a high burn rate, development split across two locations (long before this was a solved problem), issues with corporate culture, dysfunctional technical management that saw testing as a problem to be routed around, etc. Hope this newest spin on the idea has better success. (It would be hard not to - Certco was a perfect storm. That said, some great people worked there, and after a certain point I was a dysfunctional employee with a bad attitude myself. )

mywittyname 10y ago
It's hard to envision how a new technology can change your business operations until you see how other businesses are using it.

eclipse31 10y ago

When I read the title originally, it reminded me of when Microsoft wanted MSN to replace the Internet, seemed like the exact same scenario.

zoenolan 10y ago

and just to point out we (clearmatics) are hiring https://clearmatics.workable.com/ https://clearmatics.workable.com/

cloudjacker 10y ago

If big banks re-released Tether, that would work decently well The proof of concept is already there.

20yrs_no_equity 10y ago

The devil is in the details. Banks have been talking about "permissioned blockchains" for awhile, and whether this is really a bitcoin alternative, or just using the blockchain as a jumpstart for interbank transaction software remains to be seen. (The article is very light on details.) If it is a bitcoin alternative then it will be distributed and tustless. Those are some of bitcoins key innovations. Being distributed means that no central authority can rewrite history by changing balances. Being trustless means that the system keeps accurate records even if participants are compromised (assuming less than %51 are compromised.) Banks are unlikely to want to give up that level of control and probably will make it centralized (eg: a few banks run the miners) and trusted (eg: only authorized transactions and probably they will put in a way to rewrite history.) Which means, if those assumptions are true, this isn't an alternative to bitcoin, but simply banks jumping on the blockchain hype to create a centralized system of fast settlement.

gjolund 10y ago

Bitcoin is dead and the blockchain has been coopted.