Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain
wired.com
wired.com
A blockchain is a ledger (piece of paper that records transactions) with perfect memory of every single transaction that has ever occurred within a certain network. This makes double spending within the network impossible as you can trace every single coin in the network back to its origin, verifying that your trading partner does, in fact, have the coin he claims to. This removes the need for a trusted third party to oversee/verify transactions.
This is important for banks because currently they pay a 3rd party clearing house to process transactions and transfers between them. They cannot trust each other because their transactions are not linked together in one shared network.
If they all agree to get on a shared blockchain (ledger), they can split the costs of continuously verifying the validity of the blockchain (leder) between them, rather than paying a 3rd party for the same service. This would reduce fees within the industry and reduce time between transfers.
I used to be very excited about blockchain technology and its implications for creating micro/private currency networks. Something about the financial industry's interest has really turned me off the blockchain and its possible implementations.
What exactly? And don't you think banks will be more apt to use Bitcoin once things like the lightning network roll out (offering much greater transaction volumes)?
Banks will never use a public network (like Bitcoin) to manage inter-bank transfers. They'll take the underlying technology and create a custom, private network where they can tweak protocols to their liking.
The hard part will be for the banks to form a board to oversee the network, because they'll each have to contribute members and those members will have to work together and trust each other not to make sneaky or unfavorable changes to the underlying codebase of the private network. There will be lots of politics based on relative bank size and power within the network. Should be interesting to see how it plays out.
The incentive to steal large amounts of money is high and the security is relatively low. What could possibly go wrong?
Or alternatively: Pay counterparty X $1B. Then immediately turn around and pay counterparty Y the same $1B, before they've gotten an updated ledger from counterparty X. When counterparty X and Y share their ledgers, who owns your $1B?
The point of mining in Bitcoin is to resolve conflicts like this. By forcing whichever node digitally signs the latest block to perform a computationally-intensive problem, it represents that the latest block is the consensus of a majority of the network, as measured by computing power. Any node is free to publish a fraudulent block, but then any other node can inspect the block, see that the SHA256 hash doesn't match, and then reject it. Or if they get lucky and happen to find the right SHA256 hash, they will get outpaced on the next block (the Bitcoin protocol specifies that clients should assume the longest chain is correct), and the rest of the network will ignore their fraudulent transaction.
What's the alternative in private blockchains? I'm genuinely curious; I have little invested in Bitcoin, but I did spend some time understanding how the protocol works and why it includes the features it does.
For 2 in a rr system you wouldn't be able to submit 2 blocks in a row
[0] http://www.fastcompany.com/27333/trillion-dollar-vision-dee-...
If you have too many blockchains, then you split the miners between the chains and open the doors for a big player to come in and overwhelm the other miners on that chain.
I suppose you could somehow implement private blockchains where only those with the private key can participate, but I don't know whether this has been done or not.
>I suppose you could somehow implement private blockchains where only those with the private key can participate, but I don't know whether this has been done or not.
This is what everyone is talking about. They aren't talking about mined chains.
>These proposed system achieve consensus by merely voting for truth, which is technology we've had since the 80s
So what? What does that really change at all? Nothing.
Subjective truth has been around for decades. No one cared about it , because its not useful. The only reason blockchains are useful now is because they enable value transmission between untrusted parties. (Which private chains don't do)
The only reason blockchain is a buzzword now is so that consultants can bilk banks for database contracts.
It is no less truthful than bitcoin. It need not be more mutable than bitcoin. It is just different.
>The only reason blockchains are useful now is because they enable value transmission between untrusted parties.
Right because of how current blockchains are implemented and used.
We know things are true in a blockchain because energy went into it. If only a single Bitcoin node were alive, and 99% of the network disagree with him - the energy would point to the truth. This is what makes it objective. With subjective chains there are a huge suite of problems in the form of stake grinding and long/short range attacks. Why does this matter? Non-objective quorum based sysetms have been around for decades. They're not more efficient than centralized systems for many economic reasons, some of which were really well laid out in a Isabella kaminska paper on the subject (let me know if you need a link)
Tldr: blockchains aren't paxos or raft. Blockchains mostly suck, but do one thing well: resist censorship
All those attacks are based on unknown dynamic participants which isn't an issue. So ya argue against a system they aren't trying to implement.
At least you understand now that immutability requires energy...
It sounds like you are missing a lot by having a bitcoin centric view of the problem space.
So there might be a greater press problem at work here not bringing out knowledge of other aspects of blockchain research to wider audience. I dont closely follow the field so I cant accurately guess more.
Keep in mind, this is just for the banks. You're not going to use it, except indirectly as your bank is using it to talk with other banks.
Bitcoin is great because it works with an unknown set of untrusted entities, and there's no counterparty risk because the ledger is the currency.
Banks have a known set of semi-trusted entities, and want to track off-chain assets. They'll still have counterparty risk, but if they see a way to use chained blocks and something like Byzantine Paxos to speed up interbank settlement, more power to 'em.
The Bitcoin model is good at incentivizing actors to play nicely. Banks have no need to create this incentive, it's already in their interest. The Bitcoin mining system also solves another problem: how to evenly distribute new money in a fair way. Banks have no need for that either.
I was going to disagree with this, but I reconsidered my initial comment and will offer this modification:
"The Bitcoin mining system also solves another problem: how to evenly distribute new money in a provably fair way to those with the resources to participate."
That is not the problem that mining is addressing. Mining is an incentive for people spending resources to check the integrity of the blockchain.
This has nothing to do with «fairness».
https://makebitcoingreatagain.wordpress.com/2015/11/26/creat...
Bitcoin is merely proof of concept for the underlying technology. I expect that there will be many more offshoots in the future, beyond the pieces used by the existing banking system. But I won't really care about any of them, until one of them allows me to work, buy, and sell without being forced to trust any third party that I find to be intrinsically untrustworthy--including governments, banks, cartel enforcers, mobsters, miner brigades, and Anonymous.
Not there yet. This isn't even a step in that direction.
But what I do like about this is that it may have the potential to simplify mutual insurance, interbank settlement, and securities exchanges. It would be nice if the funds from an electronic transfer to my spouse could be made available faster than writing out a paper check and depositing it at a branch ATM. I would also be particularly interested if it could end certain semi-fraudulent practices, such as short positions that are not appropriately matched against a long counterparty, or speculative phantom commodities contracts that are never actually redeemed by delivery.
The nature of the Bitcoin's SHA-256 POW means that individuals can no longer meaningfully contribute to the integrity of the chain, and this responsibility is increasingly held by fewer individuals with access to (relatively) expensive specialized ASIC machines.
The Bitcoin system has (relatively) few legit trade opportunities yet, but is well used by scammers and black marketeers.
The median person has little use for Bitcoin as it is now.
MtGOX showed that exchanges are a point of vulnerability.
Silk Road seizure showed that Bitcoin is vulnerable to rubber-hose cryptanalysis and reminded everyone it is only pseudoanonymous.
Governments have already moved to attack Bitcoin or users of Bitcoin. Mostly these are proactive attempts to defend domestic currency controls, or concerns over money laundering.
The "dust DoS" attacks have called into question whether Bitcoin can scale much larger than its current extent.
You can't use Bitcoin with Apple Pay or Google Wallet. You actually can't get an app approved for Apple's App Store if it includes the ability to send Bitcoin. Google play doesn't allow in-app purchases in Bitcoin.
There's no reason to ditch it if you have already adopted it, but there's also no particular reason to adopt it in the first place, if something better might come along within a year or two. The banks aren't buying in. I haven't either.
There is no need to send email when you can send a fax
There is no need to carry a brick with you to make calls
There is no need for plastic cards when one can use cash
And so on, just because YOU do not grasp advantages and possibilities that bitcoin has brought along, does mean the rest of us dont. I use Bitcoin daily BTW it has already improved my life in ways only rivaled by the rise of the web, mobile in last 20 years
What ways has Bitcoin improved your life dramatically?
They are better for certain, specific goals, but by no means a universal improvement.
There is no bill that I receive that I can more easily pay with Bitcoin than with an electronic bank transfer, bank check, CU draft, or money order. There is no item I want that I can buy more easily with Bitcoin than with cash, check, debit card, or credit card. It is not a reliable store of value. I never need to send or receive international money transfers. I don't buy or sell black market goods or services.
The biggest thing it has going for it is potential.
I really, really hate the giant, swinefornicating, too-big-to-fail banks. Nothing would please me more than their rapid and well-deserved downfall, as people start to use crypto to recapture more of the value of their own economic contributions, and cut out some of the middlemen charging tolls and skimming off the top. But I'll be cursed to the abyss before I replace a Bank of America with a PayPal.
All I can buy with Bitcoin right now is a tiny FOADIAF to the banksters--which would probably feel really good. But right now I'd rather just give them the finger for free and use my spending money to buy pancakes instead of crypto outputs.
Still watching, though. I have been watching since 2010. I keep seeing Bitcoin users creating and using trust-dependent services rather than designing new transactions that remove the need for that trust. And then I see those services fail, to the detriment of the users.
I'm not sure what, exactly, I'm looking for, but I haven't seen it yet. It makes me wish I was even remotely qualified to write crypto at the level required to design a worldwide digital currency system. But I'm not, so I can't personally improve on Bitcoin, even though I want it to be better.
"The notion of shared public ledgers may not sound revolutionary or sexy. Neither did double-entry book-keeping or joint-stock companies. Yet, like them, the blockchain is an apparently mundane process that has the potential to transform how people and businesses co-operate. Bitcoin fanatics are enthralled by the libertarian ideal of a pure, digital currency beyond the reach of any central bank. The real innovation is not the digital coins themselves, but the trust machine that mints them—and which promises much more besides."
http://www.economist.com/news/leaders/21677198-technology-be...
This idea of selling "checksums" is his current favorite smear, but it is of course obvious nonsense.
https://github.com/hyperledger/hyperledger
TLDR: there's no code in that repo.
The article even mentioned at least one existing institution that has an incentive to preserve the problem to which they are the solution:
"Indeed, some companies involved in the project may feel
threatened by existing efforts to reinvent the financial markets
with the blockchain. State Street bank, for instance, stands to
lose if companies start using Overstock’s technology to borrow
stock. In the US, the stock loan business is a $954 billion
market; State Street, known as an agent lender, is a big part of
that. Its future depends on getting ahead of the game.
IBM intends to contribute tens of thousands of lines of its existing codebase and its corresponding intellectual property to this open source community. Digital Asset is contributing the Hyperledger mark, which will be used as the project name, as well as enterprise grade code and developer resources. R3 is contributing a new financial transaction architectural framework designed to specifically meet the requirements of its global bank members and other financial institutions. These technical contributions, among others from a variety of companies, will be reviewed in detail in the weeks ahead by the formation and Technical Steering Committees.
"enterprise grade code"
You can think of the opposite of "enterprise" software as realizing that if you use independent packages a,b, and c and tie them together with some shell script that it will do what you want. It's only been tested by one or two guys, but you can't see any reason why it wouldn't work for the 10,000 people on your site (famous last words...). You spend a week patching it together and roll it out on the weekend with no way to roll back if it doesn't work, etc.
Still not a fan of enterprise software, but I don't work for enterprise companies any more ;-)
Java.
The blockchain and SWIFT are very similar in spirit and in actuality, and it stands to reason that there is consensus that a private blockchain network would be more robust, fast, and secure than SWIFT.
http://www.linuxfoundation.org/news-media/announcements/2015...
And the website:
https://blockchain.linuxfoundation.org/
Please post if there is any more information.
This is the snake oil phase of cryptocurrency. Or, more charitably, the not-inhaling phase.
One of the most common is believing that everyone who uses their own chains are not using the bitcoin Blockchain, which is usually not the case (apart from some notable examples like Ripple or Ethereum), you can use the Blockchain with marked bitcoins or other mechanisms to essentially "convert" them to other currencies in a provable way.
Another is that everything that needs to be distributed should be done in blockchains, whether there is trust between peers or not.
[0]: https://coincenter.org/wp-content/uploads/2015/06/SecondLett...
[1]: http://www.sec.gov/Archives/edgar/data/1130713/0001047469150...
... unless you are using "sidechain" in a very loose, diluted sense.
Would it be considered a completely separate chain, since it needs to publish the timestamped hashes on the bitcoin blockchain ? (Or any other, sure, but right now bitcoin is the one with the widest adoption)
I can sign a message saying I am giving you $10 of Bank B's debt but there is no way with just signed messages for you to know I still have ownership of that debt.
I've worked in ETL at Morgan Stanley. So not only finance code. But their data systems.
You're not doing this though you're downloading the entire database to verify the subset is true and you're using blocks because adding single transactions at a time when you need to have known ordering amongst a lot of participants leads to a lot of overhead that is removed by batching.
The type of information we're talking about isn't sensitive though(unless your going down the drain and trying to hide it). And yes I just made up that I worked in ETL at MS a department pretty much no one that hasn't worked in knows exists.
But seriously, "OBC currently offers two implementations of PBFT (Practical Byzantine Fault Tolerant) consensus, as a means to validate transactions".
http://www.multichain.com/qa/13/multichain-blockchain-mining
Because these attacks exists, including Peercoin[3] and Blackcoin[4] proof of stake cryptocurrencies have "master" public keys that control the blockchain.
This class of cryptocurrency is either insecure or centralized, however proof of stake (based on a PoW currency) is useful in some systems because gaining stake is costly, but it isn't workable for bootstrapping distributed consensus.
On what the article says, transactions not relying on the first bitcoin blockchain are more vulnerable to 51% attacks[2]. Though if that many big corps joined, they could achieve a well established, attack-proof consensus relatively fast - - this probably is bad news[3] for Bitcoins' blockchain "ambitions" which is considered by many a solution to de-centralize the "internet" or services depending on third parties.
[0] In computing, the Two Generals Problem, is a thought experiment meant to illustrate the pitfalls and design challenges of attempting to coordinate an action by communicating over an unreliable link: https://en.wikipedia.org/wiki/Two_Generals%27_Problem
[1] https://www.youtube.com/watch?v=sYduOfRLHq0
[2] https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
EDIT: format, clarification
UPDATE: [3] just saw the linux foundation page, this might actually be a good thing, forgive my ignorance
PoW aims to solve that. Blockchains are just a way to store data in an agreed format with immutability and known ordering.
>On what the article says, transactions not relying on the first bitcoin blockchain are more vulnerable to 51% attacks
51% attacks are an issue for PoW systems. Private chains don't need PoW so aren't vulnerable to them.
Like I've said elsewhere you are arguing from ignorance and because you've bought into the religion of bitcoin.
Bitcoin isnt good for very much, it's mostly just useful for value transmission and censorship resistance. You're new to blockchains and don't know that, so you intend to blockchain all the things. Which is a way more extreme view.
I'm new to blockchains? I'm pretty sure I'm not.
As for sharing information - youre right... if you don't use blocks
I think we're done here. You're not doing anything but saying Nu uh! and calling me a liar.
Here's what will happen to your database: it'll drop the blocks and revert to a message passing infrastructure. Which is fine and good - but not in any way related to a blockchain.