Cryptocurrency is driving innovation in the financial sector
theindy.us
theindy.us
SWIFT launched a new service last year, that is now handling 25% of all cross-border transactions, to the tune of 100 billion USD per day.
Meanwhile, Bitcoin peaked last year at a total trading volume of 5 billion USD per day, and is now doing less than 1 billion per day. How much of that is cross-border is unknown, but even assuming 100%, it's still a tiny fraction of what SWIFT is handling.
Extrapolating from that that cryptocurrencies somehow drove SWIFT to launch their new service is a bit of a stretch to put it mildly.
In the context of how the politics of upgrading a bank's stack work, "driving" is the wrong word because in that context there are always people trying to drive "innovation". A better word is tailwind. Generally, banking tech is pretty crappy and good technologist can easily spot places where a big upgrade (aka "innovation") is warranted. The problem these people run into when lobbying for the upgrade is overcoming the hurdle of migration risk. The bigger the project, the bigger the hurdle. For JPM, I've heard this hurdle was summed up as _demonstrate a 1000x return on investment_.
Blockchain (via cryptocurrency) provides a tailwind to the people already trying to drive "innovation" in 2 ways -- it gives these people two additional angles:
1. As much as banks dislike spending money they hate losing market share. The risk blockchain poses helps in the lobbying for "innovation" without being a central point.
2. Higher ups can have the opportunity to be seen as "innovative in blockchain" by having the main "innovation" have a pet blockchain PoC on the side (similar to [1]) that's only kinda taken seriously. While the first bite at the apple (the upgrade) may not be enough this second bite (PR about them using blockchain) may satisfy them.
Does blockchain/cryptocurrency actually drive the discussion or make it into the final "innovation"? Probably not... today's gen 2 stacks just aren't good enough. Hopefully some gen 3's can change this in the next few years but that market still needs to be proven[2]. In the meantime, when dealing with a big bank's bureaucracy, every extra knot of tailwind helps.
[1]: https://www.swift.com/news-events/press-releases/22-addition...
[2]: Disclosure: I was at JPM working on blockchain back when Gemini (now called Quorum) was first purposed and when Juno was the headline JPM blockchain project. I left to co-found one of these next-gen platforms: kadena.io
I understand the justifiable HN frustration at the prevalence of scams and overpromises that have plagued the blockchain (mainly ICO) world as of late. But the blockchain is getting better, and with developments that make SWIFT innovations seem trivial by comparison.
It's been touted as the saviour of the BTC ecosystem for some time now, but would require massive sums to be locked in its channels to be near functional, and last time I saw figures it was effectively incapable of routing as little as $60 and required participants to be online 24/7 or was vulnerable to counterparty attacks if not.
It's really a bit of a joke.
Crypto-currency technology received billions of dollars in funding in 2017. Yes, plenty of that went to bullshit projects which have no chance at success, and probably have no intention to develop anything substantial. However, plenty of it also went towards hiring talented developers and creating projects focused on the next generation of crypto-currency.
Up until 2017, the actual investment into blockchain projects was minimal. And yet, even when the market was chopping around between 2014 and 2016, and barely any money was invested, very important milestones were reached. Most notably, Ethereum was launched, and has set the foundation for putting applications on the blockchain.
I don't think anyone argues that having full scale, working applications on the blockchain is a bad idea. They simply argue that the current applications are limited, and aren't working very well. As if the current state of crypto currency is static and will not improve in the next 10-20 years.
The reality is that crypto-currency and blockchain never got any serious attention until 2013-14. And even then it was short-lived. Today every single person in tech knows about blockchain and crypto-currency. They all have their own opinion on it, but compared to just 5 years ago, it has come an incredibly long way.
The technology will improve. It will improve at a much faster rate now, thanks to the bubble in 2017. These projects don't need to post quarterly earnings improvements. The developers don't need to follow a corporate timeline. You can't kill these projects. They will always improve incrementally, until at some point the technology is truly unrecognizable from what it is today.
Go back and check a computer from 1950. I'm sure plenty of people back then were laughing at how ridiculous the concept was of owning a PC. Technology moves in a straight line, forward. And unless a competitor outpaces the improvement, then every day crypto currency gains on other forms of currency.
That was literally my argument, well that and it seems like it never will be because of the fundamental design of the thing.
Not sure why you felt the need to write the rest of that, it's nothing to do with what I posted. It appears to be a lot of wishful thinking and idealism.
If you "want strong blockchain with 100.000 TPS" I can connect you over InMail.
I already get enough cryptocurrency related recruitment mail, ta. Some of it is very scammy - I particularly like the ones that want you to make them a new currency, and propose that they will then use it to pay you!
Yes.
>Go back and check a computer from 1950. I'm sure plenty of people back then were laughing at how ridiculous the concept was of owning a PC.
Computers in 1950 were being used for useful work that could not have been done before them. They had a track record of successes which has continued uninterrupted until today.
Cryptocurrency has yet to show a legal success story of any kind. The story on what cryptocurrency is "for" has swung wildly over the years as each attempted use case proves either inferior to existing solutions or impossible to achieve.
Bitcoin is digital cash. Bitcoin isn't digital cash, but it is for micropayments. Bitcoin isn't for micropayments, it's a settlement system. Bitcoin isn't a settlement system, it's borderless transactions for the unbanked. Bitcoin isn't for the unbanked, it's a settlement system again for different layers. Segregated witness will fix everything. Segregated witness wasn't meant to fix anything, it's the lightning network that will fix everything. The lightning network isn't meant to fix everything, it's designed to lock in vast amounts of currency and work only for those use cases that makes sense.
It's just endless. Cryptocurrency has no success stories, just a constant stream of "hope" that never goes anywhere in order to keep people hooked on a system that transfers a lot of money to a handful of centralised large-scale mining corporations and increasingly shady exchanges.
Even on a slow day, hundreds of millions in USD are transacted through Bitcoin alone. And plenty more through Ethereum. There are tons of use cases for crypto-currency as a transfer of value.
Eventually, there will be more stable coins, there will be instant (or virtually instant) transactions, and the cost to send a transaction will be virtually 0. That's the future of crypto-currency, and you'd be insane to think that once these basic milestones are achieved, that it won't serve any purpose.
It's a work in progress, but there are definitely people using the service as is right now for considerable amounts of money.
If nobody is buying anything, nobody is transferring money cross-borders, and no previously-unbanked people are being banked, then what are these transactions for? Nobody seems to _know_.
How do I know this? I run a business which buys and sells digital items for online games. Every single seller from Venezuela is looking for BTC. Most sellers from Kosovo as well. And tons of people are asking for BTC in general. The majority of $500+ transactions in the industry (often B2B) are done in crypto.
I can't pay my rent with it, I can't pay for groceries with it, I can't pay my taxes with it.
Those are things I want.
Can you name one thing that's come out of crypto that has seen any significant usage in the market it's trying to break into which isn't just using "we have a blockchain!" as a marketing tool?
This is made possible through increased liquidity in crypto markets. Specifically, the movement towards decentralized exchanges for crypto to crypto transactions. As this continues to progress, interesting financial innovations like MakerDAO will be become more and more sustainable. One of the primary caveats of doing business in crypto-currency is the fluctuating value.
Imagine holding a real decentralized crypto-currency that is pegged to the USD. That will open many doors for commerce, and decrease transaction costs. The ability to swap this token back and forth using atomic swaps will allow people to remain in crypto longer, without exposure to crypto price swings.
Once this happens, people will be able to keep a portion of their net worth within crypto currency indefinitely. A stable coin is what the market needs to move forward, and it will happen within the next few years.
>most interesting
not most successful
>the first implementations of smart contracts
the latest in the long line of "no, _this_ is what cryptocurrency was always for! All the previous examples were wrong!"
>Imagine holding a real decentralized crypto-currency that is pegged to the USD. That will open many doors for commerce, and decrease transaction costs. The ability to swap this token back and forth using atomic swaps will allow people to remain in crypto longer, without exposure to crypto price swings.
Imagination is not a successful project. This is literally talking about things which _don't even exist yet_.
>Once this happens
And here we reach the crux of the issue.
_If_ this happens, not once. Just like all the previous things that would have "changed the world", if only a long series of long-unsolved problems in cryptography and distributed computing were solved.
>that make SWIFT innovations seem trivial by comparison
Listen, those two phrases alone are gigantic signs of your bias. Even if they were true, the way you phrase it just screams "I own a significant amount of Bitcoin"
Add to that a sentence about
>a whole host of breathtakingly innovative developments
and, oh boy, do I ever think you are biased.
There is actually a pretty clear value prop for Bitcoin: you can exchange something approximating money for services which are undesirable or risky to do so with your traditional money. But needing to build an entirely new layer which, if I'm understanding right, has some significant impact on the semantics of how your transactions end up on the blockchain, just in order to be able to do a completely unimpressive level of throughput, is hilariously far from "breathtaking innovation" that makes traditional financial "innovations seem trivial".
For what it's worth, programmable, open source money has far bigger implications than you lead on here.
Ripple's explicit goal has always been replacing SWIFT, and they started to get some real traction. I think it's pretty clear that they were motivated by cryptocurrency, they'd been stagnant for decades despite the fact that it would have been trivial for them to do what they're doing now.
Anecdote: I have a sucky US bank, and a non-sucky Swedish bank. Last year I made a transfer from the US to Sweden, but it was after East Coast bank closing time, so it got scheduled for the next morning's batch transfer. Since I entered SWIFT details for my Swedish bank, I'm assuming the transfer went over SWIFT, but I don't actually know.
Early in the morning the next day the transfer happened, and the money was immediately available to me in my Swedish bank account, because that bank doesn't suck.
Three hours later I get an email from my US bank saying that they've processed the wire transfer, and I should maybe expect to see the money in my Swedish bank account in three business days... And I'm once again struck by how incompetent, slow, and sucky my US bank is.
And I don't think the underlying money transfer technology can do much about that.
I do find it really curious that so many in the bitcoin community either haven't heard of e-gold or don't see the parallels.
I mean, I am also a huge Stephenson fan, and had read "Cryptonomicon" and the idea sounded really cool, but I never really had anything I wanted to buy with e-gold, so other than allowing me to have customers who couldn't get credit, it was not particularly useful.
(By the way, is there a "Cryptonomicon" of bitcoin? I mean, I guess the idea of nazi gold is way more compelling than some math? but still... "Cryptonomicon" seems to be like exactly the template)
But... my loss in the e-gold shutdown (and my relating of e-gold to bitcoin) meant that I was pretty late to start accepting bitcoin, and that when I did, I used bitpay; Which has worked fine, I suppose, but I had people trying to buy with bitcoin fairly early on, and if I had accepted that and sat on it, I'd probably, well, I wouldn't be hugely rich or anything, but it would have been a nice payday. But I suppose that's the standard regret one has for not timing the market when something goes up in value sharply.
I'm personally still a long-term bear on bitcoin... but I kinda have a reputation for being a bear on a lot of things that have, uh, apparently inflated values, so who knows.
Why? Decentralized systems are sort of the standard way of defeating centralized governments. See: Tor, Guerilla warfare, Lone wolf terrorism, etc..
These two facts alone point to possibilities for interference at a large scale.
Get caught holding the last of the paper stuff just one day longer than the next greatest fool and you will be sorry. SWIFT knows this, governments know this and now the legacy financial industry (5 years too late) is starting to get it too.
These special entities need to record all transactions and verify them against this ledger. As a result you are now even more dependent on these entities than ever before. You basically just re-invented banking, only in a bad, uncontrollable way that is prone to takeovers (51% attack) by anonymous actors.
It's great. They can use their powers to keep inflation at a small positive level, help smooth out economic bumps, and help the money supply keep pace with the economy.
A fixed amount, ever, would constrain economic growth, reward hoarders rather than investors, disincentivise spending and generally be a poor substitute.
As evidence I present ... the entirety of the Western world and it's multiple decades of unparalleled prosperity.
Evil triumphs only when good men do nothing!
Please do provide your reasons, but if they're just the usual libertarian tripe about inflation and taxes, I'm afraid I might not give them much credence.
And yet here I am verifying the entire Bitcoin blockchain on an old crappy Toshiba netbook with a normal Internet connection and an old hard-drive. I use this one weird trick and big entities hate me: I have my node configured to prune already verified blocks, it only needs about 20GB of disk to store the last few months.
By the way, if you want to archive it all, a 1TB HDD can store roughly 10 years of completely full 2MB blocks. You can get one of those for less than $40, or $4/year.
...that is also declared "money" by fiat, exactly the same as paper money. It has value because we say it has value. That's not the interesting property.
The interesting property of cryptocurrencies is that the supply of money is constricted and can't be manipulated by any nation's central bank.
I don't understand how people believe this is a good thing (not implying you do specifically). One of the leading factors in the economic recovery following the 2008 crisis was Quantitative Easing and expansionary policies by the fed. Without these tools at the government's disposal, if there was another credit crisis, the effects would almost certainly be much worse and prolonged.
Like any tool, sure, it can be abused. But getting rid of it entirely by switching to a decentralized ledger (ignoring the reality that total decentralization seems infeasible), eliminates the very tangible benefits of having a central bank.
It's probably the same people who think that the Gold Standard was a fantastic thing and abandoning it was the worst thing ever.
I think you're arguing on the side of "countries need monarchies because the people can't be trusted" and "printing presses allow seditious ideas to spread and must be outlawed or tightly controlled", but, again, I can't be certain.
How is it that we can have two totally different interpretations of the truth? Isn't economics a science? Why is it that there are such varying opinions? I think it's because economies are too complex for any one person to accurately model. What you need is markets to decide what works and what's valuable and what the prices should be. What you need is competition, and that's what cryptocurrencies provide.
Bitcoin is already competing with weak currencies of corrupt governments and winning. A lot of improvements need to be made before Bitcoin is anywhere close to making a run for the #1 currency in the world, but if you're watching the technology closely, there's still a lot happening in crypto and it might be sooner than you think.
Hard to imagine how you reached that conclusion from what I wrote.
I do somewhat agree that having the precedent of a prior bailout might encourage some potentially stupid behaviour that might not otherwise be considered. The alternative, however, is much worse (in my opinion). The point isn't to keep Morgan Stanley or Merrill Lynch or whoever in business, the point is to make sure that the rest of the country doesn't lose their entire life savings because of one recession. If the cost of economic stability is propping up a few rich people, it's probably worth it considering the alternative. Of course, I'm sure the anarcho-captilist blockchain experts might feel differently.
My government denominates my tax obligations in my government's currency. This includes taxes based on transactions of non-currency goods.
So there's always demand for my local currency so long as my government exists.
What demand is there for a decentralised digital currency? What motivates stable demand for it compared to the currency I can pay my taxes in and which my employer can be legally compelled by the courts to settle debts to me in?
With things like state receipts, light clients can rely on other network nodes to provide the state of transactions that were recently confirmed, without giving up security.
This does require that some nodes are processing and storing the most recent N blocks and their transactions. Today, non-mining full nodes do this for free out of kindness, but in the future, this could be offered as a paid service instead.
Proof of work is only one option for securing a chain. Research into proof of stake and delegated proof of stake will hopefully make PoW a thing of the past and drastically reduce the energy requirements to secure a blockchain.
The Ethereum team has two main focuses right now:
1. Proof of Stkae transition (Casper) 2. Implementing sharding
At the same time, teams are working on sidechain technology such as Plasma, Plasma Cash, and Loom which will essentially allow transactions to happen on another blockchain whose state is persisted in the root chain.
This not only benefits blockchain users (higher scalability, little to no fees), but is also good for the blockchain network since the data persisted to the main chain is only a set of merkle roots from the sidechain, no matter how many transactions the sidechain has.
If it gets hacked I get my money back.
Basically it does everything cryptos promised to do, except it actually works and it’s centralized.
Mean while I have a few cryptos sitting in a wallet with no real way of turning them into anything because nobody accepts them and no services currently let me turn them into fiat in my country.
It’s been 9 years and I think we’re further away from seeing a decentralized currency than we were 8 years ago. Back then you could at least buy coffee with BTC, you can’t even do that anymore.
I do think crypto helped the financial industry step up. We wouldn’t have had our bank app if there hadn’t been competition, but I don’t see us ever moving to a decentralized economy.
And which decentralized ledger would this be? Bitcoin, with its maximum of 7 TX/sec? Before you come back with the "but LightningNetwork will fix that!" argument, please do a back of the envelope calculation of how long it would take 1 billion people to open just one channel on the LN, and let that sink in...