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Comment by simias | Hacker News Reader

>The coin will be issued on the Quorum blockchain which was developed by JP Morgan over the last year and is a private blockchain inspired by Ethereum. This means only selected miners will be able to process transactions, unlike public cryptocurrencies where anyone can.

[...]

>The purpose of the JPM Coin is to allow businesses to make near-instantaneous transactions of value across the internet without having to move fiat money in the background.

I genuinely don't understand what the blockchain does here that couldn't be implemented by any random database system. I mean the euros that I have in my bank account are also just a number that could be moved "across the internet" instantly if they so desired.

The big innovation with Bitcoin-like blockchains is that transactions can be done trustlessly but the whole "private blockchain with accredited miners" turns it into basically a slow inefficient database with extra steps.

Is it just a buzzword to generate interest or is there an aspect of this I'm missing?

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I think it may be that the decentralized control structure makes organizations who would normally be in competition with JPMorgan more willing to be on board with using something that they developed. For instance, if you are say, Goldman Sachs, would you want to use a private database at JPMorgan for you and your clients funds? Or would you prefer to use a semi-private blockchain, where although it's not open to the public, each participant in the network has equal stature to one another? I think that is the true innovation here, and I do think that it is important. It solves some of the corporate cooperation issues that prevent certain types of value from being created, because nobody wants to let their competitor control the space.

This already exists. It’s called the DTCC and everybody uses it.

https://en.m.wikipedia.org/wiki/Depository_Trust_%26_Clearin...

And that company is exactly what this tech. replaces. That company does not provide its services for free. This blockchain product does.

How does this product operate for free? Who's paying for the miners?

Sorry, there may be small fees paid to the miners. But those fees will presumably be dramatically less than this current company charges.

You are putting a lot of weight on "presumably." Someone has to pay for all that mining. Or, you know, skip the mining and your costs should be lower.

They do skip the mining. Mining defends against Sybil attacks, which you don't have to worry about if you know who all the participants are.

You don't mine in a permissioned system like quorum. The CPU load is minimal, and when running the quorum clients, you are basically just checking to make sure everyone in the system agrees on the transactions. If someone tries to cheat (or spam or whatever), you kick them out.

But then we're back to square one, aren't you basically describing a distributed (but still perfetly "trustful") database? Isn't that effectively what this DTCC provides?

What in this allows JPMorgan to provide the same service for free? Is it really technical innovation or is it just a different business model? Wouldn't they be able to do the same thing without using anything cryptocurrency/blockchain related?

I feel like I'm missing something obvious but I don't see what it is.

A blockchain is a distributed non trustful database with a method for resolving disputes built in. Roughly speaking in something like quorum, everyone checks everyone else's work, and the majority consensus is ground truth. DTCC requires a trusted third party to administer the database. Quorum doesn't. Quorum could presumably also replace intra-bank transactions as well (instead of maintaining some other kind of database).

I guess the missing piece that seems to break people's brains; the ledger in the distributed database represents a dollar amount (in the case of quorum's dollar thing) and it has money-like rules, unlike, say, postgres which ultimately relies on some other piece of software to make ledger like transactions.

Unless I am mistaken, DTCC doesn’t provide any trust for internal account balances at JPMC. It only provides trust for the details of transfers. These tokens provide trust before and after transfers. The tokens themselves actually provide no trust during transfers and the transfers are only allowed by trusted parties as a result.

Also, DTCC only handles securities not currency so this doesn’t exist at all.

What actually you should be arguing is that the JP coin and the DTCC need to be combined as they each only provide trust in a certain part of the ecosystem.

what you're missing, that's obvious, is that blockchain is a solution looking for a problem where none exists. The word was imbued with virtue, and at this point blockchain has come to mean 'virtuous database'

Technology can be more than new things; it can also be made of combining old things in new ways, or finding new uses for old things, or even simply new ways of thinking. If we removed "cryptocurrency" and "blockchain" from the above, they'd still have a new settlements process. They're using a distributed ledger to make the process safely automateable and reduce audit costs.

If someone tries to cheat, you suspend their participation if you are empowered to do so, and / or report them to the appropriate regulatory bodies / law enforcement.

Blockchain doesn’t allow anyone to circumvent anything.

Unless it’s a perfectly spherical blockchain operating in a vacuum.

>If someone tries to cheat (or spam or whatever), you kick them out.

Or, if someone doesn't pay for access, you kick them out? Or if someone is your competitor, you kick them out?

It is a technology for trading with other banks.

If you want a chain that doesn't allow transaction censorship, you need something else, like a proof of stake or proof of work blockchain.

Permissioned blockchain generally doesn't have wasteful mining because all the participants are known. So the nodes just end up signing transactions. Double spend attempts can then be prosecuted.

> And that company is exactly what this tech. replaces. That company does not provide its services for free. This blockchain product does.

There’s no such thing as “free”. You’re either paying directly or indirectly. The DTCC is owned by its member organizations so it does not have a direct profit incentive anyway.

I highly suggest reading more on the topic and the problems it’s meant to solve before pitching “But blockchain!” as a solution.

It doesn't need to have a profit motive to cost more. It's costs are what cost more.

But there is no reason for it to cost more than a private blockchain solution.

Sure there is, simply by virtue of being the only solution available. All of a sudden, a simple database becomes a sprawling corporation with a multimillionaire board of directors, waging political war among themselves for resources, power and an ever larger number of underlings.

The private sector is not magically superior to a state bureaucracy, without any competition or political pressure to reform it can act even worse.

> a sprawling corporation with a multimillionaire board of directors, waging political war among themselves for resources, power and an ever larger number of underlings.

A blockchain does not get rid of those things.

I'm talking about competition, whatever the technical implementation. That's precisely the point, cost is determined by market structure and incentives, an inferior solution can be much cheaper due to lower margins.

I'm not sure I understand your point. Blockchains do not get rid of competition.

They don't but most competition does lower prices which is his point.

Erm, yes it does. DTCC has a board of directors. It is a company. This blockchain eliminates that. Literally.

> DTCC has a board of directors

A large business "has" a lot of things. Why bring up board of directors specifically? I'm sorry but this sounds more like fumbling to grasp a point rather than an actual example of something useful.

I didn't bring it up, the comment you responded to did. You said that it didn't get rid of it, but it does. It gets rid of the entire DTCC company, and all of the salaries that go along with that. All of those costs go to zero.

Can you explain? To me, it seems like control is what matters. And the DTCC controls access to its databases, whereas JPM controls access to its blockchain. Whether the parent organization is adding a +1 to a database or a +1 to cryptographic ledger seems inconsequential.

>JPM controls access to its blockchain

Only for the initial group of banks invited to participate. After that it would be up to the consensus algorithm to decide if a prospective member can join.

Who's pitching "but blockchain"?

While you show clear ridicule for some sort of "blockchain fad", I don't see anyone pitching a solution here.

I see JPM literally implementing one, and I would assume there is a cost reduction they've calculated.

Typically the cost reduction expected is due to eliminating rent seekers.

Which rarely happens, as new rentseekers replace old rent seekers.

It's not going to be free once they finish paying the army of developers each bank will have to keep on staff to manage it.

You mean like the army of developers required to run an ethereum node?

Or the fact that their coin / Quorum IS Ethereum, so most of the work will be done for free by core devs

You seem to be missing the point. Operating this blockchain is nearly free. Building it out is a capital cost. Once its built, its ongoing expenses should be low.

You two were actually saying the same thing.

There's nothing to built... 1. `git clone ethereum jpmorgancoin` 2. profit

Maybe JP Morgan thinks it's possible to improve on the DTCC. Your link describes some controversy over their handling of naked shorts, for example. Or maybe the new system would be cheaper, or JP Morgan wants to implement new features themselves, without having to convince everybody to trust JP Morgan to track their money.

Quoting Wikipedia: "Several companies have sued the DTCC, without success, over delivery failures in their stocks, alleging culpability for naked short selling. [...] Critics blame DTCC, noting that it is the organization in charge of the system where it happens, alleging that DTCC turns a blind eye to the problem, and complaining that the Securities and Exchange Commission (SEC) has not taken sufficient action against naked shorting"

Doesn't sound that trustless to me. With a decentralized setup as in Quorum at least everybody can calculate how much they have to trust the miners.

If your company has miners of their own, you are part of the whole system and not just using a third party service.

Most quorum implementations I have seen don't use mining for consensus. Out of the box you can choose between these consensus algorithms: https://github.com/jpmorganchase/quorum/wiki/Quorum-Consensu...

Thanks for the link. I knew there were other consensus algorithms possible but I didn't know of any specific example.

The main point still stands though, the different consensus algorithm allow you more insight than a simple centralized DB that is just a black box.

I agree very much. I have worked on quorum based blockchain systems for bank consortiums in the past.

The thing is that it can take days for a transaction between two different regional banks to clear. Whereas with the solution they're proposing, I'm guessing it'd take much less time than that.

Many people are trying to solve this problem (see: Corda, XRP)

This is exactly correct. Private blockchains create efficiency between large institutions like JP Morgan and other banks who are constantly moving large volumes of money around by eliminating the traditional processes in place required to move that money. A private blockchain is essentially a shared database (distributed ledger) used by an arbitrary number of private institutions, each of whom has an interest in participating to reap efficiency gains by using a shared database that they can trust, more than they would trust a traditional database owned by a single party. It's not game changing innovation in the same way that crypto futurists think of Bitcoin as a new type of decentralized money, it's incremental efficiency for existing processes. It's more accurate to think about this as blockchain technology for JP Morgan than as cryptocurrency in the sense that Bitcoin is an application of blockchain technology. JPM coin is not like Bitcoin, or ripple for that matter.

The important thing to understand here is that JP Morgan thinks about blockchain technology completely differently than libertarian futurists. Blockchain is not a movement for them - it's a technology that reduces friction for things they are already doing.

> it's a technology that reduces friction for things they are already doing.

And there lies the rub, because as far as I can tell, this particular (and no particular) blockchain implementation does not in fact reduce any friction for things they are already doing.

This is the aveneue of questioning I'd really like to see more detailed discussion on. [Disclosure: I'm agnostic on the potential of blockchain]

Does TPS increase non-trivially in a private chain vs a public chain? If not, will a private chain's TPS at least substantially outpace the TPS of, say, Ethereum within 3-5 years? That is, will JPM's private chain reach 100, or 1k, 10k, 100k, etc TPS?

Assuming TPS reaches a sufficiently high-level (whatever that could be), would a private chain require fewer sysadmin/engineering/etc. folk, compared to what the DTCC model requires?

Does a semi-private chain (where JPM allows other partners or competitors to plug-in) have a faster on-ramp? That is, would it be faster to plug players in than a traditional solution?

Is there a cost reduction somewhere within the audit process? Other processes?

I have these types of questions, but it is difficult to find much substantive discussion on them. Typically, answers are Yes or No, but with little to no detailed explanation as to why.

I know people who have worked in this space (fintech permissioned blockchain). Although this was my initial reaction, they tell a different story. One angle to that is along the lines of "you wouldn't believe how bad the thing they use now is".

There is no innovation here because JPMorgan controls access to the network thus they centrally control the network. No problems are solved here that couldn't be solved without a blockchain.

We need a new word for a thing that's like blockchain, but not happening in public, and therefore not actually decentralized.

I submit "charm bracelet".

Maybe "base that stores data"?

DatabaseChain could be fun as well

D-Chain

Public and decentralized are not necessarily the same thing. Even if just two other banks join in, under an equal footing of ownership of the proof of work, its no longer centralized. I think assuming "all blockchain tech must be used only for situations with anonymous participants" is unimaginative gatekeeping. There is plenty of room to reimagine business process workflows between consenting participants, that doesnt at all hinder the public coin marketplace, or infringe or harm principled stands trying to change the world. These arent coins a single human bank customer would ever hold or use, these are for institutional settlement.

A good example could be a construction project where the general and all the subs collaborate on a database, but no one company owns it.

The smart part of JP Morgan's plan here is scalability. It might be centralized now, but it can be trivially extended into becoming decentralized at the flick of a switch, without a redesign.

Microsoft already has pushed for a non-public-anonymous-participant private blockchain that has throughput of around 1600 transactions per second. https://medium.com/coinmonks/coco-framework-a-game-changer-i...

> and therefore not actually decentralized

> The Quorum blockchain has been tested with other major companies including Goldman Sachs and the National Bank of Canada

It is sort of decentralized. but the access is not open to everyone. Most banks aren't comfortable with putting all their eggs in the basket that could end up under someone else's control. Decentralized doesn't really make the bank feel at ease when they back up their coin by trillions of their own money. They'll want some guaranteed form of control.

The purpose is actually to bypass SWIFT and their network with a network that is completely under the bank's control.

That's nice to state, but it simply isn't true. JPMorgan controls access to the network, but once you're in the network, you're now on equal footing with them. If you want to, you and the other participants can fork away from JPMorgan and do your own thing. JPMorgan controls the network only in the sense that they initially extend invitations.

Can't they revoke the invitation whenever they feel like?

I suppose they could revoke access to their own node, the same way any Bitcoin miner can. But I don't think they can revoke access to the other nodes.

So JP Morgan would see some state for the accounts and the clients would see something else if they disagreed with JPM?

Doesn't seem like a viable consensus algorithm.

So you can prove to me that my account balance at JPMC is actually $100 when I do a wire or do you take JPMC’s word for it when you see the wire details?

Whether or not the validation will be public could mean you still have to trust JPMC but now you essentially get an API to validate my account balance which you didn’t have before

> you essentially get an API to validate my account balance which you didn’t have before

A blockchain is not needed for this

HTTP wasn’t needed for you to send that comment to hacker news, they could have used other technologies instead. What’s your point?

My point is that the advantages you described (an API) don't justify the complexity of blockchain technology since APIs can be implemented without them.

That’s a purely technical perspective on the situation. One could make the same argument about gRPC versus SOAP versus XML.

What would have been a more constructive response was:

This looks like JPMC is trying to profit off hype by building a new accounting and settlement system on blockchain. Since they control all aspects of their network and ultimately are the only one redeeming tokens for dollars, they could have used something simpler. However, I bet they did it this way because they think forking ethereum is cheaper than building a new system from scratch and also they might get a bump in stock price from the hype. If they built and announced the same system using bespoke tech (that likely solves the problem more effectively), no one would have probably cared.

I think maybe it wasn’t clear that I was responding to your comment about no innovation was made versus that blockchain was required. The innovation is that JPMC actually has an internal accounting and settlement system they can trust, not what database it uses or what language it was written in. Previously they relied on ACH and Wires which they didn’t control.

This explanation would have credibility if the announcement included BofA and Wells. Without multiple major players entering with them, it is only a wish.

I felt it was incredibly self-serving to make the token JPMC only. An arcade is only as good as the games inside. If your token only works at JPMC, that’s a pretty weak banking arcade.

That's not quite right though (and I fault their PR people for not explaining this). The token can be exchanged between any party on the blockchain (which afaik is not JPMC-only). You only need to transact through JPMC to exchange the token for USD.

“Unlike bitcoin, only big institutional clients of J.P. Morgan that have undergone regulatory checks, like corporations, banks and broker-dealers can use the tokens.”

JPMC still controls who is allowed to exchange tokens. Which means that you still have to transact through JPMC to exchange tokens as JPMC controls the blockchain.

If somehow they don’t retain majority control of the blockchain, then you technically don’t have to transact through JPMC but I don’t see that happening.

That still doesn't need any technology derived from Bitcoin though. git branches and a git merge driver could do it.

Liquid from Blockstream is actually doing what you're describing, but as fairly and openly is possible. The company itself doesn't have any operating nodes (JPMorgan has), Liquid is open source (https://github.com/Blockstream/liquid) and public, just the operating nodes are selected in a controlled, centralized, but geographically distributed way.

Another difference is that Liquid allows 2-way pegging to BTC, but allows other (for example fiat based) tokens to issued as well (but not part of Blockstream's business model), and the transaction types and values are encrypted.

I assume they've set up an ethereum network with Proof of Authority instead of Proof of Work or Stake which means this isn't really decentralized since the transactions are being solely mined by a controlled group of trusted nodes. The five-engineer team I work on did the same over the course of the past six months and for us it's just a stop-gap until we can move to Proof of Stake, get some third party nodes on the network and finally consider ourselves decentralized as a blockchain.

It doesn't solve any of those issues. If one bank controls the infrastructure to mine and update, they can hard fork at any time. Why would another bank trust that system? The whole point of "distributed consensus" is to distribute the friggin consensus!

> what the blockchain does here that couldn't be implemented by any random database system

It says "blockchain" on it, so it can be sold to some uniquely gullible investors?

> what the blockchain does here that couldn't be implemented by any random database system

More likely it can be used to circumvent regulations by trading digital goods and investing in futures, instead of liquid assets.

Even if it is eventually regulated, the upside potential (no matter how temporary) is an upside.

It's the other way around, actually. Having small set of authorities that reach consensus via raft/pbft in case of quorum means that ethereum blockchain can be much faster. You still have full transparency of what's happening, you have access to the chain, you can read it, validate it, etc. They just run minting of blocks for you. It's true that if they don't like you, they can refuse to include transactions from you for example - that's the main cons from public consensus like PoW. But they are not worried about it, of course and other participants are usually not worried as well because they know that whoever controls minting nodes have strong incentives to run it fair (otherwise participants would not give a shit to join it). This is different from public chains where those rules don't exist. In big corps integration and security is a massive problem. Blockchain reduces those two problems by orders of magnitude. If you wanted to "implement it by any random database system" - you'd end up with something like ethereum. You can't just spawn your public postgres and publish public api to create new users, can you? Quorum has also some other extensions to ethereum related to privacy (private contracts, anonymity etc) that are attractive to corporations. It's nice to see them open sourcing quorum and publishing something real-world based on it.

I tend to agree with you. I wonder though, does reframing as a crypto help them get around any rules, regulations or taxes?

i was curious about this as well

No. Why would it?

I know nothing about finance law, but I know that governments typically have a "blind spot" for new technologies.

Sometimes this can be a good thing, and I think it's what kind of led to the internet being such an interesting place with things like BitTorrent, but often businesses will see it as a quick loophole.

I know nothing about the law for e.g. violent crime, but if you find a new murder weapon, the law would certainly not have a "blind spot" for your new technology.

The law isn't a computer program, it is a human process.

Surely if it did, regulators would move quickly to close that gap?

like the gnu/linux/systemd/gnome/blink argument, this is a great example of why calling linkedlogs/dcash/proofofwork/byzantineFT/cryptokeysasidentity "crypto" kind of muddles the conversation.

In JPMorgan's case, using linkedlogs/dcash/cryptokeysasidentity might end up working out really well. They can distribute the tech to other banks, and the killer feature, besides being distributed ends up being cryptokeysasidentity, from a security standpoint. In my book, what they are doing is still "crypto" but it isnt the genius innovation the whole sum of all bitcoin was. (You might argue that its the proof of work that makes something a crypto, and thats fine.) What made bitcoin different was APPLYING a bunch of academic knowledge to a useful to solve problem. https://queue.acm.org/detail.cfm?id=3136559

If you look up the definition of TECHNOLOGY, its "the application of knowledge." Bitcoin is a PERFECT EXAMPLE of a technology, not because its digital, electronic, and computery, but because its taking a ton of knowledge from academia and APPLYING it. This new coin is more a reapplication of technology, than any sort of creation.

I don't think it's the work "crypto" that helps people skirt regulations. It's the anonymous, permisionless consensus coordination that does. JP Morgan's coin won't have that property, they're just signing off on transactions themselves.

Yea, it definitely has limited immediate value compared to a database as long as it is on a closed network. However it does allow them to experiment with the technology in a controlled fashion. They could have done so quietly but, you know, marketing.

I think there is still value in Blockchain networks like Stellar[1] that are not fully decentralized, but are federated and diverse. If this is a first step towards them issuing a stable coin on a network like that then I welcome it.

1. https://www.stellar.org

"Stable coin" is one of those misnomers where it means exactly the opposite of what one would expect from the existing definition of those words.

Something pegged to the US dollar is inherently going to be unstable, because the dollar is unstable. The dollar is not priced in terms of dollars. One dollar today might not be a dollar tomorrow. The instability is mostly due to the conditions of the market, but then those effects are compounded by the whimsical economists printing it for fun.

OTOH, Bitcoin is a closed system. At any point in time, you can measure the amount of Bitcoin you have as a fraction of the total amount of Bitcoin which exists, and you can even directly predict how that will change due to inflation for the next 100+ years.

I personally prefer the term "fiat coin" or just "shitcoin" is sufficient.

You are correct that these sort of "private" and "federated" blockchains completely miss the point of Bitcoin (some intentionally, some not). The features they provide were possible before Bitcoin was invented, but no one really cared about finding uses for them until the blockchain hype train rolled through town.

That doesn't mean they're completely useless though. If Bitcoin eventually inspires some real innovation in fintech, then great.

But the inspirations have almost entirely not come from the stuff that makes Bitcoin and "blockchains" unique. If they realized that people want an easy way to have their assets managed and traded digitally they can do it much better without blockchain baggage.

> I genuinely don't understand what the blockchain does here that couldn't be implemented by any random database system.

A blockchain is...well... a database system itself!

There are many different types of database systems, eg. Relational, Graph, Object orientated, document (eg elastic search) and so on.

Generally you want to pick one that fits your problem area well, so picking a random database system would not be a good idea.

One of the most important data structures they need is a tree for the Merkle proofs to confirm that the data hasn't been tampered and contract execution happened correctly. Tree structures are notoriously difficult to implement in a relational db for example.

(BTW, I'm also skeptical of the hype around 'blockchain' just as before when the 'noSQL' hype came around. You will surely have some devs pick the blockchain as their database system for the wrong reasons, just like back in the day when you had devs pick noSQL because it was cool.)

Why is a Merkle proof difficult to implement in a relational DB?

The only required data fields in each row are the parent row ID and a hash, no?

One thing it could do would be to let each participent in a transaction verify the transaction itself... which I suppose is a nice feature, maybe everything goes into "escrow" and then is released when everyone ( the participtors in the transaction who can mine? ) can agree on the result.

My thoughts exactly. Isn't this:

> make near-instantaneous transactions of value across the internet

the definition of what wire transfer does? And why not doing it in "fiat money" (it's an additional level of hilarity for a major bank to use this term, for those who understands) has any value?

The value of blockchain transfers is lack of intermediaries and gatekeepers - which advantage the private chain owned by JP Morgan takes away. This is like advertising "we sell gold coins, only instead of hassle of owning heavy metal pieces, we provide you with little pieces of green paper that could be exchanges for gold coins at any gold dealer" - totally missing the point of the whole exercise.

I don't know much about this area, but I could imagine that even if the mining is selective, the transfers might not be. It could remove some overhead that large banks have to do in verifying transactions and preventing duplicates, etc.

mining and transfers are the same thing. that's the core concept - the ledger transaction is the currency.

It's absolutely just a buzzword. A blockchain is just a data structure which is useful in Nakamoto Consensus, which is only for censorship resistance.

Everything a cryptocurrency can do be done much more efficiently, faster, cheaper, safer, better UX, etc, except for censorship resistance. If you don't want your coin/token to be censorship resistant then you can have a system that's a million times better by just building a web app that uses regular cryptography.

Not really.

If you build a web with a private, centrally controlled database, then you might be messing with the database behind the scenes.

A Blockchain makes that database transparent, and makes any secret funny business immediately apparent.

That black or white worldview absolutely ignores a middle ground use case for a bunch of collaborative entities that _sort of_ trust each other, are ok being non-anonymous, and want to work together on a shared ledger. Ten firms working towards a common goal can do so without an insane amount of redundant double entry accounting at each firm, they can do the work once and share the results, they can audit and verify the log. And they arent all just accessing one databased stored at one firm.

Im not sure people really understand the implications of a team of companies that collaborate often banding together, and eliminating the need for 3rd party audits and 3rd party fund settlement.

> Im not sure people really understand the implications of a team of companies that collaborate often banding together, and eliminating the need for 3rd party audits and 3rd party fund settlement.

I think it is more that people don't understand what existing technologies there are already, but they've heard of this "blockchain" thing, and the black and white view is one where you either need a blockchain or you don't need anything.

There are some other interesting technologies and research areas. One example is SMPC. In 2008 (pre-dating Bitcoin), a secure auction with sealed bids was conducted in Denmark for the purchase of beets from independent farmers[1]. This kind of research get drowned out by the blockchain hype because nobody is interested in something which doesn't print their own money.

There are also more well understood distributed databases and consensus algorithms which work when you have semi-cooperative parties. I think a lot of these "blockchains" really just want a merkle-tree, and they could probably get by with a database like noms[2]

When you have a bunch of cooperating parties, they either need to assume that the parties are cooperative, or you need an arbitration process. The arbitration process is what the blockchain is about (with the record keeping in the blockchain being a kind of toxic waste which is kept around to support that). What do you do when the parties are being uncooperative? If there are only a few parties, then PoW is not a viable solution because one party could outpace others if they have more computing power. If you pick something like Proof-of-stake, then several parties could collude to swindle others. If you have a centralized system, you've not gained anything. Ultimately, the companies involved are always going to take any quarrels to a legal court and have a human decide the outcome - meaning their blockchain is going to have to be "fixed" by manual intervention anyway.

[1]:https://eprint.iacr.org/2008/068

[2]: https://github.com/attic-labs/noms

You can interact with people you don't trust using standard cryptography. The blockchain just facilitates censorship resistance.

The blockchain signs each dollar. You could have done this instead by making each dollar a PGP signature and allowing trusted parties to decrypt the signature and claim the dollar.

Honestly though, if the chain isn’t public, JPMC can update the code behind-the-scenes so there’s not as much trust as there would be on a public network.

I also fail to see the point of this... maybe to prove once and for all that blockchain doesnt make any sense as an institutional/private service?

well how many servers that you interface with financially allow you to audit all of their transactions in a mathematically verifiable way?

the moment you start using a private blockchain you miss the point of cryptocurrency. all of these enterprise coins make me laugh

There are a lot of points of cryptocurrency. It's true a private chain has no protection against central control... however it does have protection against double-spends, mutable history, confirmation guarantees, etc.

right but all of those are more performantly implemented with a cluster of mysql replicas .. the protection against double spends is only as strong as the cluster of machines doing the hashing

Given a standard for moving assets across chains, this starts to become really interesting.

"What can be achieved by HTTP that can't be achieved by any random binary protocol?"

Plasma could facilitate this for Ethereum-compatible chains, including Quorum.

> random database system

Who would own this database?

JPMorgan

Which is the problem that JPM Coin is aiming to solve. For them to use a DB solution requires both parties to the transaction to be customers of JP Morgan. A block chain issued coin doesn't require that and, therefore, has some theoretical advantage. Of course it remains to be seen how true that turns out to be.

There is a DB based solution for financial transfers today in SWIFT. It has numerous flaws that a block chain based solution legitimately solves.

I am not saying SWIFT is perfect, but please enumerate these flaws and the ways in which blockchain legitimately solves these flaws without introducing an equal number of equally problematic flaws.

SWIFT transactions can be slow depending on the banks involved.

If a bank's SWIFT credentials are compromised the attackers can transfer all the funds a bank controls. With a blockchain coin it would require the private key of the customer to send the coins.

> With a blockchain coin it would require the private key of the customer to send the coins.

There are no "customers", this is a private blockchain where only banks participate.

Obviously the customers are the businesses with money deposited at the bank.

> If a bank's SWIFT credentials are compromised the attackers can transfer all the funds a bank controls. With a blockchain coin it would require the private key of the customer to send the coins.

Replace "SWIFT credentials" with "private key" and you have exactly the same scenario.

How is compromising SWIFT credentials different than compromising a private key?

> It has numerous flaws that a block chain based solution legitimately solves.

This is false. It solves nothing. If you disagree please detail a specific example instead of vaguely claiming it solves lots of problems.

> For them to use a DB solution requires both parties to the transaction to be customers of JP Morgan

JP controls the network, so they must already have a prearranged agreement with JP in order for any of this to be possible anyway, at that point, the blockchain doesn't give you anything that couldn't be done faster and cheaper with public/private keys and digital signatures.

Sure, I'll give a problem.

A private database is not public to the customers. Customers have to trust that the database isn't being changed behind the scenes.

A Blockchain makes it transparent to all parties in the network, so you don't have to trust that nothing wierd is going on where you wont be able to see it.

> A private database is not public to the customers. Customers

The article describes a private blockchain which is not public to customers, so your example does not work here. I'm willing to consider any other specific examples you can think of.

The customers here in question are other large institutions (for now).

It is public to the other participants in the network.

"Customers" in this instance is in reference to the banks and businesses that would be apart of this Blockchain.

The "private" Blockchain is not private to the participants. IE, other banks.

This is bank to bank technology that is meant to replace the current settlement layer that banks currently use, but is quite slow.

IE, wire transfers between banks, that can be made much faster, and require less trust the current methods that banks transfer money between each other.

Right now settlement times between banks are high, or require that they trust some centralized, non transparent database.

This, on the other hand, reduces the trust necessary between banks.

Plus if it is backed by the dollar, it is subject to the same central bank manipulation than the actual dollar.

Not really a con based on the use case, right?

Then why create a currency if it isn't as a currency at all?

What they're gaining is interoperability with public blockchains. JP Morgan's permissioned blockchain—Quorum—is essentially a fork of Ethereum. They can issue assets on their private chain (which, yes, by itself is no better than a traditional database). However, they can then transfer these assets to and from public blockchains.

By doing this, they are gaining access to the greater crypto ecosystem while still maintaining centralized control when they need it.

Here's a little example of how this might work in practice:

1. You hold $100k in your JPM money market account

2. You convert $25k of that to JPM's stablecoin on their Quorum chain

3. You withdraw this $25k JPM-coin to the public Ethereum blockchain

4. You use it in Ethereum's burgeoning "Decentralized Finance" or "Open Finance" protocols.. some examples: https://www.dharmalever.com, https://compound.finance, https://www.augur.net/

5. You finish what you're doing, and transfer it back to your JPM account

Where is the benefit? If I wanted $25k in eth, why wouldn't I just buy $25k in eth instead of adding in the extra step of a JPM stablecoin?

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