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It takes us back because of pre-funding trades. I dont know what the author means...

ksdale 7y ago
I believe it's referring to the idea that because settlement of transactions happens instantly on blockchain, there is no lag time between a commitment to make a trade, and the trade itself, which means there is no credit, which means much less liquidity in markets. I read this whitepaper: http://perspectives.dtcc.com/articles/steampunk-settlement http://perspectives.dtcc.com/articles/steampunk-settlement In it, they mention that there only needs to be deposited cash of something like $8 billion to enable like $250 billion (I may be getting the exact numbers wrong) worth of trades on the NYSE because they can offset trades against each other as they come in and settle the trades hours after they are entered without needing cash at the moment the trade is placed. If cash was required at the moment of placing the order, much, much more cash would be required than is currently required.
- whatshisface 7y ago
  >which means there is no credit Why not just have explicit credit instead of implicit credit?
  - ksdale 7y ago
    I'm not really a finance guy, but just off the top of my head, explicit credit requires trust, which mostly defeats the purpose of the blockchain, where you're trying to transact without needing trust. I also assume that explicit credit is more expensive administratively than the kind of liquidity provided by a clearinghouse. I guess technically the NYSE (or whoever the clearinghouse for the NYSE is) is extending traders credit in the sense that it must believe they are good for the trades they make without requiring them to post full collateral for every trade, so in a way, it is explicit, it's just not bilateral between each pair of traders. But also, I'm in way over my head here.
    - dfox 7y ago
      Once you start to do transactions that involve transfer of anything off-blockchain (ie. any really useful transaction) you still have the same issues with trust and credit as without blockchain or whatever. What blockchain solves is somewhat fast settlement of monetary-ish transfers, which to me looks like a problem that does not really exist. (In my exerience SEPA transfers are mostly instantenuous and generally irreversible)
- sedeki 7y ago
  I believe smart contracts could solve this. (I am not endorsing Ethereum.)

I believe it's referring to the idea that because settlement of transactions happens instantly on blockchain, there is no lag time between a commitment to make a trade, and the trade itself, which means there is no credit, which means much less liquidity in markets. I read this whitepaper: http://perspectives.dtcc.com/articles/steampunk-settlement http://perspectives.dtcc.com/articles/steampunk-settlement In it, they mention that there only needs to be deposited cash of something like $8 billion to enable like $250 billion (I may be getting the exact numbers wrong) worth of trades on the NYSE because they can offset trades against each other as they come in and settle the trades hours after they are entered without needing cash at the moment the trade is placed. If cash was required at the moment of placing the order, much, much more cash would be required than is currently required.

whatshisface 7y ago
>which means there is no credit Why not just have explicit credit instead of implicit credit?
- ksdale 7y ago
  I'm not really a finance guy, but just off the top of my head, explicit credit requires trust, which mostly defeats the purpose of the blockchain, where you're trying to transact without needing trust. I also assume that explicit credit is more expensive administratively than the kind of liquidity provided by a clearinghouse. I guess technically the NYSE (or whoever the clearinghouse for the NYSE is) is extending traders credit in the sense that it must believe they are good for the trades they make without requiring them to post full collateral for every trade, so in a way, it is explicit, it's just not bilateral between each pair of traders. But also, I'm in way over my head here.
  - dfox 7y ago
    Once you start to do transactions that involve transfer of anything off-blockchain (ie. any really useful transaction) you still have the same issues with trust and credit as without blockchain or whatever. What blockchain solves is somewhat fast settlement of monetary-ish transfers, which to me looks like a problem that does not really exist. (In my exerience SEPA transfers are mostly instantenuous and generally irreversible)
sedeki 7y ago
I believe smart contracts could solve this. (I am not endorsing Ethereum.)