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> 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)?

I think I was turned off because I envisioned a much grander future for blockchain tech than a glorified clearinghouse for big banks.

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.

sounds like a job for Dee Hook!

[0] http://www.fastcompany.com/27333/trillion-dollar-vision-dee-...

I doubt their private blockchain will work for the very same reason they want a private blockchain - they're not trustworthy. The bitcoin blockchain is secured by the large number of disparate people mututally checking the system. When it's just banks involved the number of players is reduced by many orders of magnitude and it becomes very much easier to game the system.

The incentive to steal large amounts of money is high and the security is relatively low. What could possibly go wrong?

How would you steal large amounts of money on a private chain?

Add a new transaction to the end of the chain saying that counterparty X has paid you $1B. Publish this transaction. Counterparty X, of course, publishes a version of the blockchain where you have paid them $1B dollars. How do participants in a private blockchain determine which published version represents reality?

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.

In example 1 you would have to forge a signed transaction to do that. Otherwise Bitcoin miners could just steal everyone's coins.

For 2 in a rr system you wouldn't be able to submit 2 blocks in a row

How do the banks ensure that aren't outmined? One of the key components of a blockchain is that no one mines more than half that chain.

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.

They will use a private network with their own custom protocol, just reusing the idea of block chains to not require a central entity.

I was wondering the same. What's the incentive for me to mine (verify transactions) on their blockchains?

You won't have the option too and they won't have the need for you to so there is no incentive.

How does anyone trust it then? Isn't it by default able to have them alter it then, as they win 51% of the processing power? It seems to miss all the benefit of a blockchain, or I'm missing something?

They know all the participants and they don't use PoW. The benefits of a blockchain are known entry ordering and immutability.

It sounds like you are missing a lot by having a bitcoin centric view of the problem space.

Every time Ive ever heard blockchain on here it was a Bitcoin- or Xcoin-centric view involving mining. I always countered with stuff like you just said from old research into distributed, fault-tolerant DB or SCM design. I had no idea until now that there was even parallel blockchain work with no proof of work.

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.

The so-called non-work based blockchains are typically just presented as blockchains for the marketing hype. These are run of the mill paxos databases which isn't very useful compared to modern signed message sending platforms that companies like swift use

I figured it was something like that. Makes sense. Audible sigh once more for effect of marketing hype on comprehension.

I think the main press issue is that these other chains aren't really for public use so there is little benefit to pushing for press unless you're a company that develops them trying to find clients and we do actually see a lot of stories about this in the financial news.

Makes sense.

Same reason people trust the banks current way of doing things.

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.

Banks don't need mining for their chains.

>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.

If there's no mining its not a blockchain. Objective truth is the innovation that Bitcoin offered. These proposed system achieve consensus by merely voting for truth, which is technology we've had since the 80s

Bullshit. Nothing about the term blockchain implies there must be mining. This whole "it's not a blockchain without mining" thing came straight from /r/bitcoin where a bunch of people seem to think that saying something isn't a blockchain matters so they keep trying to change the definition of it so bitcoin is the only true blockchain.

>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.

It means the security is non existent. Read any of the andrew poelstra papers for details on how and why.

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.

No it doesn't mean that at all. Just because you are unable to think up a system doesn't mean it's impossible. A basic and secure enough system is trivially easy. Which paper?

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.

Search for "on stake and consensus" I'd link to it, but I'm on mobile right now. Btw- I know you're new to blockchains because poelstra has been writing seminalpapers for years and you haven't even heard of him.

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

That entire paper is about PoS and dynamic membership systems where the participants aren't known. Relevance to the current discussion? Zero.

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.

So if the trust each other - passing messages in the style of SMTP (or soap) is drastically better than a hokey round robin "blockchain emulation" architecture.

At least you understand now that immutability requires energy...

This discussion might be a little above my pay-grade, but you're seeming to conflate "unknown participants" with "untrusted participants" from this response. It's possible to know someone without trusting them. I think that it's pretty apparent that there is a difference between an unknown anonymous actor, and an actor that you know, but just can't 100% trust.

Note that in practice, this 3rd party clearing house often is owned by the banks (as joinz venture), reducing your implied incentive to obsolete them.

Not to mention them getting credit fees. They love current system: it's a cash cow. Any work on blockchains will be to benefit them.