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Comment by dkoston | Hacker News Reader

I’m going to try to distill this down to it’s easiest form.

- JPMC will now create a digital signature (token) for every dollar that enters its network.

- Those digital signatures can be exchanged by any trusted authority

- JPMC will exchange a single dollar to those trusted authorities for a single digital signature

Using the blockchain allows JPMC to trust each dollar that goes through both their network and partner networks as they cryptographically trust that forgery is almost impossible. They also can trust that when a “wire” comes in that the funds are actually available.

This is purely an accounting system backed by cryptography that allows much more trust.

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I wanted to reply to my above comment to clarify because people are somehow thinking that just because I wanted to take the time to explain what this is that I support it.

I probably don’t. This is an internal accounting system used by JPMC and potentially other banks. I don’t give a crap about what they use for accounting unless it works well and provides consumer benefits. I don’t care if it’s MySQL and PGP or a person with punch cards.

Whether or not I support this depends on if JPMC:

1. Gets adoption so this works with a bunch of banks and people and businesses can send me or I can send them money

2. Results in a reduction in settlement times versus ACH and wire

3. Comes at a lower cost to the consumer than wire or ACH

4. Comes with the same guarantees

I’m pretty skeptical as services like Zelle and Venmo provide way less guarantees than wire and ACH

This could be very useful, but it doesn't require blockchains in any way.

"Blockchains" are an implementation detail that covers a large category of related things.

For a centralized service, Blockchains are still useful for things like transparency.

Correct. Especially since it’s centralized, they could have used any secure form of asymmetric encryption to offer the same guarantees

edit: didn’t like my analogy

I’d prefer you posted something constructive rather than just saying “doesn’t need blockchain”. Of course it doesn’t. Storing data doesn’t require a relational database, or a key value store either. All have pros and cons.

Saying “doesn’t require blockchain” is obvious and adds no value. It’s like coming into a workshop explain what a saw is and saying “other cutting tools also exist”.

You seem to be making the leap that because I’m explaining what something is without saying whether or not I think it’s the right move that I think it is.

I don’t know whether or not it was cheaper and more effective for JPMC to fork ethereum or to build their own accounting system from scratch and I doubt you have the correct information to make that assumption either. Maybe JPMC doesn’t have a team capable of writing accounting software (seems unlikely). What’s more likely is they are looking for headlines because they know blockchain is hyped technology. It would have probably not made the news if they announced they were adding another settlement system beyond Zelle, ACH, and wire. So, they probably chose this because they think it will reduce costs and move their stock price while building a bespoke software accounting system would have been more costly and wouldn’t have provided as much hype.

Businesses don’t make decisions about technology completely based on its technical merits.

Many times they choose technology because someone recommended to them, or it’s cheap, or they can’t build it themselves, or that’s not their primary business, etc.

> I don’t know whether or not it was cheaper and more effective for JPMC to fork ethereum or to build their own accounting system from scratch and I doubt you have the correct information to make that assumption either.

We can make a good guess -- they're already a bank, so they're already running the same accounting system this project requires.

This system is both accounting and transfers. All their other transfer systems (ACH, wire, Zelle) are run by third parties. As mentioned, we don’t know what the cost of building their own transfer system would be.

In the long term, using someone else’s code for your bespoke project typically means you run up against “square peg round hole” issues so it’s likely they are just deferring engineering costs.

> All their other transfer systems (ACH, wire, Zelle) are run by third parties.

Those are systems for transferring money from JP Morgan to another bank. This system doesn't do that; it can only transfer money from JP Morgan to JP Morgan. That is much easier for JP Morgan to do, and they already have their own system for it.

That is wrong. Please re-read the article.

OK, I read the article. It says

> the coin is only available to JP Morgan’s institutional clients

without really expanding on anything.

But, JP Morgan has an official announcement out about this, which is much more informative than this article is. It says:

> How does it work?

> In step 1, a J.P. Morgan client commits deposits to a designated account and receives an equivalent number of JPM Coins. In step 2, these JPM Coins are used for transactions over a blockchain network with other J.P. Morgan clients (e.g., money movement, payments in securities transactions). Finally in step 3, holders of JPM Coins redeem them for USD at J.P. Morgan.

and it says:

> Only institutional customers passing J.P. Morgan KYC can transact with these coins

So, in order to make any transaction using JPM Coins, you need to be a JP Morgan customer who's passed their KYC checks. Parties who are not clients of JP Morgan cannot purchase, receive, or redeem coins. What part of what I said was wrong? What language from the article were you thinking of?

> Those are systems for transferring money from JP Morgan to another bank. This system doesn't do that; it can only transfer money from JP Morgan to JP Morgan.

In theory, anyone who passes KYC can transfer money in token format to anyone else on the network.

There is a major issue with the network which is that it seems as if only JPMC can actually redeem the tokens for dollars.

> JPM Coins are used for transactions over a blockchain network with other J.P. Morgan clients

Moving your JP-Morgan-client-only coins from your JPMcoin account held with JP Morgan to someone else's JPMcoin account held with JP Morgan is not conceptually different from moving USD from your JP Morgan dollar-denominated account to someone else's JP Morgan dollar-denominated account. In both cases, participating in the system in any way at all requires you to hold an account with JP Morgan, and the transfer that takes place "moves" currency from JP Morgan to JP Morgan.

And, no surprise, JP Morgan already has all of the infrastructure in place to do transfers from one JP Morgan account to another JP Morgan account.

> There is a major issue with the network which is that it seems as if only [J. P. Morgan] can actually redeem the tokens for dollars.

That's not an issue. In theory, you hope for the cryptocurrency to be valid currency in its own right; you don't want people to think they need to redeem it.

The issue is that you can't receive these coins unless you hold an account with JP Morgan. (You can't spend them either, but that's moot unless there's a way to get them in the first place.)

I think we are talking about the same issue in different ways.

What’s clear is that this is either about internal efficiency at JPMC or marketing hype. This has no benefits for retail banking customers, unless JPMC provides new benefits (cheaper transfers). It certainly is not transformative to retail clients.

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