14 ms·

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 bui

by 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.
    - ethanbond 10y ago
      Well as banks switch over to this we can certainly expect to see our transaction and transfer fees fall...
      - monocasa 10y ago
        Hahahahahahaha
      - pzone 10y ago
        Transfers may become faster too.
- deleted 10y ago
  [deleted]
- ChemicalWarfare 10y ago
  Yes, there's no 100% trust of course, but the banks, merchants and general population trust other banks more than they would trust some random entities or bitcoin exchanges for example. There are of course reasons for that, the major ones being the shared (and regulated) clearing system you're referring to (which I'm assuming this "bitcoin alternative" is aiming to replace) and then there's the fact that these are accredited financial institutions with reasonable controls in place to keep them honest. In a hypothetical scenario where credit card authorization succeeds (meaning that the issuing bank is guaranteeing the funds to the merchant), merchant ships the goods but the funds don't make it to their account on the merchant bank side because the issuing bank "misrepresented the position" - if the issuing bank gets caught doing this they'll be in all sorts of trouble.
  - pzone 10y ago
    It's not that just about having an inherent distrust of one another. When they do have a dispute, it is necessary to have very good documentation to bring to court. Legally doing a mediocre job with keeping records is barely better than not keeping records at all. So they end up spending a lot to mind their p's and q's, even though they do have a good amount of trust. With a blockchain it becomes cheap to add a layer of ex-post verifiable mutual agreement between mostly-trusted parties.
    - ChemicalWarfare 10y ago
      I'm all for a blockchain (or ripple or whatever) type solution replacing today's antiquated setup. My point however is that I highly doubt that it's the trust issues between financial institutions that is the primary driving force behind this implementation.
icebraining 10y ago
I don't think so, otherwise you wouldn't have a central (and State-run) clearing house like today. The blockchain, as a signed distributed database, is still useful. What you can do away is with the whole mining thing, since unlike in the semi-anonymous world of Bitcoin, if a bank were to start double-spending, it would easily be identified by the other banks and the authorities.
- patrickk 10y ago
  > What you can do away is with the whole mining thing You could have a "proof of stake" algorithm to power this proposed private blockchain, with the four originating banks (for example) given 25% "mining" power. The stakes could be readjusted when new banks come in, or existing ones leave. What makes Bitcoin and other currencies expensive to run is that they run on "proof of work" algorithms, which are far more energy intensive, requiring huge amounts of electricity and specialised hardware. With proof of stake, you just need to show that you own a certain stake in the overall network, which is not energy expensive and quite feasible on a private blockchain.
joeyspn 10y ago
> inherently trust each other Not really... I posted this before here on HN: https://media.licdn.com/mpr/mpr/shrinknp_800_800/AAEAAQAAAAAAAAQTAAAAJGRmZjY1MWU2LWI5NTQtNGY1Ny04YWY5LWFlZmU4YzM2MTcyNQ.png https://media.licdn.com/mpr/mpr/shrinknp_800_800/AAEAAQAAAAA...
ed_blackburn 10y ago
I would suggest that the libor scandal implies that trust is not long implicit amongst all parties regarding inter-bank transfers.
CaptainZapp 10y ago
A big part of the recent financial crisis was the fact that after Lehman went bust the money market, which is extremely critical for overnight or very short term financing between banks and multinational companies, essentially froze up completely. There was a real risk that solvent, multinationals (think Pfizer, or Nestle) would actually go bust because of liquidity issues, which could not be covered for a very short term. The main reason was that banks didn't trust each other at all and interbank lending, without collateral, essentially went into a coma.

by andr 10y ago

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.
  - ethanbond 10y ago
    Well as banks switch over to this we can certainly expect to see our transaction and transfer fees fall...
    - monocasa 10y ago
      Hahahahahahaha
    - pzone 10y ago
      Transfers may become faster too.
deleted 10y ago
[deleted]
ChemicalWarfare 10y ago
Yes, there's no 100% trust of course, but the banks, merchants and general population trust other banks more than they would trust some random entities or bitcoin exchanges for example. There are of course reasons for that, the major ones being the shared (and regulated) clearing system you're referring to (which I'm assuming this "bitcoin alternative" is aiming to replace) and then there's the fact that these are accredited financial institutions with reasonable controls in place to keep them honest. In a hypothetical scenario where credit card authorization succeeds (meaning that the issuing bank is guaranteeing the funds to the merchant), merchant ships the goods but the funds don't make it to their account on the merchant bank side because the issuing bank "misrepresented the position" - if the issuing bank gets caught doing this they'll be in all sorts of trouble.
- pzone 10y ago
  It's not that just about having an inherent distrust of one another. When they do have a dispute, it is necessary to have very good documentation to bring to court. Legally doing a mediocre job with keeping records is barely better than not keeping records at all. So they end up spending a lot to mind their p's and q's, even though they do have a good amount of trust. With a blockchain it becomes cheap to add a layer of ex-post verifiable mutual agreement between mostly-trusted parties.
  - ChemicalWarfare 10y ago
    I'm all for a blockchain (or ripple or whatever) type solution replacing today's antiquated setup. My point however is that I highly doubt that it's the trust issues between financial institutions that is the primary driving force behind this implementation.

icebraining 10y ago

I don't think so, otherwise you wouldn't have a central (and State-run) clearing house like today. The blockchain, as a signed distributed database, is still useful. What you can do away is with the whole mining thing, since unlike in the semi-anonymous world of Bitcoin, if a bank were to start double-spending, it would easily be identified by the other banks and the authorities.

patrickk 10y ago
> What you can do away is with the whole mining thing You could have a "proof of stake" algorithm to power this proposed private blockchain, with the four originating banks (for example) given 25% "mining" power. The stakes could be readjusted when new banks come in, or existing ones leave. What makes Bitcoin and other currencies expensive to run is that they run on "proof of work" algorithms, which are far more energy intensive, requiring huge amounts of electricity and specialised hardware. With proof of stake, you just need to show that you own a certain stake in the overall network, which is not energy expensive and quite feasible on a private blockchain.

joeyspn 10y ago

> inherently trust each other Not really... I posted this before here on HN: https://media.licdn.com/mpr/mpr/shrinknp_800_800/AAEAAQAAAAAAAAQTAAAAJGRmZjY1MWU2LWI5NTQtNGY1Ny04YWY5LWFlZmU4YzM2MTcyNQ.png https://media.licdn.com/mpr/mpr/shrinknp_800_800/AAEAAQAAAAA...

ed_blackburn 10y ago

I would suggest that the libor scandal implies that trust is not long implicit amongst all parties regarding inter-bank transfers.

CaptainZapp 10y ago

A big part of the recent financial crisis was the fact that after Lehman went bust the money market, which is extremely critical for overnight or very short term financing between banks and multinational companies, essentially froze up completely. There was a real risk that solvent, multinationals (think Pfizer, or Nestle) would actually go bust because of liquidity issues, which could not be covered for a very short term. The main reason was that banks didn't trust each other at all and interbank lending, without collateral, essentially went into a coma.