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Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” b

Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” between mostly trusted partners with provisions for reversing transactions as needed. Useful because it would have lower administration overhead than one bank maintaining a service for exchanging funds, no concerns about downtime, and all sorts of guarantees about the correctness of balances. Lots of back end software that just doesn’t need to be written or maintained. Lots of similar usecases where small mostly trusted groups need to keep track of asset transfers or trade between them.

adrr 4y ago
If its bank transfers between trusted entities why do you need blockchain?
- GartzenDeHaes 4y ago
  This is called the ACH network and there's no way to trace, undue, or recall transactions. It has been used in bank robberies [1] and numerous financial institutions and payment processors who are not banks use it, not all of whom are trustworthy. [1] https://www.kaspersky.com/about/press-releases/2015_the-great-bank-robbery-carbanak-cybergang-steals--1bn-from-100-financial-institutions-worldwide https://www.kaspersky.com/about/press-releases/2015_the-grea...
  - colechristensen 4y ago
    ACH is only for internal US transfers and is absolutely reversible. Your linked article is not about that. There is of course a time limit.
  - deleted 4y ago
    [deleted]
  - adrr 4y ago
    ACH can be clawed back. It moves money via the FED. You can’t access it unless you’re a bank.
kelseyfrog 4y ago
Do banks not presently trust each other? edit: Suggesting that the interbank system move to crypto on a thread about a massive failed crypto project is a huge failure on reading the room. It's like trying to convince people to buy Titanic II tickets at the funeral for the Titanic I victims or trying to sell a Model 38 to Jacqueline Kennedy on November 23, 1963.
- skippyboxedhero 4y ago
  People significantly underestimate how much cost there is at certain points in the chain. Interbank transfers are very cheap. A lot of central banks have invested heavily in payments systems too (the BoE is one, Faster is very good). But at certain other points, this technology could be very valuable. Two examples that occur to me immediately are pensions and fund administration. Obviously, Ethereum goes beyond that with a more generalized VM. From what I have seen, this is a ludicrously inefficient way to perform computations. If that is wrong, then maybe there is more. But just blockchain alone will have a huge impact (if you look at back/middle-offices in banks/fund managers/pensions/insurance, I remember working in this area and going to one of the largest pension admins in my country...I remember vividly opening the door to the pig pen, and it was just a sea of people, 95% just responding to very basic customer queries/doing incredibly basic computation work and costing huge amounts of money...because, of course, there is no cost pressure from "customers"...a parallel that more people understand is US healthcare admin, huge inefficiencies, pension admin is like that). We are not even at day one with this trend. I am sure people will find other applications after, but applying blockchain/distributed storage/distributed computing/whatever to back/middle office in finance will be huge. It also isn't really a question about whether it is going to happen...it will.
  - Peleus 4y ago
    > I remember vividly opening the door to the pig pen, and it was just a sea of people, 95% just responding to very basic customer queries/doing incredibly basic computation work and costing huge amounts of money...because, of course, there is no cost pressure from "customers"...a parallel that more people understand is US healthcare admin, huge inefficiencies, pension admin is like that How does blockchain solve this? There are always people pushing generalized "it will be good for this" statements, yet they can never seem to give concrete examples of where blockchain would be a better solution than the current implementation.
msbarnett 4y ago
> Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” between mostly trusted partners with provisions for reversing transactions as needed. But they’re already trusted partners who already have a functioning settlement mechanism that already has provisions for reversing transactions. Jamming a blockchain on top of this solves nothing not already solved. The claim that this would reduce maintenance overhead is hogwash – we’ve seen an unending litany of unexpected bugs in blockchain protocols and smart contracts, while the existing transfer mechanisms are already debugged. Trustless mechanisms are harder to get right than trust-based ones, not easier.
- colechristensen 4y ago
  How many serious bugs have there been in bitcoin? All I’m talking about is a simple ledger, not the fancy smart contact nonsense.
  - msbarnett 4y ago
    > All I’m talking about is a simple ledger, not the fancy smart contact nonsense. You wrote: > > A private “coin” between mostly trusted partners with provisions for reversing transactions as needed. Either you’re doing that with a smart contract, or you’re just plain trusting the other people to reverse it when asked, in which case there’s zero reason to be using a blockchain to begin with. You don’t want or need trustless ledgers to interact with trusted parties - that’s a big increase in complexity for zero gain.
amluto 4y ago
If banks distrust each other enough to want a blockchain to handle nightly settlements, then they are massively exposed to transaction rollback shenanigans. Interbank settlements can be very, very large, and I have trouble imagining, even in the wildest cryptocurrency fantasy land, that banks could arrange for all their different types of settlements to be on the same blockchain.
- colechristensen 4y ago
  No problem having dozens of specific purpose blockchains. It’s just a ledger, it doesn’t matter at all how big the numbers are. It’s not real money just a record of balances. I’m not talking about a cryptocurrency, just a blockchain as a replacement for a database table, essentially a different api that ran distributed instead of on some ancient mainframe.
  - purerandomness 4y ago
    Wait what problem are we solving again? If we need dozens of specific purpose ledgers between banks, what's wrong with database tables running on ancient mainframes, and how would dozens of different blockchains solve that specific problem?
  - amluto 4y ago
    Which is useful how? Suppose you and I are large institutions. I owe you $10bn today. You owe me 10bn EUR today. I owe you some currencies tomorrow, and you owe me some tomorrow, etc. (I may also owe you a bunch of future corn, you may owe me some shares of Coinbase, etc.). The practicalities we need to attend to include, at least: I actually owe you those dollars, and a business decision was made to keep that debt payable today. So I have to convey the dollars to you. Similarly, you need to convey those Euros to me. We can do this by actually transferring them via central bank mechanisms, or I suppose we could have a custodian that operates a blockchain and use that blockchain. I’m unclear how that helps. But keep reading… There is a risk that one of us will default. If I default before any transactions take place, it’s not a huge deal — I still have my Euros, you still have your dollars, no one is out a huge amount of money, and the lawyers and courts can pick up the pieces later. But there is also a risk that only one transaction goes through. (Look up Herstatt Bank.) If this happens, then one of us is out $10bn until the law does its thing. That is a big deal. This can be mitigated by atomic multi-currency transactions or maybe by a hypothetical blockchain handling USD and EUR (and Coinbase shares and everything else), but that seems every bit as hard as getting the central banks to use the same database, if not harder. [0]. Or they can use an escrow service like CLS, which works without a blockchain. [0] Blockchains perform spectacularly poorly in the event of a network partition. Does anyone really think it would be wise for, say, the central banks of the US and Russia to allow currency to move in the same blockchain or, for that matter, on a POW or PoS blockchain?

adrr 4y ago

If its bank transfers between trusted entities why do you need blockchain?

GartzenDeHaes 4y ago
This is called the ACH network and there's no way to trace, undue, or recall transactions. It has been used in bank robberies [1] and numerous financial institutions and payment processors who are not banks use it, not all of whom are trustworthy. [1] https://www.kaspersky.com/about/press-releases/2015_the-great-bank-robbery-carbanak-cybergang-steals--1bn-from-100-financial-institutions-worldwide https://www.kaspersky.com/about/press-releases/2015_the-grea...
- colechristensen 4y ago
  ACH is only for internal US transfers and is absolutely reversible. Your linked article is not about that. There is of course a time limit.
- deleted 4y ago
  [deleted]
- adrr 4y ago
  ACH can be clawed back. It moves money via the FED. You can’t access it unless you’re a bank.

kelseyfrog 4y ago

Do banks not presently trust each other? edit: Suggesting that the interbank system move to crypto on a thread about a massive failed crypto project is a huge failure on reading the room. It's like trying to convince people to buy Titanic II tickets at the funeral for the Titanic I victims or trying to sell a Model 38 to Jacqueline Kennedy on November 23, 1963.

skippyboxedhero 4y ago
People significantly underestimate how much cost there is at certain points in the chain. Interbank transfers are very cheap. A lot of central banks have invested heavily in payments systems too (the BoE is one, Faster is very good). But at certain other points, this technology could be very valuable. Two examples that occur to me immediately are pensions and fund administration. Obviously, Ethereum goes beyond that with a more generalized VM. From what I have seen, this is a ludicrously inefficient way to perform computations. If that is wrong, then maybe there is more. But just blockchain alone will have a huge impact (if you look at back/middle-offices in banks/fund managers/pensions/insurance, I remember working in this area and going to one of the largest pension admins in my country...I remember vividly opening the door to the pig pen, and it was just a sea of people, 95% just responding to very basic customer queries/doing incredibly basic computation work and costing huge amounts of money...because, of course, there is no cost pressure from "customers"...a parallel that more people understand is US healthcare admin, huge inefficiencies, pension admin is like that). We are not even at day one with this trend. I am sure people will find other applications after, but applying blockchain/distributed storage/distributed computing/whatever to back/middle office in finance will be huge. It also isn't really a question about whether it is going to happen...it will.
- Peleus 4y ago
  > I remember vividly opening the door to the pig pen, and it was just a sea of people, 95% just responding to very basic customer queries/doing incredibly basic computation work and costing huge amounts of money...because, of course, there is no cost pressure from "customers"...a parallel that more people understand is US healthcare admin, huge inefficiencies, pension admin is like that How does blockchain solve this? There are always people pushing generalized "it will be good for this" statements, yet they can never seem to give concrete examples of where blockchain would be a better solution than the current implementation.

msbarnett 4y ago

> Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” between mostly trusted partners with provisions for reversing transactions as needed. But they’re already trusted partners who already have a functioning settlement mechanism that already has provisions for reversing transactions. Jamming a blockchain on top of this solves nothing not already solved. The claim that this would reduce maintenance overhead is hogwash – we’ve seen an unending litany of unexpected bugs in blockchain protocols and smart contracts, while the existing transfer mechanisms are already debugged. Trustless mechanisms are harder to get right than trust-based ones, not easier.

colechristensen 4y ago
How many serious bugs have there been in bitcoin? All I’m talking about is a simple ledger, not the fancy smart contact nonsense.
- msbarnett 4y ago
  > All I’m talking about is a simple ledger, not the fancy smart contact nonsense. You wrote: > > A private “coin” between mostly trusted partners with provisions for reversing transactions as needed. Either you’re doing that with a smart contract, or you’re just plain trusting the other people to reverse it when asked, in which case there’s zero reason to be using a blockchain to begin with. You don’t want or need trustless ledgers to interact with trusted parties - that’s a big increase in complexity for zero gain.

amluto 4y ago

If banks distrust each other enough to want a blockchain to handle nightly settlements, then they are massively exposed to transaction rollback shenanigans. Interbank settlements can be very, very large, and I have trouble imagining, even in the wildest cryptocurrency fantasy land, that banks could arrange for all their different types of settlements to be on the same blockchain.

colechristensen 4y ago
No problem having dozens of specific purpose blockchains. It’s just a ledger, it doesn’t matter at all how big the numbers are. It’s not real money just a record of balances. I’m not talking about a cryptocurrency, just a blockchain as a replacement for a database table, essentially a different api that ran distributed instead of on some ancient mainframe.
- purerandomness 4y ago
  Wait what problem are we solving again? If we need dozens of specific purpose ledgers between banks, what's wrong with database tables running on ancient mainframes, and how would dozens of different blockchains solve that specific problem?
- amluto 4y ago
  Which is useful how? Suppose you and I are large institutions. I owe you $10bn today. You owe me 10bn EUR today. I owe you some currencies tomorrow, and you owe me some tomorrow, etc. (I may also owe you a bunch of future corn, you may owe me some shares of Coinbase, etc.). The practicalities we need to attend to include, at least: I actually owe you those dollars, and a business decision was made to keep that debt payable today. So I have to convey the dollars to you. Similarly, you need to convey those Euros to me. We can do this by actually transferring them via central bank mechanisms, or I suppose we could have a custodian that operates a blockchain and use that blockchain. I’m unclear how that helps. But keep reading… There is a risk that one of us will default. If I default before any transactions take place, it’s not a huge deal — I still have my Euros, you still have your dollars, no one is out a huge amount of money, and the lawyers and courts can pick up the pieces later. But there is also a risk that only one transaction goes through. (Look up Herstatt Bank.) If this happens, then one of us is out $10bn until the law does its thing. That is a big deal. This can be mitigated by atomic multi-currency transactions or maybe by a hypothetical blockchain handling USD and EUR (and Coinbase shares and everything else), but that seems every bit as hard as getting the central banks to use the same database, if not harder. [0]. Or they can use an escrow service like CLS, which works without a blockchain. [0] Blockchains perform spectacularly poorly in the event of a network partition. Does anyone really think it would be wise for, say, the central banks of the US and Russia to allow currency to move in the same blockchain or, for that matter, on a POW or PoS blockchain?