Bank Consortium Successfully Tests Bitcoin Tech (thestack.com) 47
An anonymous reader writes: R3CEV, a startup dedicated to bringing blockchain technology to traditional finance, yesterday ran a successful test of transactions between 11 of the world's largest financial institutions. This represents a big step forward in bringing blockchain, the foundation for Bitcoin, to traditional banking. The test, which connected the banks on a private 'distributed ledger' using Microsoft's cloud-based Azure service, allowed participants to execute sample financial transactions instantly, globally, and without a centralized third-party clearing house. Participants included Barclays, BMO Financial, Credit Suisse, HSBC, Royal Bank of Scotland, TD Bank, UBS, and UniCredit among other leading financial groups.
Creating money (Score:3)
Creating money out of thin air; the banks are going to have a field day creating their own currency.
Umm, they already do that [positivemoney.org] via the Federal Reserve and similar mechanisms in other countries.
I can see the block-chain tech being useful for various applications, including some financial ones. I don't think Bitcoin itself will be among the useful applications. But that's ok. Proof of concept technology is a valuable thing and while I think Bitcoin is fatally flawed it seems to be a good proof of concept.
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Re: Creating money (Score:2)
No transaction is free (Score:5, Informative)
The other point is that transactions are free.
That's a misconception surrounding bitcoin. Transactions are NEVER free of cost. You can find ways to reduce the cost of transactions but they are never free. You have to consider exchange rate risk, opportunity cost, time value of money, transaction coordination, in some cases counterparty risk, technology risk and more. If you want to have a system as wide spread and convenient as the credit card system, there is a TON of cost in building and maintaining that. People have a mistaken idea that bitcoin transactions are free because they forget about risk and the time value of money and opportunity cost. Bitcoin is seemingly cheap because it piggybacks on the internet and computers people already own (sunken costs) but it is a false economy.
Banks make a lot of money passing the money around.
Yes they do because passing money around is a valuable activity and they make it easier than it would be otherwise. Imagine how much of a pain it would be to send money to Europe from the US if you didn't have a bank to facilitate the transaction. It would be a huge and expensive problem.
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time value of money and opportunity cost are NOT part of the transaction cost that the GP was talking about and you know it. those are inherently part of any transaction.
Yes, it costs a ton of money, if you look at just the lump sum, to handle credit card transactions.
However, the actual cost per transaction has steadily gone down for the credit card companies since credit cards were invented. Guess who soaked up that decrease?
Here in Canada, the cost of debit transactions has steadily increased, while th
Monopolistic pricing (Score:2)
However, the actual cost per transaction has steadily gone down for the credit card companies since credit cards were invented. Guess who soaked up that decrease?
The fact that average transaction cost has decreased as the networks have scaled up should surprise no one. That's just "good" business at least in the sense of profits. Yes the credit card companies have soaked up most of the improved margin. They are basically a quasi-monopoly so one should expect monopolistic pricing.
As for who soaked up the cost it depends on how big a player you are. I assure you that Walmart takes far less of a hit than your local mom-n-pop. Transaction volume matters. The banks
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"The magic of btc is the fact that the money supply isn't controlled."
Bullshit. The supply of money is highly controlled. There is a limited amount of currency and only about a dozen major players holding the majority of btc.
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The blockchain tecnhology is a fantastic idea, however Bitcoin is the technology AND a currency (actually more like an investment vehicle TBH) and the banks don't want someone elses alpha release currency that is outside anyones control when they can magic up their own and control it completely whilst still retaining the benefits of blockchain.
Banks used to issue their own currency. (Score:1)
Before the rise of central banking, banks would routinely issue commercial banknotes [wikipedia.org].
It isn't as bad as it sounds. It actually applies free market principles to currency, rather than the monopoly situation we have now.
Banks have to ensure that there's demand for their banknotes, relative to banknotes issued by their competitors, which helps encourage them to create a product that's valuable and desired.
not a currency, just a distributed USD ledger (Score:3)
To clear up a common misconception, what the banks are doing is neither Bitcoin nor any new crypto-currency. It's just a way to keep track of US dollar transactions.
Right now, when you use your Bank of America card at a store and that store banks with Wells Fargo, BOA sends the money to Wells Fargo. At the same time, across the street, a Wells Fargo customer pays at a store which banks with BOA, so money flows the opposite direction. Millions of transactions moving in circles.
The idea is that it might be m
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Right now, when you use your Bank of America card at a store and that store banks with Wells Fargo, BOA sends the money to Wells Fargo. At the same time, across the street, a Wells Fargo customer pays at a store which banks with BOA, so money flows the opposite direction. Millions of transactions moving in circles.
This is pretty much it. I used to work in a bank, and back in the day, at the end of each day the representatives of each bank would meet somewhere with a balance sheet. Bank A owed Bank B $10mil, and Bank B owed Bank A $9.5mil, so they wrote a cheque for $50k and all went to the pub for drinks.
The 21st century version of this is exactly the same but electronic. From the sounds of it, they are looking to use blockchain as the intermediary technology rather than cash, that is all.
sounds like the drinks came first (Score:2)
> Bank A owed Bank B $10mil, and Bank B owed Bank A $9.5mil, so they wrote a cheque for $50k and all went to the pub for drinks.
If Bank B was happy with that $50k, I think the drinks came BEFORE the math. :)
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"Creating money out of thin air; the banks are going to have a field day creating their own currency"
This would be a test of blockchain tracing of transactions, not virtual currency. Questions have been raised recently about the scalability of blockchain to large volumes of transactions, and what banks are good at is volume transactions of conventional currencies. If blockchain is long-term viable, it has to pass this test.
It's Ethereum, not Bitcoin. (Score:5, Informative)
It's ok, you utter the word, the secret's out now... Anyone seriously looking at "blockchain" technology is considering using Ethereum (aka bitcoin 2.0), not Bitcoin, including R3 CEV in the linked article. The ability to script transactions in bitcoin is fairly limited and not flexible. Yes there are ongoing ventures and ideas to work around that: side-chains, blockstream, colored coins, rootstock, etc, but these are all non-existent for production use at this time. Ethereum launched 6 months ago and can be used now, although it has far less time in the open than bitcoin (6 months vs ~7 years), so from a security perspective, it still needs to prove itself. Meanwhile, research teams of organizations can start testing it. Where Bitcoin can disrupt the financial sector, Ethereum can disrupt finance and "everything" else.
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So, like BitCoin, all these transaction changes have to be kept? For example, if you want protection better than "trust me" with BTC, you have to download and parse the entire 67 gig Bitcoin blockchain ledger for every transaction. Not doing so pretty much ensures you can be a victim of double spending.
It would be nice to not have to go through every single transaction done in a cryptocurrency to ensure one is covered.
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If you trust no one, sure, you need that 67 gig ledger and the matching decent connection. It is likely to be too much for a smartphone but it is well within reach of home PCs.
However, the only ones that really need to do this check are people who sign the transaction, i.e. the miners. They could not do the checks but they better do, because otherwise, they are likely to get rejected by other signers and lose their rewards. In a normal transaction, several confirmations may be required, which make double sp
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Not that you are going to hear it, but... (Score:4, Informative)
The blockchain is not the key innovation behind Bitcoin. The block chain concept existed long before Bitcoin and was then known as "eternal log file". The problem with eternal log files was authenticity: Prior to Bitcoin, in order to make sure that you had an untampered version of the eternal logfile, the maintainer of the logfile would regularly publish hashes in ways that were deemed immutable. For example, one could print the current cryptographic hash in a daily newspaper with wide enough circulation that it would be infeasible to tamper with all archived copies. Obviously this process is slow and leaves the logfile open to manipulation for long times between publication of hashes. Bitcoin solves this authentication problem without trust, without a central entity and without long periods where entries to the logfile (or blockchain) could be modified. This is the key innovation of Bitcoin.
Universal currency adoption... (Score:1)
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I highly divisible universal currency being tested by banks. Might not be a horrible idea. Remove the necessity for currency exchange markets. If you economy is tanking, the price of goods increase but based off of a universally monitored and controlled currency with a specific market value. I don't necessarily like the idea of the value of the currency fluctuating independently of a given nations inflation, but the idea still would have merit to investigate.
I personally think it is a horrible idea. On the plus side I don't know of any banks that are interested in doing something like that.
If you are confused, the banks are only testing the "ledger" ability of block chains, not the "currency" aspect. The idea is that a block chain would be associated with asset (stocks, bonds, gold, whatever) and this asset could be traded directly between institutions and people without a trusted intermediary (a.k.a. the middle man). One interesting application, which boarder
Clearly I misunderstand this (Score:3)
Because when I read " instantly, globally, and without a centralized third-party "
I think of the blockchain as the centralized third-party.
It's just not so physically defined as a nice clean data center some entity built, managed, and charges fees for.
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No one "owns" it, no one controls it, no "master" copy of it exists anywhere. Instead, it exists as a distributed collection of every BTC transaction ever made, with each distinct block contributed by a random miner.
Or put another way, fish need water to live. You can't really call the ocean a "third party" to their life-cycle.
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The independence of the blockchain assumes a sufficiently decentralized mining population. Sufficient coordination and the blockchain has a clear owner (cluster). Much like capitalism, blockchains only work properly when the major players are not willing to cooperate. This does not mean that any cooperation will immediately destroy the usefulness of either, but that large scale cooperation can potentially undermine the interests of other participants.
Let me get this straight (Score:1)
R3CEV announces they've successfully completed their testing (bitcoin for banks)
A few days ago - global headlines - "Bitcoin a failure" - NY Times headline article.
The person writing "bitcoin a failure" works for R3 - funded by the banks. He single handedly tried to disrupt bitcoin with XT and other approaches.
Am I following this correctly?
I think alternatives and better solutions to bitcoin will come up - but there is something unsavory about this whole Mike Hearn thing.
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I know - Like that fuckin' Santa Claus, the worthless slaver... Don't ever take your eyes off the corrupt bastard!
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The blockchain concept could be a success at the same time that bitcoin fails completely.
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The purpose of this new blockchain is to cut out the Fed and ACH system middlemen (and associated fees) to settle funds between banks. Chase customers may write checks to BoA customers. BoA customers also write checks to Chase (and so on). At the end of each day, banks need to settle up with each other and transfer funds to make up the difference. The distributed ledger will be used for this purpose, where previously settlement funds would be routed through the Fed or the ACH system at a cost.
It will not be
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Chase customers may write checks to BoA customers. BoA customers also write checks to Chase (and so on).
OT: Does people in the US actually use checks still? I haven't seen one since the late 80s here in northern Europe.
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Chase customers may write checks to BoA customers. BoA customers also write checks to Chase (and so on).
OT: Does people in the US actually use checks still? I haven't seen one since the late 80s here in northern Europe.
Yes. While I pay most of my bills electronically through my bank's bill-pay service, I still pay those one/few-times-a-year bills with a check and my various property tax bills with a check so there's a hard-copy trail. My wife used to pay for groceries with checks, but since she died in 2006, I basically use a CC for everything (or cash) and pay off the card every month.
Bitcoin is like TCP/IP (Score:3)
These banks are simply butthurt that their do not control Bitcoin so they believe they can build an alternative that they control so they can compete against it. There is zero value in the banks' protocol for anyone other than the banks. Whereas, Bitcoin will have value for anyone and everyone that invests in it or uses it. So, unless the banks open up their protocol to the public, like Bitcoin, and allow people to innovate and make money on their platform, Bitcoin has it beat.
IMO, it's fairly stupid to not have a tiny speculative investment in Bitcoin at this point. But then again, I feel stupid for not investing in Google when I had the chance and knew it was the standard for search.
A big opportunity will be lost (Score:1)
If they don't call it credits.
Hmm... (Score:2)
... and without a centralized third-party clearing house.
You mean without that thing you used?
The test, which connected the banks on a private 'distributed ledger' using Microsoft's cloud-based Azure service,
Granted, you rented the cloud service yourself, for yourself, but still...