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

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

[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]

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

[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.

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

[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]

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

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: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:3..2..1..

[NotInHere]

Blockchain patents incoming.

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

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.