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In a private blockchain setup there really is no need for incentives - the parties participating in the blockchain are covering the expenses. Financial institu

In a private blockchain setup there really is no need for incentives - the parties participating in the blockchain are covering the expenses. Financial institutions do "trust" each other to a higher extent than some random actors but they still maintain ledgers that are getting reconciled and in the vast majority of cases the funds aren't dispersed to their intended recipients until the reconciliation flow completes unless the sending counterparty maintains a balance in recipient's system. Blockchain implementations take this trust to a different level and as a nice side effect make reconciliation/dispute resolution a breeze compared to a standard setup.

Canada 10y ago
If you know this from experience working on actual reconciliation systems, could you elaborate on why this is the case? Why is bothering with a blockchain so much better than SWIFT for example? That's a system that has third parties logging transactions so it's not like banks can just say "oh no we didn't"
- ChemicalWarfare 10y ago
  SWIFT is essentially a messaging system, the funds still have to clear elsewhere. Blockchain solutions (ripple being the biggest crypto for interbank funds exchange atm) combine these 2 systems basically. With so many moving parts involved with proprietary not immediately visible logging mechanisms - the banks play it safe especially when it comes to international transactions spanning multiple jurisdictions etc.
  - nadaviv 10y ago
    As long as the blockchain-based currency doesn't have a legal tender status, won't banks have to clear elsewhere anyway? The way I see it, unless the central bank joins the party and declares records on the blockchain as the final word over ownership and that the blockchain currency must be accepted as legal tender, the blockchain records are just that - historical records to keep track of who-owes-who-what, with settlement happening elsewhere and enforced via contracts, lawyers and court. The point being, blockchain makes sense for bearer assets like Bitcoin, where owning the key is owning the asset and there are no other external processes that can effect ownership (moving around trucks with cash, court disputes, etc). What banks really need, in my opinion, is simply a cryptographically-signed append-only log where they record debt among each other. No global consensus, shared state or blockchain is needed here - just a private log for each pair of banks that transact with each other, kept locally for the interested parties only, and which can be used in court if either party misbehaves and does not settle the payment.
    - Canada 10y ago
      I never get an answer to this basic question. There seems to be all this money thrown into the (not bitcoin) blockchain, but nobody is ever willing to explain in detail why that is.
  - Canada 10y ago
    Yes I keep hearing this, but can you tell me why? What are the moving parts now, and how exactly will a blockchain make them go away, given that any blockchain a bank would use won't directly represent the assets the bank claims to have? How can it ever be different from an authenticated messaging system? I'd be very interested to read a detailed, technical explanation.
    - ChemicalWarfare 10y ago
      Check out Ripple docs. That's just one angle of looking at the situation (using a non-100%-privately-controlled-system) but it should clarify a few basic things.
      - Canada 10y ago
        I've looked at the Ripple site. Can you explain why a blockchain is such a big deal over traditional consensus algorithms?
        ChemicalWarfare 10y ago
        Not sure what " traditional consensus algorithms" you're referring to. Using a trusted 3rd party entity to keep everyone honest?
rlpb 10y ago
> Blockchain implementations take this trust to a different level And what properties of the genius of the Bitcoin blockchain are you using for a "private blockchain setup" that git didn't already provide?
- ChemicalWarfare 10y ago
  one word - consensus. also, I'm not specifically talking about a "bitcoin blockchain" but I suppose that's beside the point at this level of argumentation :)

Canada 10y ago

If you know this from experience working on actual reconciliation systems, could you elaborate on why this is the case? Why is bothering with a blockchain so much better than SWIFT for example? That's a system that has third parties logging transactions so it's not like banks can just say "oh no we didn't"

ChemicalWarfare 10y ago
SWIFT is essentially a messaging system, the funds still have to clear elsewhere. Blockchain solutions (ripple being the biggest crypto for interbank funds exchange atm) combine these 2 systems basically. With so many moving parts involved with proprietary not immediately visible logging mechanisms - the banks play it safe especially when it comes to international transactions spanning multiple jurisdictions etc.
- nadaviv 10y ago
  As long as the blockchain-based currency doesn't have a legal tender status, won't banks have to clear elsewhere anyway? The way I see it, unless the central bank joins the party and declares records on the blockchain as the final word over ownership and that the blockchain currency must be accepted as legal tender, the blockchain records are just that - historical records to keep track of who-owes-who-what, with settlement happening elsewhere and enforced via contracts, lawyers and court. The point being, blockchain makes sense for bearer assets like Bitcoin, where owning the key is owning the asset and there are no other external processes that can effect ownership (moving around trucks with cash, court disputes, etc). What banks really need, in my opinion, is simply a cryptographically-signed append-only log where they record debt among each other. No global consensus, shared state or blockchain is needed here - just a private log for each pair of banks that transact with each other, kept locally for the interested parties only, and which can be used in court if either party misbehaves and does not settle the payment.
  - Canada 10y ago
    I never get an answer to this basic question. There seems to be all this money thrown into the (not bitcoin) blockchain, but nobody is ever willing to explain in detail why that is.
- Canada 10y ago
  Yes I keep hearing this, but can you tell me why? What are the moving parts now, and how exactly will a blockchain make them go away, given that any blockchain a bank would use won't directly represent the assets the bank claims to have? How can it ever be different from an authenticated messaging system? I'd be very interested to read a detailed, technical explanation.
  - ChemicalWarfare 10y ago
    Check out Ripple docs. That's just one angle of looking at the situation (using a non-100%-privately-controlled-system) but it should clarify a few basic things.
    - Canada 10y ago
      I've looked at the Ripple site. Can you explain why a blockchain is such a big deal over traditional consensus algorithms?
      - ChemicalWarfare 10y ago
        Not sure what " traditional consensus algorithms" you're referring to. Using a trusted 3rd party entity to keep everyone honest?

rlpb 10y ago

> Blockchain implementations take this trust to a different level And what properties of the genius of the Bitcoin blockchain are you using for a "private blockchain setup" that git didn't already provide?

ChemicalWarfare 10y ago
one word - consensus. also, I'm not specifically talking about a "bitcoin blockchain" but I suppose that's beside the point at this level of argumentation :)