Blockchain technology could reduce role of banks, says BIS | Hacker News Reader

Blockchain technology could reduce role of banks, says BIS

in.reuters.com

53 pointsrakkhi46 comments

OK, so, it actually says:

"Basel-based BIS's Committee on Payments and Market Infrastructure (CPMI), made up of central bankers from across the world, said it could challenge banks' role - but if the technology became widespread it was unclear who would then provide credit and savings facilities."

Emphasis: "but if the technology became widespread it was unclear who would then provide credit and savings facilities."

Having worked at a bank, they're interested because it could reduce the large role of simply making sure everybody's shit lines up at the end of the day between counterparties. This isn't the disruption you're dreaming of... It's not changing how capital and resources are directed and allocated throughout the economy... it's changing how those decisions get confirmed across systems.

It then goes on to say it could theoretically challenge the need for a central bank, as it's decentralized... this makes a huge, implicit assumption that a rule-based interest rate decision is desirable, which, I don't know, until we can have an actual way of knowing the natural interest rate and hand off analyzing the economy to algorithms, it may be best to leaving that to people who spend their lives devoted to that.

> ... as it's decentralized ...

Is it? Compute resources are not free and that protocol has an inherent bias towards centralizing.

I mean I actually agree with you, that was just what the article was suggesting.

Well, the article is from Reuters and they are in the entertainment business, not the facts business.

+1 Yep a closed blockchain could provide almost instant clearinghouse functionality while ensuring that the funds are both available and were delivered. Strip that on top of existing banking infrastructure like swiftnet and you get a very lucrative system for banks which reduces quite a bit of risk on pretty much every domain involved in most transactions.

There are absolutely no efficiencies to private blockchains. Are you proposing that banks will run miners merely for the purpose of passing signed messages to one another?

There is no need to run miners. They can use the "Practical Byzantine Fault Tolerance" consensus algorithm.

http://forum.hyperledger.com/t/hyperledger-vs-bitcoin/20

See my note to the other commenter. Hyperledger does not sell blockchains, they sell decades old replicated databases

There is so much blockchain hype at the moment, and this is my thought too. There only rational I can come up with is Bitcoin was the kick in the pants banks needed to realise they can go from 30 year old technology to 10 year old technology.

What Bitcoin solved was decentralized trust. I don't see any banks replacing their existing 'trust' network with code, they'll want to reverse transactions and mistakes, and will also want a veto over any distributed ledger.

Bitcoin solved decentralized trust, but at the same time, it solved distributed trust. What preexisting database product allowed multiple organizations to confidently write to a single shared database?

Distributed ledgers are perfectly capable of reversing transactions.

Smtp

Literally any distributed object store, filestore, or OS (see Amoeba and Globe). Only need to add some security enhancements to some parts as others did for that and other use cases.

That is not what they're doing. When you have a known set of entities and trust that at least 1/3 of them will be honest, you can use other consensus systems like Byzantine Paxos. There's at least one project combining that consensus algorithm with the Ethereum virtual machine.

Just passing signed messages around wouldn't be sufficient, you need a way of ensuring overall consensus.

That's not a blockchain, paxos has been around since the 90s and don't offer objectively true information (only subjectively true) . they haven't been used by banks prior because they're insecure and not nearly as efficient as centralized message passing protocols.

You're using an arbitrary, uncommon definition of blockchain. A blockchain is a Merkle tree of validated transactions with a consensus algorithm.

thats the best consolidated broad definition of a blockchain I've heard. Do you mind if I use it?

Should we also include elliptic curve signatures?

Some kind of public key signature seems essential, doesn't necessarily have to be elliptic curves. There's already talk about using post-quantum algorithms.

But verifying the signature is part of the validation algorithm, so "validated transactions" already covers it.

It's a terrible definition. There's no mention of pow, which was the innovation of Bitcoin, and that which secures the network

That is the definition of blockchain. It's what was invented in Bitcoin. All other definitions would suggest blockchains were invented in the 90s or 80s

I agree with your post, but Byzantine Paxos require at least 2/3rd to be honest not 1/3rd

Ah that's right, thanks.

This claim is repeated often in /r/Bitcoin without any facts to back it up. I work on blockchains every day, and I disagree. Blockchains provide a mechanism for parties to agree on a transaction history that no party can retroactively alter without detection. No one can execute a transaction without the agreement of the validators. Traditional databases don't have these benefits.

Pass signed messages to one another and accumulate them into a consistent record, yes. But when all the entities are known there's no need for proof-of-waste mining.

Nor is there need for blocks. They can merely broadcast signed messages and acks for all members of the network. The only reason blocks are there is so that phbs will buy these bad databases

The Bitcoin blockchain, as implemented today:

- Takes over 10 minutes to come to consensus

- Cannot handle the transaction volume of a reasonably large retail company

- Loses accepted transactions!!! (blockchain forks, orphan blocks, etc) From a distributed database perspective the Bitcoin blockchain is broken and loses data: like a decentralized MongoDB, but slower by several orders of magnitude.

Articles like this are largely uninformed non-technical people responding to hype. They don't know what a replicated log is, let alone a Merkle tree.

There are many interesting distributed ledger technologies, like Stellar SCP, Hyperledger, and Tendermint.

The Bitcoin blockchain is ill-suited for this purpose.

These banks aren't talking about _Bitcoin_ block chain.

Perhaps you'd like to define what a blockchain means outside the context of Bitcoin?

Is SCP a Blockchain? Is Hyperledger? Is Tendermint?

Is every database that uses a replicated log a blockchain?

Are Certificate Transparency logs blockchains? Do Merkle trees count as blockchains?

It's a meaningless term that was never used or defined in the Bitcoin paper.

What about, and this is an attempt: "A Merkle tree of transactions signed using an elliptic curve digital signature and validated using a consensus algorithm"

You need truth to be objective in order to be a blockchain. There's no mention of pow in that definition. If every single node in the Bitcoin network went down but one, and 99% of the network were "lying" then we'd still know the "truth". That is what a blockchain does. These voting databases are silly decades old technology

Distributed, log-based systems... old tech... can do that on fault-tolerant hardware in near real-time with no waste from mining. Necessary crypto accelerators already exist for those, too. Some systems in banking on mainframes or NonStop have been doing transaction processing with decades of uptime despite HW faults and hacker threats.

Compared to blockchains, variations on old approach seem better from the tech efficiency to field results.

> - Loses accepted transactions!!! (blockchain forks, orphan blocks, etc) From a distributed database perspective the Bitcoin blockchain is broken and loses data: like a decentralized MongoDB, but slower by several orders of magnitude.

When a block is orphaned or when there is a fork, transactions are not lost, they'll always be present in the main chain. Or said another way, all miners are trying to mine the unconfirmed transactions in their mempool. If one miner ends up finding the winning block, transactions they didn't include that were included in an orphaned block are going to be mined in the next block.

What you may be referencing, though, is not "lost transactions", but rather double spends? What I said above holds true assuming no one else is trying to spend the same outputs. However, if you wait 6 confirmations (the recommended amount before you should consider a transaction "accepted"), you won't see double spends, either.

The memory pool is not consistent among nodes, and nodes are free to drop or ignore transactions as they see fit. As you say, nodes may have conflicting transactions, a.k.a. double spends. Transactions are not durable in a meaningful way until they have been included in a block.

Waiting for six confirmations is probably enough to prevent accidental reversions, but takes on average an hour, with a fair amount of variance.

Waiting for six confirmations is enough, as it's been shown both in theory and in practice.

I was correcting the parent as saying Bitcoin loses transactions is false. The network never loses a valid unconfirmed transaction.

In other news, email could reduce the role of the post office

This really has little to do with Bitcoin. A distributed ledger maintained by mutually mistrustful parties is useful for some back-end problems. The Bank for International Settlements, MERS, and Depository Trust Corporation are all candidates for replacement, because they're all just neutral parties that run clearing houses.

What we've learned from Bitcoin is that blockchain technology is robust enough to strongly resist attacks. If it were profitably breakable, it would have been broken by now. That it hasn't been is quite impressive.

As a settlement system, it doesn't require "mining" - just enough mutually mistrustful players that no one can tamper with logged transactions.

My understanding is that bitcoin has been broken for quite some time as there have been multiple 51% events from mining pools, it's just more profitable (for now) for these parties to keep the status quo

Your understanding is incorrect.

> What we've learned from Bitcoin is that blockchain technology is robust enough to strongly resist attacks.

Bitcoin is highly vulnerable to spam attacks (as demonstrated several times), malleability, and has forked twice so far, with a double-spend demonstrated during one of them.

Sure Bitcoin's crypto hasn't been broken, but how is that impressive? Bitcoin did not innovate there in any way. It's not like Satoshi invented Merkle trees (otherwise I'm sure they'd be called Satoshi trees:)

As a side note: can we please stop using cryptocurrency and start using cryptocommodity? Bitcoin et. al. are not currency.

Or rather crypto-network-for-value-transfer, which is more correct and doesn't include law-jargon on it.

I can't find any interpretation of the word 'currency' that would prevent it from applying to bitcoin. As far as I can tell, it's a "commodity money" kind of currency.

Currencies have their value nominally defined by a sovereign power. Some currencies in the past used precious metals in coinage, but that didn't determine it's value. Value of currency can be changed according to policy. As such gold has never been a currency, but has been a commodity used in some coinage. The discussion is "nominalism" versus "metalism". Nominalism wins by a country mile! Gold backed currencys, similarly to currencys who tie their value to a different currency (such as pegging exchange rates) only serve to reduce the capacity of the issuing body to pursue domestic policy in the interests of the populous. In that sense, a commodity can be a store of value that's not a currency, and can be used as material to represent currency, but cannot be a currency.

Where are you reading that currencies require sovereign powers?

Taxation (or any other liability imposed on a population by a sovereign) is what drives the value of money. This is a good macroeconomic and historical overview http://m.youtube.com/?#/watch?v=0zEbo8PIPSc also check out A Primer on Modern Money by Randall Wray and anything by Bill Mitchell (including his blog).

Good luck with that

Thanks!

Reply on news.ycombinator.com