5 ms·

Side note: cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time.

JumpCrisscross 6y ago
> cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time If I sell my Bitcoin on Coinbase, I instantly get the funds in my checking account? Because that's what real-time settlement means. Blockchains dramatically simplify the clearing part of the equation. That simplification comes with costs, however.
- psychlops 6y ago
  Real-time settlement means that if you sell your bitcoin on coinbase, then the currency you bought (say Dollars) is yours to invest fully or withdraw into another account (say your checking account).
- vl 6y ago
  If you sell Bitcoin on Gemini for dollars, you can instantly wire dollars to your checking account at your bank. (Haven’t tried Coinbase, so can’t say).
psychlops 6y ago
Came here to say this. Crypto exchanges have led the way in real-time clearing and in 24 hour trading. Both of which are better for the consumer.
satellite2 6y ago
I'm going to simplify a bit, but there is a big difference in clearing crypto vs cash. Clearing crypto doesn't require debt because your broker directly sends the TX on chain. Doing the same with cash would require sending trucks of cash to their various clients banks throughout the day and would be prohibitely expensive. That's why clearing was invented. I.e. having the bigger banks lending to the smaller and allowing to delay the actual exchange. (And hopefully never having to actually move cash since balance fluctuations between banks tends to be cyclical)
- psychlops 6y ago
  Clearing crypto doesn't require debt because the broker is doing an internal transaction. If done on-chain, it will be an atomic transaction. Neither require clearing with another firm. Banks don't actually shuttle physical dollars back and forth as most transfer via SWIFT. The physical money banks need is only for teller withdrawals, ATMs or whatnot.
  - cameldrv 6y ago
    SWIFT doesn't handle settlement. Settlement usually happens through a series of correspondent banking relationships.
  - satellite2 6y ago
    Swift is only a communication protocol it doesn't solve the clearing problem. The clearing problem is really at its core about avoiding to move cash and how to transfer debt between two entities that don't know (and trust) each other, as far fetched as it sounds. When you transfer $1 to a friend of yours that is at another bank, your bank owes you one less dollar and your friend's bank owe him one more. But aginst what? The promise by your bank to pay it with a physical dollar (or some other better debt) in the future. But if you are with a small bank, your friend's bank might not trust it. So the they use a bigger bank that both trust that act as an intermediary and that lends for a very small rate as it is a 100% collateralized debt. This is the definition of clearing.
    - psychlops 6y ago
      Swift is a communication protocol to move digital cash. Once the wire goes through, the next bank has the cash and the last bank doesn't. That solves the clearing problem (for currencies). Yes, the process is sticky as every bank likes to hold the money as long as possible, but ownership is clear and fast. The clearing problem for OP is with stocks and deal with purchasing and selling from different owners using a regulatory intermediary (DTCC). Getting all those parts coordinated is more challenging.
rank0 6y ago
They also have insane fees and require partnerships with banks to do so. Visa and Mastercard make this possible for Coinbase. Its kind of funny these crypto exchanges are supposed to decentralize our finances but end up relying on the same centralized financial institutions that brokers also use. I can also perform trades and instantly have access to the money on my TDA account.

> cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time If I sell my Bitcoin on Coinbase, I instantly get the funds in my checking account? Because that's what real-time settlement means. Blockchains dramatically simplify the clearing part of the equation. That simplification comes with costs, however.

psychlops 6y ago
Real-time settlement means that if you sell your bitcoin on coinbase, then the currency you bought (say Dollars) is yours to invest fully or withdraw into another account (say your checking account).
vl 6y ago
If you sell Bitcoin on Gemini for dollars, you can instantly wire dollars to your checking account at your bank. (Haven’t tried Coinbase, so can’t say).

psychlops 6y ago

Came here to say this. Crypto exchanges have led the way in real-time clearing and in 24 hour trading. Both of which are better for the consumer.

satellite2 6y ago

I'm going to simplify a bit, but there is a big difference in clearing crypto vs cash. Clearing crypto doesn't require debt because your broker directly sends the TX on chain. Doing the same with cash would require sending trucks of cash to their various clients banks throughout the day and would be prohibitely expensive. That's why clearing was invented. I.e. having the bigger banks lending to the smaller and allowing to delay the actual exchange. (And hopefully never having to actually move cash since balance fluctuations between banks tends to be cyclical)

psychlops 6y ago
Clearing crypto doesn't require debt because the broker is doing an internal transaction. If done on-chain, it will be an atomic transaction. Neither require clearing with another firm. Banks don't actually shuttle physical dollars back and forth as most transfer via SWIFT. The physical money banks need is only for teller withdrawals, ATMs or whatnot.
- cameldrv 6y ago
  SWIFT doesn't handle settlement. Settlement usually happens through a series of correspondent banking relationships.
- satellite2 6y ago
  Swift is only a communication protocol it doesn't solve the clearing problem. The clearing problem is really at its core about avoiding to move cash and how to transfer debt between two entities that don't know (and trust) each other, as far fetched as it sounds. When you transfer $1 to a friend of yours that is at another bank, your bank owes you one less dollar and your friend's bank owe him one more. But aginst what? The promise by your bank to pay it with a physical dollar (or some other better debt) in the future. But if you are with a small bank, your friend's bank might not trust it. So the they use a bigger bank that both trust that act as an intermediary and that lends for a very small rate as it is a 100% collateralized debt. This is the definition of clearing.
  - psychlops 6y ago
    Swift is a communication protocol to move digital cash. Once the wire goes through, the next bank has the cash and the last bank doesn't. That solves the clearing problem (for currencies). Yes, the process is sticky as every bank likes to hold the money as long as possible, but ownership is clear and fast. The clearing problem for OP is with stocks and deal with purchasing and selling from different owners using a regulatory intermediary (DTCC). Getting all those parts coordinated is more challenging.

rank0 6y ago

They also have insane fees and require partnerships with banks to do so. Visa and Mastercard make this possible for Coinbase. Its kind of funny these crypto exchanges are supposed to decentralize our finances but end up relying on the same centralized financial institutions that brokers also use. I can also perform trades and instantly have access to the money on my TDA account.