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I'm all for deflating blockchain hype, but I found the overall tone of the article pretty disagreeable, and more importantly, wholly missing the point. "In oth

by lhl 10y ago

I'm all for deflating blockchain hype, but I found the overall tone of the article pretty disagreeable, and more importantly, wholly missing the point. "In other words, the only thing previously stopping the standardization of reconciliation processes was the unwillingness of financial institutions to collaborate." No, actually, the one thing the blockchain provides, which was literally unsolved before pre-Nakamoto, was a working implementation of "trustless" consensus. Turns out fraud prevention is kind of a big deal shuffling around billions or trillions among numerous third parties, but I'm sure that's just because they're "security-conscious egoists."

Everhusk 10y ago
I think they are referring to post-bitcoin days, the quote was referenced from a paper released just last month. Resistance to new technology is definitely a thing at banks, I remember when I worked at one I mentioned blockchain one day and everyone looked at me like deer in the headlights.
deleted 10y ago
[deleted]
gbarc888 10y ago
The banks aren't using trustless consensus. They're using a third-party "uniqueness service" to prevent fraud.
- mtkd 10y ago
  I doubt this message will propagate further than technical forums - you're just going to have suck up the homogenization, pasteurization, retail branding and consumer promotion of a once great technology
  - lhl 10y ago
    Interesting, my original understanding was that they were using the blockchain for uniqueness for Corda, but it looks like it's optional: https://r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distributed-ledger-designed-for-financial-services https://r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distr... This somewhat makes sense since one of Corda's departures is that consensus and validation are limited in scope to the participants.
the_mitsuhiko 10y ago
> No, actually, the one thing the blockchain provides, which was literally unsolved before pre-Nakamoto, was a working implementation of "trustless" consensus. That's the part banks do not care about so I think it's largely irrelevant in the context of this article.
- lhl 10y ago
  I spoke at length w/ a friend working on mortgage-backed securities for GS a few years ago and dealing with third-party (and even intra-office) trust was specifically why he was looking into blockchains, but I'll admit to not being super familiar w/ R3's blockchain implementation. If anyone has a less diatribey and more technical resource they could link to that'd be great.
  - tigershark 10y ago
    It will never work in that use case. And I was hoping that the recent ethereum fork after the Dao debacle made it clear for everyone..
    - to3m 10y ago
      They will probably not be using the public Ethereum blockchain, so the fork won't be relevant.
- coderzach 10y ago
  > That's the part banks do not care about so I think it's largely irrelevant in the context of this article. I have no idea where you got that idea, but it's not true. Which is why any deal that happens between institutions (and sometimes intra-institution) has an army of middle men who are responsible for verifying, monitoring, reporting, etc etc.
  - brians 10y ago
    But you still need them in a Blockchain world, and still need to trust them.
ojosilva 10y ago
And things like Smart Contracts are relatively new (1994), even though the concepts had been laid out in the 1970s. Smart Contracts are part of what makes blockchain more versatile, enabling transaction ledgers that can support the level of overwhelming (and sometimes unnecessary) complexity BFSIs can produce. Unfortunately, even at this point, Smart Contracts probably still have many security challenges to overcome before banks can adopt it.
zby 10y ago
The trustlesness comes with a heavy price of Proof of Work with its wastefulness, complexity and vulnerability to various attacks. I can understand why financial institutions don't want that part.
- runeks 10y ago
  It shouldn't be necessary either. The proof-of-work is only necessary to avoid a central party wrt. which blockchain is the "right one". Financial institutions are working together with each other, they can easily just agree on which blockchain to follow. But without proof-of-work, the blockchain is just a database with atomic updates. I don't see why they would need a blockchain for that. Ripping Bitcoin in two gives you two fairly uninteresting things: 1) hash-cash and 2) a database full of public keys/signatures. Only combining the two gives you something interesting: negotiable/fungible hash cash (hash cash that can be transferred from person to person via a distributed database).
  - dgreensp 10y ago
    I think by "blockchain" they mean hashed blocks that include the hash of the previous block and can be synced; basically git.
    - TillE 10y ago
      That doesn't gain you much besides a definite order and a way to check integrity. Useful things to be sure, but nothing a traditional database can't do.
  - bendbro 10y ago
    I had this feeling when I was discussing it here. https://news.ycombinator.com/item?id=12044767 https://news.ycombinator.com/item?id=12044767
  - wpietri 10y ago
    > But without proof-of-work, the blockchain is just a database with atomic updates. I don't see why they would need a blockchain for that. I have been asking this question for a long time and not yet seen a satisfactory answer. At this point I'm sure that either I or a bunch of blockchain advocates are missing something important. Glad to know somebody else sees the problem too.

by lhl 10y ago

Everhusk 10y ago

I think they are referring to post-bitcoin days, the quote was referenced from a paper released just last month. Resistance to new technology is definitely a thing at banks, I remember when I worked at one I mentioned blockchain one day and everyone looked at me like deer in the headlights.

deleted 10y ago

[deleted]

gbarc888 10y ago

The banks aren't using trustless consensus. They're using a third-party "uniqueness service" to prevent fraud.

mtkd 10y ago
I doubt this message will propagate further than technical forums - you're just going to have suck up the homogenization, pasteurization, retail branding and consumer promotion of a once great technology
- lhl 10y ago
  Interesting, my original understanding was that they were using the blockchain for uniqueness for Corda, but it looks like it's optional: https://r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distributed-ledger-designed-for-financial-services https://r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distr... This somewhat makes sense since one of Corda's departures is that consensus and validation are limited in scope to the participants.

the_mitsuhiko 10y ago

> No, actually, the one thing the blockchain provides, which was literally unsolved before pre-Nakamoto, was a working implementation of "trustless" consensus. That's the part banks do not care about so I think it's largely irrelevant in the context of this article.

lhl 10y ago
I spoke at length w/ a friend working on mortgage-backed securities for GS a few years ago and dealing with third-party (and even intra-office) trust was specifically why he was looking into blockchains, but I'll admit to not being super familiar w/ R3's blockchain implementation. If anyone has a less diatribey and more technical resource they could link to that'd be great.
- tigershark 10y ago
  It will never work in that use case. And I was hoping that the recent ethereum fork after the Dao debacle made it clear for everyone..
  - to3m 10y ago
    They will probably not be using the public Ethereum blockchain, so the fork won't be relevant.
coderzach 10y ago
> That's the part banks do not care about so I think it's largely irrelevant in the context of this article. I have no idea where you got that idea, but it's not true. Which is why any deal that happens between institutions (and sometimes intra-institution) has an army of middle men who are responsible for verifying, monitoring, reporting, etc etc.
- brians 10y ago
  But you still need them in a Blockchain world, and still need to trust them.

ojosilva 10y ago

And things like Smart Contracts are relatively new (1994), even though the concepts had been laid out in the 1970s. Smart Contracts are part of what makes blockchain more versatile, enabling transaction ledgers that can support the level of overwhelming (and sometimes unnecessary) complexity BFSIs can produce. Unfortunately, even at this point, Smart Contracts probably still have many security challenges to overcome before banks can adopt it.

zby 10y ago

The trustlesness comes with a heavy price of Proof of Work with its wastefulness, complexity and vulnerability to various attacks. I can understand why financial institutions don't want that part.

runeks 10y ago
It shouldn't be necessary either. The proof-of-work is only necessary to avoid a central party wrt. which blockchain is the "right one". Financial institutions are working together with each other, they can easily just agree on which blockchain to follow. But without proof-of-work, the blockchain is just a database with atomic updates. I don't see why they would need a blockchain for that. Ripping Bitcoin in two gives you two fairly uninteresting things: 1) hash-cash and 2) a database full of public keys/signatures. Only combining the two gives you something interesting: negotiable/fungible hash cash (hash cash that can be transferred from person to person via a distributed database).
- dgreensp 10y ago
  I think by "blockchain" they mean hashed blocks that include the hash of the previous block and can be synced; basically git.
  - TillE 10y ago
    That doesn't gain you much besides a definite order and a way to check integrity. Useful things to be sure, but nothing a traditional database can't do.
- bendbro 10y ago
  I had this feeling when I was discussing it here. https://news.ycombinator.com/item?id=12044767 https://news.ycombinator.com/item?id=12044767
- wpietri 10y ago
  > But without proof-of-work, the blockchain is just a database with atomic updates. I don't see why they would need a blockchain for that. I have been asking this question for a long time and not yet seen a satisfactory answer. At this point I'm sure that either I or a bunch of blockchain advocates are missing something important. Glad to know somebody else sees the problem too.