IBM Reported To Be Developing Blockchain-Based Currency Transaction System

An anonymous reader writes: According to a Reuters source, IBM is working with the U.S. Federal Reserve and other central banks to develop a digital currency transaction system using the same blockchain technology that underpins Bitcoin — but which will deal with existing national currencies. The anonymous source says: "These coins will be part of the money supply...It's the same money, just not a dollar bill with a serial number on it, but a token that sits on this blockchain," Despite vocal community protest about the potential "co-opting" of a geographically-neutral cryptocurrency in favor of a centrally-controlled distributed transaction ledger, the IBM project, if true, is only one among hundreds seeking to leverage the blockchain for new transaction systems.

Comments

Conversation went roughly like...

[smallfries]

Government: We really like the idea of being able to watch every currency transaction in real time...
IBM: We can sell you a bitcoin system.
Government: We don't really like terrorist money, or people mining free cash...
IBM: We can sell you an IBMcoin system. Please fill in the details on this rather large cheque.

Re:Conversation went roughly like...

[JesseMcDonald]

Instead the community glommed onto a rather flawed version based on artificial scarcity...

Scarcity is a fundamental requirement for any currency. It's either natural due to physical scarcity, as in gold, or artificial, as in bitcoin or US dollars or most other currencies in common use. Any digital currency will have the property of artificial scarcity, because information is not naturally scarce. Ensuring that scarcity is maintained without reliance on a central authority is what the blockchain is all about. The only significant difference in the form of scarcity between bitcoins and dollars is that one is governed by a fixed and unbiased mathematical formula, while the other is dictated by politics and thus unpredictable and subject to corruption.

You can complain all you like about "unfairly" enriched early adopters, but I for one would much rather have that than unfair enrichment based on one's political connections. When bitcoins come into existence they're distributed by a scrupulously fair lottery with proportional odds to people doing useful work for the network. When dollars are produced they benefit first with the authority to order them, and then those who decide how they're distributed, then finally the banks and government contractors and employees who get a chance to spend them before prices adjust to the increased supply; at each stage there is plenty of scope for self-enrichment through manipulation of the flow of new money.

Anyway, if you really want to trade traditional currencies online (as credit—the closest you're likely to get to trading the actual currencies), the reference client and server for Ripple are open source under the ISC License. Such a system can't be completely distributed, of course, since it's tied to external centralized currencies, so it's no substitute for Bitcoin; Ripple solves a different, and easier, problem by dealing in loans rather than assets, leaving it up to the users to decide how much credit to extend.

How long will it take IBM to find it won't work?

[Baron_Yam]

Unless they've figured out blockchain trimming, and how to vastly increase the transaction rate to traffic ratio, the blockchain simply isn't viable.

There's a reason all those 3rd party Bitcoin intermediaries popped up for 'off-chain' transactions (that solve all of Bitcoin's problems by removing Bitcoin from the equation).

While there may be some Bitcoin enthusiasts at IBM, it won't take very long for the rest of the organization to figure out the technology doesn't scale, isn't efficient, and has a short practical lifespan.