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When two banks transfer money, there's no concrete thing being moved or transmitted. It pretty much just involves bank B telling bank A "You hereby have $100k o
by amarkov 9y ago
When two banks transfer money, there's no concrete thing being moved or transmitted. It pretty much just involves bank B telling bank A "You hereby have $100k of my cash". So A needs some kind of global ledger to keep track of how much cash B actually has, and double check whether it's already told C, D, E that they have all of it.
There's no reason in principle a blockchain is better at solving this problem than a trusted central bank. But if the existing central bank is moving slowly or has annoying policies, it's much easier to bootstrap a blockchain than bootstrap a new trusted authority.
- gaius 9y agoSo A needs some kind of global ledger to keep track of how much cash B actually has, and double check whether it's already told C, D, E that they have all of it. https://en.m.wikipedia.org/wiki/Nostro_and_vostro_accounts https://en.m.wikipedia.org/wiki/Nostro_and_vostro_accounts This is a long solved problem. No blockchains necessary. As an aside this is a problem I often see in fintech pitches...
- ucaetano 9y ago"When two banks transfer money, there's no concrete thing being moved or transmitted. It pretty much just involves bank B telling bank A "You hereby have $100k of my cash". So A needs some kind of global ledger to keep track of how much cash B actually has, and double check whether it's already told C, D, E that they have all of it." No, there's no global ledger, and it isn't required. There are checks and balances and regulations that allow money to work in a completely distributed way. Unlike cryptocurrencies that use a centralized ledger (all the 'major' ones, at least).