Nine of World's Biggest Banks Create Blockchain Partnership

An anonymous reader writes: Nine major banks, including Barclays, Goldman Sachs, Credit Suisse, and JP Morgan have teamed up to bring Bitcoin's blockchain technology to financial markets. "Over the past year, interest in blockchain technology has grown rapidly. It has already attracted significant investment from many major banks, which reckon it could save them money by making their operations faster, more efficient and more transparent." Leaving aside the question of whether banks actually want to become more transparent, they're funding a firm dedicated to running tests on how data can be shared and collected through the blockchain. "The blockchain works as a huge, decentralized ledger of every bitcoin transaction ever made that is verified and shared by a global network of computers and therefore is virtually tamper-proof. ... The data that can be secured using the technology is not restricted to bitcoin transactions. Two parties could use it to exchange any other information, within minutes and with no need for a third party to verify it."

Comments

3..2..1..

[click2005]

Blockchain patents incoming.

Re:3..2..1..

[NotInHere]

Blockchain patents incoming.

And certification, as you can't just let anybody mine bitcoins, I mean this is anarchy.

Re:3..2..1..

[Anonymous Coward]

Already here. The banks are behind the 8-ball as the Overstock.com CEO has been doing R&D and filing patents now for some time.

I told you so

[Applehu Akbar]

"The data that can be secured using the technology is not restricted to bitcoin transactions. Two parties could use it to exchange any other information, within minutes and with no need for a third party to verify it."

The best feature of Bitcoin has been its use as a proving ground for blockchain technology. Now that it has survived several years of the intensive hacking attempts that a virtual currency would obviously be first to undergo, banks are starting to deem it ready to track other kinds of transactions.

Re:I told you so

[Nrrqshrr]

>track other kinds of transactions
Track, but also hide...

Re:I told you so

[pla]

Now that it has survived several years of the intensive hacking attempts that a virtual currency would obviously be first to undergo, banks are starting to deem it ready to track other kinds of transactions.

True, but extending the resilience of the BTC blockchain to privately controlled uses, ignores one key point...

The current BTC mining network pushes 407.7 PH/s. The entire TOP500 supercomputer list can manage 363.3 PFLOPs/s. One hash takes 12697 FLOPs (officially - The exact number depends on how you calculate it, since hashing doesn't actually involve any floating point operations). That means we have approximately 14000x the computing power on this planet dedicated to Bitcoin mining as we do "real" supercomputing resources available.

The Bitcoin network has such high resilience to attack because you would need more computing horsepower than it has to compromise it (and even that doesn't mean you can arbitrarily rewrite the past, just that you can force a fork in the blockchain that you control). Assuming some half-assed clone by a handful of companies would have anywhere near the same level of security ignores almost everything that makes Bitcoin so secure.

Re:I told you so

[Anonymous Coward]

That means we have approximately 14000x the computing power on this planet dedicated to Bitcoin mining as we do "real" supercomputing resources available.

One thing is ASICs useless for anything but mining Bitcoin, the other is turing complete computers. The lack of flexibility isn't something you can forget in a meaningful comparison.

Re:I told you so

[Anonymous Coward]

Actually, given that these banks business involves finding ever greater and newer ways of committing massive fraud, this probably means they've finally found a successful way of exploiting blockchain tech, and want to roll it out to the rest of the world.

Re:I told you so

[Anonymous Coward]

True, but extending the resilience of the BTC blockchain to privately controlled uses, ignores one key point...
The current BTC mining network pushes 407.7 PH/s.

Bitcoin mining has little to do with blockchain computations. The former needs vastly more computational resources than the latter. The security of the blockchain has nothing to do with "computing horsepower", and everything with its distributed nature.

Re:I told you so

[Anonymous Coward]

Who says they're talking about making a half-assed clone. I presumed they were talking about using *the* Bitcoin Blockchain for this stuff, so all those existing petahashes can be leveraged.

Of course then we have a freeloader problem ...

Re:I told you so

[Anonymous Coward]

I'm sorry but you are 100% wrong. The security has EVERYTHING to do with the computing horsepower, the distributed nature is what makes it robust.

You need a 51% attack to "double-spend". When the cost of achieving a 51% is more than a king's ransom: that is security in a very real and meaningful way. If someone COULD tamper with the blockchain, they WOULD tamper with the blockchain because their is a HUGE monetary incentive to do so.

Re:I told you so

[Anonymous Coward]

Nope, the blockchain is tamper proof because:
- the data is distributed to a large number of nodes
- the validity of that data is determined by consensus between those nodes
- the data is cryptographically signed

To spoof a blockchain record, you'd need to either:
- control a majority of the nodes
- break the cryptographic sign -> even with all the computing horsepower of the world at your disposal, this would take literally forever

What I was arguing before, is that to USE blockchain transactions, you don't need that much computing power. It's tied to mining in Bitcoin, but doesn't need to be.

Re:I told you so

[Anonymous Coward]

Namecoin.

Re:I told you so

[TechyImmigrant]

ignores almost everything that makes Bitcoin so secure.

Bitcoin uses secp256k1. It is barely secure today. It will likely fall in due course. That's a really stupid curve to use. That's why no one uses it for anything - except bitcoin.

Try googling "koblitz curves are bad".

Re:I told you so

[TechyImmigrant]

Nope, the blockchain is tamper proof because:
- the data is distributed to a large number of nodes
- the validity of that data is determined by consensus between those nodes
- the data is cryptographically signed

To spoof a blockchain record, you'd need to either:
- control a majority of the nodes
- break the cryptographic sign -> even with all the computing horsepower of the world at your disposal, this would take literally forever

What I was arguing before, is that to USE blockchain transactions, you don't need that much computing power. It's tied to mining in Bitcoin, but doesn't need to be.

Don't be so confident about the signing part. It's one IACR paper away from doom.

Re:I told you so

[GuB-42]

Bank will probably won't use a proof-of-work mining scheme like bitcoin.
More likely they will keep a centralized model for currency generation and use the blockchain model only for transactions.

Re:I told you so

[Anonymous Coward]

THIS should be given MUCH more consideration. A privately run and developed blockchain is absolutely completely worthless at best and maliciously fraudulent at worst regardless of how "decentralized" the distribution of information is. They absolutely *WILL* backdoor the shit out of any such system they develop.

Re:I told you so

[sexconker]

Try googling "bitcoin".

It's security comes primarily from the distributed nature. To hijack the network and insert valid blocks, you'd have to be a majority player.

If secp256k1 is weakened by a few bits, everyone in the network can take advantage of that. The network would then adjust the complexity of mining automatically so blocks would still be mined at the same rate.

If secp256k1 is straight broken, then you can switch curves with a software update and a blockchain fork. Bitcoin has forked the blockchain before, it's really not a big deal unless you're on the losing branch in terms of popularity.

Further, there is no indication that secp256k1 is compromised. Please show us support for your claim that "It is barely secure today.".

If it were compromised, we'd be seeing the effects on the Bitcoin network, and we'd be talking about switching curves.

Re:I told you so

[TechyImmigrant]

>Further, there is no indication that secp256k1 is compromised.

Check out the finding on fields of low characteristic presented to EuroCrypt in January. secp256k1 uses a binary curve, so the characteristic is 2.
So it's bang in line for improvements in the attacks based on those findings.

Re:I told you so

[Anonymous Coward]

the validity of that data is determined by consensus between those nodes

The way this consensus is reached depends on the proof of work which is part of the mining. The huge amount of work is what makes it difficult to establish an alternate blockchain. The "cryptographic signature" of each block is just a hash of the current block and the hash of the previous block in the chain. Anyone can create a new block with a proper signature, and this would be a trivial operation if it weren't for the proof of work. The proof of work involves finding a value which, when added to the block, results in a number of bits of the hash value to be zero. The number of bits that need to be zero is the difficulty, and it depends on the amount of processing power in the network: Each additional bit that needs to be zero halves the chance that a randomly chosen number satisfies the validity requirements of the block chain.

Re:I told you so

[Anonymous Coward]

The defining quality of a valid block chain is its length. If the computational power to create a new chain is low, then anyone can create a longer one with totally different transactions and invalidate all the transactions of the previous chain. To protect against this, it should be very difficult to create a new alternate chain. The answer to this is to use a lot of processing power.

Now, validating a blockchain is much easier than making one and does not require extensive processing power. Maybe that is what you are referring to.

Blockchain is terrible, though.

[Anonymous Coward]

Blockchain is terrible because it will continue to just grow constantly.

There needs to be a cut-off period for transactions that literally don't matter to the system at all, and have another method of representing where money is.

Either that or a whole new system entirely.

Re:Blockchain is terrible, though.

[JcMorin]

You can delete all the spend output and keep only the unspend one. This is well documented. If I give 1$ to Bob, and Bob to Alice. The first transaction can be deleted safely if you know the transaction from Bob to Alice was ok.

Re:Blockchain is terrible, though.

[Anonymous Coward]

What if Bob originally stole his 1$ from Mt.Gox? As long as he legitimately spent it later, everything's OK?

Re:Blockchain is terrible, though.

[Anonymous Coward]

Morality is irrelevant to bookkeeping.

Re:Blockchain is terrible, though.

[JcMorin]

exact, the same way if you received a 20$ bill that was used in a drug transaction before. It's called fungibility and it's very important.

Re:Blockchain is terrible, though.

[Anonymous Coward]

Auditing, though not about morality, is about factuality. If anything, the blockchain, with a reasonable level of certainty, needs to remain auditable. Otherwise it's just another string of bits.

Re:Blockchain is terrible, though.

[Anonymous Coward]

How about proof the currency was mined. If I give a buck to Bob, Bob gives to Alice, and deletes the record previous to Bob giving her the currency, how do we know that the currency in Alice's hands is legitimate or not if there isn't a way to show where it came from.

Re:Blockchain is terrible, though.

[Anonymous Coward]

Can't you just archive it and move on to NextCoin ad infinitum? That might be a hassle for the general public, but since it's a bunch of cooperating institutions, they could just come up with some kind of transition procedure. They could even do it nightly along with their other "nightly dump" processes.

Re:Blockchain is terrible, though.

[Anonymous Coward]

So all Jed needs to do now is transfer 744,408 bitcoins from his Bob wallet to his Alice wallet and all the transactions that got those missing bitcoin into his Bob wallet in the first place can be safely forgotten because fungibility is very important, correct?

Re:Blockchain is terrible, though.

[rickb928]

"Morality is irrelevant to bookkeeping."

All legislation is someone's morality.

Bookkeeping rules are, essentially, legislation. Even the GAAP standards are either required or recommended in legislation.

Morality, specifically being honest, is at the heart of the science and genesis of accounting. Its abuse does not change that.

Re:Blockchain is terrible, though.

[sexconker]

In the financial world, we keep records for 7 years, 10 years, etc. depending on what they are.
Auditing doesn't go back forever in the real world.

Should it for Bitcoin? It currently does, though that can be changed. Last I checked, people were discussing this issue because keeping a full copy of the block chain on a typical desktop was becoming burdensome.

About BitCoining Time...

[jaeztheangel]

Razormind, Ethereum, Eris Industries et al have been working on decentralized systems for nearly two years now. Eris released their DApp server for exactly this usecase and are working in the States to spread word of the tech. Ethereum recently pulled into release mode, and their decentralized system for smart contracts is slowly gaining momentum. Razormind has been working on a Decentralized Operating System which is driven by blockchains. The banks have only recently moved into the space properly - there was a $30m investment in Chain by Citi et al a few days ago - but folks like UBS and Barclays have been setting up blockchain labs and accelerators in London to investigate the possibilities.

Open or Close Blockchain

[JcMorin]

Let me guess: they want to copy Bitcoin but not everyone can participate (only approved banks). They want to copy bitcoin but not everyone can mine (only major banks). They want to copy bitcoin but not everyone can see all transactions (filter to your own transactions only?). Yeap, it will end up with a close system in a centralized database just like they have right now.

Bitcoin is about losing control to anyone and open access.

• - If not everyone can participate they will remove the consensus code and add some sort of centralized authentication.

• - If not everyone can mine it they will again have some sort of centralized authentication.

• - If they remove the mining entirely, the currency creation will be either pre-mined with some banks at start or distributed based on a some specific rule that will favor the big starting banks. Having no mining will also remove all incentive to validate the transaction, make the whole thing weak and prone to double spend attack.

• - If they don't want everyone to see all the transactions, it will be close network with restricted access. A single bank could leaked out the entire blockchain, I'm not sure they really want to go in that direction!

Re:Open or Close Blockchain

[known_coward_69]

this isn't about mining anything. it's about doing financial transactions without Visa, Mastercard or pesky central banks having to be paid to verify transactions

Re:Open or Close Blockchain

[U2xhc2hkb3QgU3Vja3M]

If you don't mine, you don't get new blocks. If you don't get new blocks... well, that's how the blockchain works.

Re:Open or Close Blockchain

[Viol8]

"If you don't mine, you don't get new blocks."

Don't be silly. Mining was a side effect of the algorithmic design of bitcoin. For a completely new system the blocks could all be created in advance using random numbers and allocated on a need basis. If someone manages to guess an unreleased block and uses it then the police are called.

Re:Open or Close Blockchain

[Anonymous Coward]

They won't be using the blockchain as currency, only as a ledger. The coins won't represent actual money, but the capacity to write entries to the ledger. The incentive to validate transactions is they want transactions to be validated, not because the coins have direct monetary value.

Re:Open or Close Blockchain

[Troed]

Huh?

How can news blocks be created in advance without knowing the input and outputs?

There's no blockchain without "mining". There's no mining without incentives. Whether the inventive is called a coin or not is irrelevant as to its value.
 

Re:Open or Close Blockchain

[Troed]

Feel free to detail your blockchain that creates verified transactions without detail of the transactions.

Re:Open or Close Blockchain

[Anonymous Coward]

That is my concern. Bankers want control of something so they can game the system at their whim. If one of the players decides they need more currency, they can just create some out of thin air, while everyone else that isn't one of the "big boys" has to play by the "rules".

Heck with that. Why even bother with a cryptocurrency when the average prole has to offer something of value to get a currency, while a select few can just make it out of thin air. We don't need another fiat currency. We definitely don't want a currency where nobody but the man behind the curtain can see the statistics behind it.

If BitCoin gets this "tainted" where we have 51% of the control ceded to one party that can change the rules whenever they feel like it, it might just be time for a BitCoin 2.0.

Re:Open or Close Blockchain

[Solandri]

Bitcoin's problem is that they artificially limited the maximum number of bitcoins to 21 million. That breaks one of the fundamental requirements for a true currency. The entire reason countries have moved off the gold standard is because for a currency to function, it has to grow at roughly the same rate as your economy. Gold didn't, and every time economic growth outstripped the rate new gold was mined, the currency deflated (gold became worth more). The economy subsequently went into recession as it became more cost-effective to stuff your money under the mattress and wait for its value to increase, than to go spend that money in ways which brought in more money via economic activity. In other words, it was a feedback loop halting economic growth every time it passed the rate at which new gold was being mined.

Bitcoin has the exact same problem. Its rapid appreciation in value is not the sign of a healthy currency or due to it increasing in popularity. It's a hallmark of a currency whose supply has not been keeping up with economic growth, making it completely unsuitable as a currency. Just like gold. Everyone who runs the banks realizes this, so don't want to touch bitcoin. But they do see merit in the blockchains for accounting and authentication purposes.

You see, the concept of "money" is simply as a tangible representation of productivity. You do something productive, it's worth money - you can trade it to someone else for money, then trade the money to someone else for some of their productivity. Why not just barter productivity for productivity? Because that's not always possible. You make milk but you want eggs. Barter only works if (1) someone who makes eggs wants milk, and (2) you two happen to meet. If you can't find such an egg-maker, you have to find someone else - a middleman who wants milk, but makes something the egg-maker wants. Money acts as the universal middleman, making all barter transactions possible without having to find a real middleman. You sell your milk for money to the first person you meet who wants milk. You buy eggs with money from the first person you meet who's selling eggs. That's the only reason money exists.

When there's too much inflation, "money" isn't working properly because the money you got for your productivity is decreasing in value too much before you can spend it - you're better off bypassing the money and simply bartering your productivity for someone else's productivity. Thus defeating money's reason for existing.

When there's deflation, "money" isn't working properly because people who are hoarding it (people with large gold or bitcoin reserves) are getting richer even though they aren't doing anything productive. Money is no longer a representation of productivity, again defeating its reason for existing.

The best case is when the amount of "money" grows at exactly the same rate at which the economy (the sum total of everyone's productivity) grows, thus preventing inflation and deflation. You can't do that with gold. You can't do that with bitcoins. You can do it with a fiat currency (that's managed responsibly).

(As for "fixing" Bitcoin's problem in a new decentralized virtual currency, that's a lot harder if not impossible. The whole reason a fiat currency is centralized is because someone has to release more currency into the supply pool to keep up with the rate of economic growth, and they have to do so responsibly. Too much and you get hyperinflation; too little and you get deflation, and you're no better off than you were with gold. Government usually fills this role, thus making it a centralized currency. With a decentralized currency, there is no one to fill this role. Which is why they artificially capped bitcoins at 21 million - to prevent bitcoins from flooding the market effectively causing bitcoin inflation and making them worthless. But for the economy, the opposite - deflation - is just as bad a trait for a currency. Bitcoin has no protection against deflation, and in fact its supply cap of 21 million guarantees it )

Re:Open or Close Blockchain

[Anonymous Coward]

Blockchains without the mining aspect have existed for a long time, but the concept is better known as "eternal log file" (sorry, there is no English Wikipedia article), cryptographic timestamping service or digital notary.

Bitcoin solves some of the problems with these services very elegantly. At the core of the solution is the work-proof, which in turn requires an incentive (a "mining" reward). It will be interesting to see if the banks just want to go for another eternal log file or if they're essentially aiming to replace Bitcoin with a clone.

Re:Open or Close Blockchain

[lgw]

Bitcoin's problem is that they artificially limited the maximum number of bitcoins to 21 million. That breaks one of the fundamental requirements for a true currency. The entire reason countries have moved off the gold standard is because for a currency to function, it has to grow at roughly the same rate as your economy. Gold didn't, and every time economic growth outstripped the rate new gold was mined, the currency deflated (gold became worth more).

No, that's way off base. The size of the US money supply isn't increased by printing more slips of paper with presidents on them. The number of tangible (well, whatever you want to call a bitcoin) units of currency barely matters to the money supply.

The size of the money supply is controlled by fractional reserve lending, and indirectly by insurance floats and credit derivative swaps (there are nearly $1 quadrillion in CDSs now). All of that would work with BTC, or gold, or USD with equal facility.

Remember, when you deposit money in a saving account or CD, there's no physical curreny backing that up. There's no ledger entry backing that up (except the IUO from the bank). The bank keeps nothing lying around with which to repay you. If even 2% of money in savings accounts were withdrawn as cash, the cash simply couldn't be found to do that (without new deposits in cash). None of that would be different with a BTC or gold-backed currency.

The economic breakthrough was fraction-reserve lending, not fiat currency. People just accept the former easier with the latter.

Re:Open or Close Blockchain

[spyfrog]

Best description of the problems with Bitcoins and the limit of 21 millions that it has ever (and that a great deal of the coins is actually missing).
The fact that you can divide a Bitcoin in smaller chunk doesn't really help when a great deal of the coins is already mined and owned by someone.
My guess is that you will be down moderated since you say things that the Bitcoin fan-boys don't want to hear...

Re:Open or Close Blockchain

[Anonymous Coward]

yes.. instead we have pesky bitcoin dealers / "exchanges" with shady practices, shitty rates and very non easy to use methods just to get any bitcoin. Progress!

Re:Open or Close Blockchain

[Viol8]

And using random block id numbers would preclude transactions because....

Take your time.

Re:Open or Close Blockchain

[Troed]

And how would random block IDs preclude "mining"? I don't think you understand the basics of a block chain at all. I'm guessing that's why you're unable to detail your idea.

Re:Open or Close Blockchain

[Viol8]

Oh FFS, are you truly this stupid?

Ok, lets do it in crayon. The idea of mining is to discover a valid block. This is done by using an SHA based matching algorithm which - eventually - will find a valid new block.

The banks however just generate blocks with their own random id's, DO NOT provide an algorithm to match these ids, DO NOT release them unless they want to AND IF they see an unreleased block out in the wild then its obviously a forgery and police are called.

Now, please explain how mining works in that above scenario which I originally mentioned and you clearly didn't fucking read.

Re:Open or Close Blockchain

[Troed]

Thanks for explaining, finally, that you don't know what a block is, how a chain of blocks is built, how that can be verified and why all of this is a distributed transaction ledger.

You might want to read up on Bitcoin before you claim that others are "truly this stupid". I also think you should generalize this, considering how often your posts are modded "troll" or "flamebait" according to your post history.

Re:Open or Close Blockchain

[Viol8]

Whatever makes you happy. Clearly your narrow mind has only just comprehended bitcoin and has zero ability to consider other methods. As for my posting history, at least people bothered reading it. You've barely ever been modded at all. Probably because you're posts are so laughably ignorant.

Re:Open or Close Blockchain

[Troed]

I've given you enough rope to hang you with in detailing how your block-chain would work. You're obviously not able to :)

Myself I've been a Bitcoin proponent since 2010. Since you're in Europe you might even had had the chance hearing me talking about it at a conference or two.

Re:Open or Close Blockchain

[twokay]

Actually i believe the 21 million number has some background in the cryptography and how it is computed. The specifics are way above my understanding, but i certainly remember reading an explanation that cited this as one of the reasons for the upper limit.

False understanding

[Anonymous Coward]

"The blockchain works as a huge, decentralized ledger of every bitcoin transaction ever made that is verified and shared by a global network of computers and therefore is virtually tamper-proof. ... The data that can be secured using the technology is not restricted to bitcoin transactions. Two parties could use it to exchange any other information, within minutes and with no need for a third party to verify it."

As we've already discussed with Bitcoin, if a majority of the blockchain miners conspire, the recorded history can be rewritten.

To make this work correctly, they'd have to implement the same miner-bribes as Bitcoin and have the blockchain mining open to anyone who downloads the proper software. However, I anticipate them avoiding that cost by processing the blockchains on their own servers, which also implies that in any scenario when 5 of the 9 conspire, history can be falsified.

Re:False understanding

[Sarten-X]

And how is that any worse than today, where any bank can change internal records unilaterally, and we rely on an infrequent audit to catch it?

That simple-majority rule is configurable, being just a convenient way to decide which competing blockchain to accept if it diverges for any reason. In this implementation, it's fairly straightforward to resolve, since we already have a centralized auditor: the US government (in various offices for various jurisdictions). If any participants' blocks cause the chain to diverge, both sides of the disparity get an audit.

This violates Bitcoin's rule against central authority, but we don't really care much, because our goals are different. With Bitcoin, the goal is to avoid government. With this blockchain transaction system, the goal is to avoid on a third party for routine operations. Transactions would be validated in blocks, and each bank would ideally unanimously verify each others' findings. The tedious third-party validation need only happen if banks disagree... and that would mean something failed in a big way, so it's probably a government matter.

Re:mining

[JcMorin]

The concept of mining was to bootstrap the currency. How do you start it? who have how many? The big bank all start with 1 billion? They transfert a real billion to who to get the virtual currency? If they transfer the real money in a "pot", that would be a system the ACH in USA. Someone do control the pot. This has nothing to do with a decentralised blockchain.

The concept of mining CANNOT be removed that easy.

a Blockchain to Big to Fail

[turkeydance]

blockchain bail-out

history can be falsified

[Anonymous Coward]

Nothing is real and nothing to get hung about
Strawberry Fields forever

A blockchain too big to fail

[Anonymous Coward]

FTFY

So much for decentralized

[Anonymous Coward]

Writing is on the wall. Digital implantable chips are easier to sell/force if they are "decentralized" except if a bank empire owns each digital wallet they can wipe you clean if you step out of line.

After the coming collapse the world will be forced into crypto as a means to re-start world trade, and you can bet the big banks will hold all the cards in one hand and hold everyone else by the balls in the other.

Re:So much for decentralized

[Anonymous Coward]

Time to up your meds. You're caught up in fantasy.

Re:So much for decentralized

[Anonymous Coward]

I wish it were that simple. Have a good dig into the history of the word's banking system. Collapse is absolutely guaranteed. This is the ultimate end game.

It would be quite convenient to "re-start" the system using a digital currency that the banks still control. That's the whole point.

Chase has been pushing lately to outlaw cash. (I'm no fan of "zerohedge" but the references are interesting).
http://www.zerohedge.com/news/2015-04-23/largest-bank-america-joins-war-cash

The war on cash is escalating. Just a week ago, the infamous Willem Buiter, along with Ken Rogoff, voiced their support for a restriction (or ban altogether) on the use of cash. Today, as Mises' Jo Salerno reports, the war has acquired a powerful new ally in Chase, the largest bank in the U.S., which has enacted a policy restricting the use of cash in selected markets; bans cash payments for credit cards, mortgages, and auto loans; and disallows the storage of "any cash or coins" in safe deposit boxes.

Efficiency

[fisted]

Are they ignoring the proof-of-work or what? That's not efficient at all. By design.

Re:Efficiency

[Anonymous Coward]

Given the design goal of a decentralized power structure, proof-of-work is indeed very efficient.

Your definition of "efficiency" is wrong.

Re:Efficiency

[fisted]

No, you're conflating efficient with effective. I'm not denying that it is effective. But it isn't efficient.

Re:Efficiency

[Anonymous Coward]

If it's the only effective method, then it's the most efficient method; please state your alternative.

Re:Efficiency

[Anonymous Coward]

If it is the only effective method, then it's the least efficient method. You are not discussing what "fisted" means by efficient and your comment is vacuous.

Re:Efficiency

[fisted]

If it's the only method, it's both the most and the least efficient method. Please state the point of your reply.

Making sure they dont lose their backups ?

[Spookticus]

I wonder if this is coming about because of Mr. Robot ? Prevent someone from destroying all their data/backups :P

Fixed headline

[monkaru]

"Nine of the worlds biggest banks have figured out how to game bitcoin"

Re:Fixed headline

[Khashishi]

If you start out with enough money you can game anything because you make the rules.

Also Censorship Proof?

[Anonymous Coward]

The blockchain works as a huge, decentralized ledger of every bitcoin transaction ever made that is verified and shared by a global network of computers and therefore is virtually tamper-proof. ... The data that can be secured using the technology is not restricted to bitcoin transactions. Two parties could use it to exchange any other information, within minutes and with no need for a third party to verify it.

So, if I encode the latest pop hit, or perhaps a movie that will start appearing in theatres next weekend, as a series of transactions in the blockchain...

Re:Also Censorship Proof?

[JcMorin]

You can do it but that would cost you a lot of money as the amount of data stored is limited to 80 bytes per transaction and the transaction fee is proportially of the size of the transaction.
1 gig of data would be 12.5 millions transactions.
If you spend 0.00001 BTC in fee per transaction that would cost you 125 BTC or 28 426$ :)

Bitcoin Shows Signs of Growing Up

[Anonymous Coward]

This is a sign of Bitcoin maturity.

It's also a sign of major players seizing control.

There's going to be a new BankBitcoin. It'll be better and more monetizable and under control, with hookers and blackjack!

It's a signature, not a currency. History of USD

[raymorris]

There are two different concepts. Bitcoin is a digital "currency". It happens to use a block chain to publish a record of transactions in that currency. Currency and transaction records are two different things. A digital currency doesn't have to use a block chain, and a block chain doesn't have to be tied to a currency.

The "proof of work" is used for the CURRENCY, to avoid having a limitless supply of Bitcoins. You want to limit people's ability to produce new bitcoins. You don't need (or want) to limit people's ability to validate the transaction history, which is what the block chain is for.

The banks might use a block chain to publish a record of US dollar transactions. Maybe they'll have a chain for Tesla stock, so when your monthly retirement savings occurs it'll record "fisted bought 10 shares of Tesla". Rather than recording transactions that occur in Bitcoins, the chain will record transactions of TSLA.

There's no new digital currency involved, so no "proof of work" is relevant. All that's needed is a way to validate the statement that you are the new owner of the stock. So in this example, Alice is now retired, so she sells her 10 shares of Tesla. You buy them. THAT is the transaction which gets added to the block chain. There's no currency being generated.

Chain, not currency. Consider a Tesla stock chain

[raymorris]

Bitcoin is a digital "currency". It happens to use a block chain to publish a record of transactions in that currency. Currency and transaction records are two different things. A digital currency doesn't have to use a block chain, and a block chain doesn't have to be tied to a currency.

The banks might use a block chain to publish a record of US dollar transactions, or stock transactions. Maybe they'll have a chain for Tesla stock, so when your monthly retirement savings occurs it'll record "JcMorin bought 10 shares of Tesla from Alice". Rather than recording transactions that occur in Bitcoins, the chain will record transactions of TSLA.

All that's needed is a way to validate the statement that you are the new owner of the stock. So in this example, Alice is now retired, so she sells her 10 shares of Tesla. You buy them. THAT is the transaction which gets added to the block chain. There's no currency being generated.

There goes the neighborhood

[WOOFYGOOFY]

Sell.

Someone please explain

[mark_reh]

If the block chain is so unerringly perfect, recording the validity of every transaction throughout time, how has it been so easy for people to steal huge numbers of bitcoins and disappear with them?

Re:Someone please explain

[Anonymous Coward]

Because people connect systems like poor security to the internet. The blockchain doesn't can't discriminate between a transaction that involved a transfer of dollars first or not. All it cares about is if the chain of ownership is valid. You can only steal a bitcoin if the person you're stealing it from has a bitcoin to be stolen.

Nobody has ever hacked the blockchain or bitcoin itself. Only systems that utilize bitcoin.

And nobody has ever "disappeared" with a bitcoin. It's still traceable trough the blockchain. They may send a millionth of the amount to a million different addresses, or choose to lay low and not create a new transaction for years, but it's all still there.

Re:Someone please explain

[Anonymous Coward]

If the block chain is so unerringly perfect, recording the validity of every transaction throughout time, how has it been so easy for people to steal huge numbers of bitcoins and disappear with them?

Because there is a difference between tracking that coin #224 was transferred from wallet #167 to wallet #563 and determining that the authorization to make the transfer came from the legitimate owner of wallet #167, or who wallet #563 belongs to.

nothing to do with bitcoin

[tomhath]

They might use block chain technology to track their own transactions. They don't care about bitcoin.

Pre-Pay the Fines

[MonkeyTrial]

I think the banks should pre-pay the eventual millions/billions of dollars they will eventually be fined for whatever nefarious purpose this will be used for. They can write it off their books early, we can avoid lengthy trials and endless bloviating about how "something must be done to rein in the financial system", and we can all just admit that it's going to happen anyway so why not get ahead of the curve?

Be Ascared, Be Very Ascared

[Anonymous Coward]

I work for a big bank, we have stagecoaches in our ads, and trust me, if the big banks are getting involved, it's not a good thing.

We learned nothing from the recession, we bundle everything now, not just mortgages, but used car loans, credit card debt, leases on box cars, you name it, if it has an interest rate attached we bundle it and sell the bundles to Wall Street, and we'll be bundling bitcoins next.

The next economic downturn is probably going to be worse, because it won't just be home loans in trouble.

Your alternate currency will be dragged into the next depression/recession with everything else, and you should assume it will be a small part of the banks portfolio and it will be the first thing sacrificed to save the bottom line.

Re:Be Ascared, Be Very Ascared

[Anonymous Coward]

They can track everything you do, everywhere you spend money, and if you think they won't abuse that kind of control, just look what the courts, the fbi, the ISP, etc. etc. do whenever they want to take down a web site.

CONTROL

[Anonymous Coward]

This is about control. Finally a cashless society will be forced on us because no bank or big corporation will accept or issue cash.

The financial institutions and their government partners will have nearly 100% control over your money. If you piss them off, they will cut off your ability to spend money because they will cut off transactions.

This can't be allowed to happen under any circumstances. Even if it means war.

Re:It's a signature, not a currency. History of US

[Anonymous Coward]

Proof of Work has nothing to do with currency

The Proof-of-Work algorithm that Bitcoin uses is a dynamically scaling version of Hashcash, which was invented by Adam Back to thwart email spam; it's how you allow anyone to participate in maintaining the blockchain without getting bogged down in spam.

Now, because a consortium of banks might well know exactly who is going to participate in maintaining some blockchain, that consortium's solution might not require such an anti-spam algorithm; members of the consortium could simply digitally sign blocks until some threshold of signers has been met.

Re:It's a signature, not a currency. History of US

[Anonymous Coward]

Excellent insight!

Seems to fit in well

[Anonymous Coward]

with the upcoming quantum crypto killers.

Could this be used for property transfer records?

[Anonymous Coward]

I ask as someone not thoroughly familiar with the blockchain methods--but during the housing bubble, banks got into trouble by bypasssing the traditional deed/mortgage record-keeping that was usually done at the county courthouse, so that mortgage notes were passed around without properly recording the transfers. Some banks took to forging signatures and other paperwork so they could foreclose on houses, and left the properties with impaired title records. The whole legal basis of property ownership has depended (for many centuries) on reliable title records. One wonders if blockchain technology would be robust enough to make these sorts of transfers dependably.

Bitcoin is experimental remember

[JcMorin]

Ok I'm a bitcoin fan-boy, I will say that bitcoin is an experimental currency. All other have infinite supply, and this one doesn't. Let the game play and see the result in the long terme. By the way this is many clone of Bitcoin including some without any limit.

Unintended consequences of Partial reserve banking

[Anonymous Coward]

Unintended consequences, how does partial reserve banking and leveraged investing fit into this equation? Is it through the interest rate? Doesn't borrowing money to reinvest also create a feedback loop? Also how does the fiat "Spread the Wealth" when it needs to.
As far as i know any system that offers a counter dynamic or hedge helps keep the system stable. Gold and bitcoin offer a counterbalance to risk.The fact that no fiat currency is tied to bitcoin will allow its value to fluctuate just like any other currency
I can sell my milk for USD then use the USD to buy Bitcoin, Then use the Bitcoin to buy crack. Its the same system because our economy is global. In actuality
the economy in good times should far outpace the value of gold or bitcoins value. This will cause the value of both to drop or crash again. The current value of BC is as a hedge and an unregulated currency not as an everyday currency. Just look at the Euro Crisis in Greece. You can't get more than a few bucks a day out of the ATM!
This could all change if the major bank networks allowed BC like Mastercard and Visa. IF that happened then BC could easily become THE breakout hit.