7 ms·

Permissioned blockchains can be useful in trade finance and international trade. Financial transactions across borders can be delayed to allow for clearance and

Permissioned blockchains can be useful in trade finance and international trade. Financial transactions across borders can be delayed to allow for clearance and settlement between several institutions, which requires multiple banking systems to verify the integrity of transaction and collect a lot of paper trail. There are several competing projects solving for that problem right now.

koheripbal 5y ago
I don't see why these would need a blockchain rather than just a centralized database. I'm very skeptical of these use cases.
- speeder 5y ago
  The purpose of blockchain is to solve what happens when neither side of a transaction trust the other. For example, suppose US and Iran agreed to pay each other some amount as proof of their sactions deal... US doesn't trust Iran or its central bank. Iran doesn't trust SWIFT, since it can be easily manipulated by its enemies (as it has been, before). US doesn't trust the alternative to SWIFT, since it is run by Russia and China. EDIT: common people, that was just an example, it doesn't mean future transactions between US and Iran would be done that way. It was just an easy to understand example.
  - SideburnsOfDoom 5y ago
    > The purpose of blockchain is to solve what happens when neither side of a transaction trust the other. So what's the purpose of _private_ blockchains then? Grandparent comment was about "Permissioned blockchains can be useful..." not blockchain in general. How does it remain private in a trustless case? Alternatively, who keeps the blockchain private? Who manages access? If there is an impartial 3rd party, an "authority" or a "broker", a "governor" that all other parties can trust to do that, even if they don't trust each other ... can't that authority just use a database, with some checksums and signed rows if need be? What can't you get from a private github repo? Is the "private blockchain" centralised or decentralised? I feel that every time I see this discussion, the argument is shifted to a straw man whenever the wrong question is asked.
    - jnwatson 5y ago
      There's no purpose of private blockchains, unless your definition of blockchain is just chained signatures perhaps with a Merkle tree. The intersection of the set of "private" and "mutually distrustful parties" is essentially 0.
      - SideburnsOfDoom 5y ago
        That's what I thought, but I'd like to see a proponent of private blockchains explain it with out resorting to answering a different and more general question about "the purpose of blockchain is..."
  - bydlocoder 5y ago
    That's like the worst example ever. With international peace talks there usually is a trusted third party, like US was a part of various Israeli-Palestinian talks.
  - meepmorp 5y ago
    OTOH: https://apnews.com/article/fd4113419276444eba1d2a46d5c29752 https://apnews.com/article/fd4113419276444eba1d2a46d5c29752 In 2016, the US paid Iran $1.7B in pallets of EUR and CHF. The article's not explicit, but the settlement network probably uses a C-130.
  - markwkw 5y ago
    Could you explain this example a bit more? US and Iran meet and discuss some deal? And then the want to pay each other some amount as proof of reaching the deal? Could they do it in public and invite various journalists to witness the post-signing conference where both parties say they have reached the deal? (It seems to be a standard procedure) Or is the set of blockchain payments an guarantee of adherence to the deal? How would that help? Are the coins supposed to be returned in case of lack of adherence? If that is the case, how would I trust the other party to return the bitcoin?
    - tnzm 5y ago
      Governments A and B meet and discuss some deal. Their agreement is recorded on a public append-only ledger, which is hosted by participants worldwide. If any party reneges on the deal, that's remembered by the public record too, where no amount of propaganda can erase it. Parties confirmed to be less trustworthy are subsequently afforded fewer compromises during negotiations. A NFT could also be minted, where people and institutions stake money on the deal and if either party breaks the agreement, the NFT is burned. So stakers are incentivized to do whatever is within their reach to make governments stick to the deal - otherwise they would lose their investments. The way to bootstrap participatory democracy in a world that only cares about the money is to bake it into the money.
      - SideburnsOfDoom 5y ago
        > Governments A and B meet and discuss some deal. Their agreement is recorded on a public append-only ledger, which is hosted by participants worldwide. If any party reneges on the deal, that's remembered by the public record too, where no amount of propaganda can erase it. You can do this with paper. Signed paper documents. You have invented the "treaty". It has been a thing for centuries.
        htrp 5y ago
        A "signed paper document" or a "treaty" is also meaningless without robust enforcement mechanisms.... or the instant it's in either side's interest to ignore.
  - lordlimecat 5y ago
    >The purpose of blockchain is to solve what happens when neither side of a transaction trust the other. Normally the courts solve this problem, so this is only an issue if one or both parties are operating outside of the law. Which, for normal financial enterprises trying to do business, creates regulatory problems: Chase can't exactly transact with the PLA without getting bulldozed by regulators, and you can't exactly hide the transaction on blockchain (since its immutable). In the scenario you describe, there are ways of cheating even in blockchain (51% attack), and there are ways of solving the issue outside of blockchain (military force, embargos).
  - nonameiguess 5y ago
    We actually already do this. See this job description: https://acpol2.army.mil/fasclass/search_fs/search_fs_output.asp?fcp=zutpk3eFRtaToL2jq8dGuam0buidbYOYk6RViGC7hLBpYICWmag%3D https://acpol2.army.mil/fasclass/search_fs/search_fs_output.... This would generally be responsible for paying parties that actually trust you, using Treasury checks and possibly small amounts of cash, but there is an equivalent position within the uniformed Finance Corps where you pay untrusted parties who also don't trust you. For that purpose, you deliver extremely large briefcases full of cash. Basically, the same idea as a drug deal where the buyer and seller don't trust each other. Everything is transacted in cash, and both parties are carrying a lot of guns. This is generally how we make payments to local warlords in theaters of combat where they are not by any means an internationally recognized legitimate authority you can make any kind of a treaty with, but you need to buy their cooperation anyway. As for trusting they'll actually deliver what you're buying, again, that's what the guns are for. Heck, as it stands right now just for normal consumers, buyers and sellers don't need to trust each other. They just need a legal authority who can prosecute each side and they need to trust that legal authority. Barring that, they need an extra legal authority they trust with guns. As it stands, the obvious limitation of a blockchain is it only helps if your transaction is solely the exchange of data stored on the blockchain itself. Otherwise, you're back to the same issue. The fact that a transaction is recorded on a ledger doesn't mean either party actually received the goods they expected, and it doesn't mean they have any means of remediation, legal or otherwise, if they don't. The fact that a ledger says you own something doesn't mean you're in possession of it, and it doesn't mean the party that is in possession of it has to give it to you.
- picardo 5y ago
  Banking systems are complex. You can't build a single centralized system that works for everyone, let alone get everyone to trust each other on the system. The solution needs to be decentralized, trustworthy and provide built-in checks for integrity.
  - SideburnsOfDoom 5y ago
    Would you say that we have a "a single centralized system that works for everyone" in banking now? It seems more like a patchwork of a lot of systems to me.
    - picardo 5y ago
      No, we don't. That's why it's slow and expensive to trade across borders, especially if the counterparties have never done business before. It's an arduous process of proving creditworthiness through letters of credit. You often see document fraud where someone can tamper with a letter of credit, which is hard to detect.
      - SideburnsOfDoom 5y ago
        > That's why it's slow and expensive to trade across borders, ... document fraud Would you say that blockchains make this faster, cheaper and less prone to fraud?
        picardo 5y ago
        Sure. Here is a story from 4 years ago. [1] Barclays says blockchain cut this process from 10 days to 4 hours. [1] https://www.reuters.com/article/us-banks-barclays-blockchain/barclays-says-conducts-first-blockchain-based-trade-finance-deal-idUSKCN11D23B https://www.reuters.com/article/us-banks-barclays-blockchain...
        SideburnsOfDoom 5y ago
        I don't see a lot of news on that since 2016. Are they still using it?
carterschonwald 5y ago
Yup. All of this is really about having a db for known counter party multi org db for financial institutions without having to basically fund new clearing corporations for each new market. Source: I was at Jpm on some of the relevant teams for a few years.

koheripbal 5y ago

I don't see why these would need a blockchain rather than just a centralized database. I'm very skeptical of these use cases.

speeder 5y ago
The purpose of blockchain is to solve what happens when neither side of a transaction trust the other. For example, suppose US and Iran agreed to pay each other some amount as proof of their sactions deal... US doesn't trust Iran or its central bank. Iran doesn't trust SWIFT, since it can be easily manipulated by its enemies (as it has been, before). US doesn't trust the alternative to SWIFT, since it is run by Russia and China. EDIT: common people, that was just an example, it doesn't mean future transactions between US and Iran would be done that way. It was just an easy to understand example.
- SideburnsOfDoom 5y ago
  > The purpose of blockchain is to solve what happens when neither side of a transaction trust the other. So what's the purpose of _private_ blockchains then? Grandparent comment was about "Permissioned blockchains can be useful..." not blockchain in general. How does it remain private in a trustless case? Alternatively, who keeps the blockchain private? Who manages access? If there is an impartial 3rd party, an "authority" or a "broker", a "governor" that all other parties can trust to do that, even if they don't trust each other ... can't that authority just use a database, with some checksums and signed rows if need be? What can't you get from a private github repo? Is the "private blockchain" centralised or decentralised? I feel that every time I see this discussion, the argument is shifted to a straw man whenever the wrong question is asked.
  - jnwatson 5y ago
    There's no purpose of private blockchains, unless your definition of blockchain is just chained signatures perhaps with a Merkle tree. The intersection of the set of "private" and "mutually distrustful parties" is essentially 0.
    - SideburnsOfDoom 5y ago
      That's what I thought, but I'd like to see a proponent of private blockchains explain it with out resorting to answering a different and more general question about "the purpose of blockchain is..."
- bydlocoder 5y ago
  That's like the worst example ever. With international peace talks there usually is a trusted third party, like US was a part of various Israeli-Palestinian talks.
- meepmorp 5y ago
  OTOH: https://apnews.com/article/fd4113419276444eba1d2a46d5c29752 https://apnews.com/article/fd4113419276444eba1d2a46d5c29752 In 2016, the US paid Iran $1.7B in pallets of EUR and CHF. The article's not explicit, but the settlement network probably uses a C-130.
- markwkw 5y ago
  Could you explain this example a bit more? US and Iran meet and discuss some deal? And then the want to pay each other some amount as proof of reaching the deal? Could they do it in public and invite various journalists to witness the post-signing conference where both parties say they have reached the deal? (It seems to be a standard procedure) Or is the set of blockchain payments an guarantee of adherence to the deal? How would that help? Are the coins supposed to be returned in case of lack of adherence? If that is the case, how would I trust the other party to return the bitcoin?
  - tnzm 5y ago
    Governments A and B meet and discuss some deal. Their agreement is recorded on a public append-only ledger, which is hosted by participants worldwide. If any party reneges on the deal, that's remembered by the public record too, where no amount of propaganda can erase it. Parties confirmed to be less trustworthy are subsequently afforded fewer compromises during negotiations. A NFT could also be minted, where people and institutions stake money on the deal and if either party breaks the agreement, the NFT is burned. So stakers are incentivized to do whatever is within their reach to make governments stick to the deal - otherwise they would lose their investments. The way to bootstrap participatory democracy in a world that only cares about the money is to bake it into the money.
    - SideburnsOfDoom 5y ago
      > Governments A and B meet and discuss some deal. Their agreement is recorded on a public append-only ledger, which is hosted by participants worldwide. If any party reneges on the deal, that's remembered by the public record too, where no amount of propaganda can erase it. You can do this with paper. Signed paper documents. You have invented the "treaty". It has been a thing for centuries.
      - htrp 5y ago
        A "signed paper document" or a "treaty" is also meaningless without robust enforcement mechanisms.... or the instant it's in either side's interest to ignore.
- lordlimecat 5y ago
  >The purpose of blockchain is to solve what happens when neither side of a transaction trust the other. Normally the courts solve this problem, so this is only an issue if one or both parties are operating outside of the law. Which, for normal financial enterprises trying to do business, creates regulatory problems: Chase can't exactly transact with the PLA without getting bulldozed by regulators, and you can't exactly hide the transaction on blockchain (since its immutable). In the scenario you describe, there are ways of cheating even in blockchain (51% attack), and there are ways of solving the issue outside of blockchain (military force, embargos).
- nonameiguess 5y ago
  We actually already do this. See this job description: https://acpol2.army.mil/fasclass/search_fs/search_fs_output.asp?fcp=zutpk3eFRtaToL2jq8dGuam0buidbYOYk6RViGC7hLBpYICWmag%3D https://acpol2.army.mil/fasclass/search_fs/search_fs_output.... This would generally be responsible for paying parties that actually trust you, using Treasury checks and possibly small amounts of cash, but there is an equivalent position within the uniformed Finance Corps where you pay untrusted parties who also don't trust you. For that purpose, you deliver extremely large briefcases full of cash. Basically, the same idea as a drug deal where the buyer and seller don't trust each other. Everything is transacted in cash, and both parties are carrying a lot of guns. This is generally how we make payments to local warlords in theaters of combat where they are not by any means an internationally recognized legitimate authority you can make any kind of a treaty with, but you need to buy their cooperation anyway. As for trusting they'll actually deliver what you're buying, again, that's what the guns are for. Heck, as it stands right now just for normal consumers, buyers and sellers don't need to trust each other. They just need a legal authority who can prosecute each side and they need to trust that legal authority. Barring that, they need an extra legal authority they trust with guns. As it stands, the obvious limitation of a blockchain is it only helps if your transaction is solely the exchange of data stored on the blockchain itself. Otherwise, you're back to the same issue. The fact that a transaction is recorded on a ledger doesn't mean either party actually received the goods they expected, and it doesn't mean they have any means of remediation, legal or otherwise, if they don't. The fact that a ledger says you own something doesn't mean you're in possession of it, and it doesn't mean the party that is in possession of it has to give it to you.
picardo 5y ago
Banking systems are complex. You can't build a single centralized system that works for everyone, let alone get everyone to trust each other on the system. The solution needs to be decentralized, trustworthy and provide built-in checks for integrity.
- SideburnsOfDoom 5y ago
  Would you say that we have a "a single centralized system that works for everyone" in banking now? It seems more like a patchwork of a lot of systems to me.
  - picardo 5y ago
    No, we don't. That's why it's slow and expensive to trade across borders, especially if the counterparties have never done business before. It's an arduous process of proving creditworthiness through letters of credit. You often see document fraud where someone can tamper with a letter of credit, which is hard to detect.
    - SideburnsOfDoom 5y ago
      > That's why it's slow and expensive to trade across borders, ... document fraud Would you say that blockchains make this faster, cheaper and less prone to fraud?
      - picardo 5y ago
        Sure. Here is a story from 4 years ago. [1] Barclays says blockchain cut this process from 10 days to 4 hours. [1] https://www.reuters.com/article/us-banks-barclays-blockchain/barclays-says-conducts-first-blockchain-based-trade-finance-deal-idUSKCN11D23B https://www.reuters.com/article/us-banks-barclays-blockchain...
        SideburnsOfDoom 5y ago
        I don't see a lot of news on that since 2016. Are they still using it?

carterschonwald 5y ago

Yup. All of this is really about having a db for known counter party multi org db for financial institutions without having to basically fund new clearing corporations for each new market. Source: I was at Jpm on some of the relevant teams for a few years.