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Bank Consortium Successfully Tests Bitcoin Tech (thestack.com)
An anonymous reader writes: R3CEV, a startup dedicated to bringing blockchain technology to traditional finance, yesterday ran a successful test of transactions between 11 of the world's largest financial institutions. This represents a big step forward in bringing blockchain, the foundation for Bitcoin, to traditional banking. The test, which connected the banks on a private 'distributed ledger' using Microsoft's cloud-based Azure service, allowed participants to execute sample financial transactions instantly, globally, and without a centralized third-party clearing house. Participants included Barclays, BMO Financial, Credit Suisse, HSBC, Royal Bank of Scotland, TD Bank, UBS, and UniCredit among other leading financial groups.
Creating money out of thin air; the banks are going to have a field day creating their own currency.
Creating money out of thin air; the banks are going to have a field day creating their own currency.
Umm, they already do that via the Federal Reserve and similar mechanisms in other countries.
I can see the block-chain tech being useful for various applications, including some financial ones. I don't think Bitcoin itself will be among the useful applications. But that's ok. Proof of concept technology is a valuable thing and while I think Bitcoin is fatally flawed it seems to be a good proof of concept.
It's ok, you utter the word, the secret's out now... Anyone seriously looking at "blockchain" technology is considering using Ethereum (aka bitcoin 2.0), not Bitcoin, including R3 CEV in the linked article. The ability to script transactions in bitcoin is fairly limited and not flexible. Yes there are ongoing ventures and ideas to work around that: side-chains, blockstream, colored coins, rootstock, etc, but these are all non-existent for production use at this time. Ethereum launched 6 months ago and can be used now, although it has far less time in the open than bitcoin (6 months vs ~7 years), so from a security perspective, it still needs to prove itself. Meanwhile, research teams of organizations can start testing it. Where Bitcoin can disrupt the financial sector, Ethereum can disrupt finance and "everything" else.
No trees were killed in the making of this post; however, many trillions of electrons were horribly inconvenienced.
Before the rise of central banking, banks would routinely issue commercial banknotes.
It isn't as bad as it sounds. It actually applies free market principles to currency, rather than the monopoly situation we have now.
Banks have to ensure that there's demand for their banknotes, relative to banknotes issued by their competitors, which helps encourage them to create a product that's valuable and desired.
The blockchain is not the key innovation behind Bitcoin. The block chain concept existed long before Bitcoin and was then known as "eternal log file". The problem with eternal log files was authenticity: Prior to Bitcoin, in order to make sure that you had an untampered version of the eternal logfile, the maintainer of the logfile would regularly publish hashes in ways that were deemed immutable. For example, one could print the current cryptographic hash in a daily newspaper with wide enough circulation that it would be infeasible to tamper with all archived copies. Obviously this process is slow and leaves the logfile open to manipulation for long times between publication of hashes. Bitcoin solves this authentication problem without trust, without a central entity and without long periods where entries to the logfile (or blockchain) could be modified. This is the key innovation of Bitcoin.
I highly divisible universal currency being tested by banks. Might not be a horrible idea. Remove the necessity for currency exchange markets. If you economy is tanking, the price of goods increase but based off of a universally monitored and controlled currency with a specific market value. I don't necessarily like the idea of the value of the currency fluctuating independently of a given nations inflation, but the idea still would have merit to investigate.
Because when I read " instantly, globally, and without a centralized third-party "
I think of the blockchain as the centralized third-party.
It's just not so physically defined as a nice clean data center some entity built, managed, and charges fees for.
deleting the extra space after periods so i can stay relevant, yeah.
...And all transactions can be monitored and tracked.
For your safety, of course.
R3CEV announces they've successfully completed their testing (bitcoin for banks)
A few days ago - global headlines - "Bitcoin a failure" - NY Times headline article.
The person writing "bitcoin a failure" works for R3 - funded by the banks. He single handedly tried to disrupt bitcoin with XT and other approaches.
Am I following this correctly?
I think alternatives and better solutions to bitcoin will come up - but there is something unsavory about this whole Mike Hearn thing.
These banks are simply butthurt that their do not control Bitcoin so they believe they can build an alternative that they control so they can compete against it. There is zero value in the banks' protocol for anyone other than the banks. Whereas, Bitcoin will have value for anyone and everyone that invests in it or uses it. So, unless the banks open up their protocol to the public, like Bitcoin, and allow people to innovate and make money on their platform, Bitcoin has it beat.
IMO, it's fairly stupid to not have a tiny speculative investment in Bitcoin at this point. But then again, I feel stupid for not investing in Google when I had the chance and knew it was the standard for search.
--- We need more Ron Paul!
If they don't call it credits.
The central reason this is being pushed is to tie blockchain transactions to actually individual receipts and copyright product keys.
This will be rolled out for software and media where the ONLY way to play something will be through a verified blockchained transaction.
Bank will keep a central clearing house for all of this because that is what banks do - charge people for things they don't need.
The other point is that transactions are free.
That's a misconception surrounding bitcoin. Transactions are NEVER free of cost. You can find ways to reduce the cost of transactions but they are never free. You have to consider exchange rate risk, opportunity cost, time value of money, transaction coordination, in some cases counterparty risk, technology risk and more. If you want to have a system as wide spread and convenient as the credit card system, there is a TON of cost in building and maintaining that. People have a mistaken idea that bitcoin transactions are free because they forget about risk and the time value of money and opportunity cost. Bitcoin is seemingly cheap because it piggybacks on the internet and computers people already own (sunken costs) but it is a false economy.
Banks make a lot of money passing the money around.
Yes they do because passing money around is a valuable activity and they make it easier than it would be otherwise. Imagine how much of a pain it would be to send money to Europe from the US if you didn't have a bank to facilitate the transaction. It would be a huge and expensive problem.
... and without a centralized third-party clearing house.
You mean without that thing you used?
The test, which connected the banks on a private 'distributed ledger' using Microsoft's cloud-based Azure service,
Granted, you rented the cloud service yourself, for yourself, but still...
It must have been something you assimilated. . . .
Blockchains only give the banks the ability to identify each transaction and to verify it. All it does is turn more control over to banks, and I don't relinquish control.
Cash only, and my own secure electronic transactions to individuals, and become your own bank.
To clear up a common misconception, what the banks are doing is neither Bitcoin nor any new crypto-currency. It's just a way to keep track of US dollar transactions.
Right now, when you use your Bank of America card at a store and that store banks with Wells Fargo, BOA sends the money to Wells Fargo. At the same time, across the street, a Wells Fargo customer pays at a store which banks with BOA, so money flows the opposite direction. Millions of transactions moving in circles.
The idea is that it might be more efficient to use a block chain to keep track of how many dollars BOA owes Wells Fargo at the end of the day, rather than the databases they use now.
Customers won't see this. You still use your debit or credit card, issued by Bank A, to make purchases in USD as always. Later, it'll show up in the store's bank account at Bank B, just as it always has. What may change is how the dollars get from Bank A to Bank B, a process that's invisible to the customer.
> Bank A owed Bank B $10mil, and Bank B owed Bank A $9.5mil, so they wrote a cheque for $50k and all went to the pub for drinks.
If Bank B was happy with that $50k, I think the drinks came BEFORE the math. :)
However, the actual cost per transaction has steadily gone down for the credit card companies since credit cards were invented. Guess who soaked up that decrease?
The fact that average transaction cost has decreased as the networks have scaled up should surprise no one. That's just "good" business at least in the sense of profits. Yes the credit card companies have soaked up most of the improved margin. They are basically a quasi-monopoly so one should expect monopolistic pricing.
As for who soaked up the cost it depends on how big a player you are. I assure you that Walmart takes far less of a hit than your local mom-n-pop. Transaction volume matters. The banks and credit card processors get the biggest slice of the pie but large merchants benefit too. With size comes negotiating power.
Here in Canada, the cost of debit transactions has steadily increased, while the actual cost per transaction to the banks has decreased. It is likely the same in the US.
It is unquestionably the same in the US at least until fairly recently. However that is a problem resulting from a lack of competition. There is no meaningful competing network so you tend to see monopoly pricing. Annoying and a tad unfair to be sure but not at all surprising. Here in the US some legislation was passed a few years ago that substantially cut debit card processing fees. They still are probably higher than they might be in a truly competitive market but the market is regulated to some degree. Whether that is a good thing or not I leave as an exercise for the reader.
This is why things like bitcoin are interesting. Bitcoin itself is a boondoggle but some of the technology involved might result in future transaction processing tech that could increase competition potentially. Only time will tell.