Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain

http://www.wired.com/2015/12/big-tech-joins-big-banks-to-create-alternative-to-bitcoins-blockchain/

by dankohn1 • 11 years ago

101 103 11 years ago

wired.com

pilatesfordogs• 11 years ago

Does anyone have a link to a simplistic explanation of the block chain and why it seems to be so relevant?

joeyspn2• 11 years ago

A bit long, but probably the best explanation you can find out there...

https://www.youtube.com/watch?v=sE7998qfjgk

macns2• 11 years ago

blockchain aims to solve the "Two Generals' Problem"[0] short explanation in video[1]

On what the article says, transactions not relying on the first bitcoin blockchain are more vulnerable to 51% attacks[2]. Though if that many big corps joined, they could achieve a well established, attack-proof consensus relatively fast - - this probably is bad news[3] for Bitcoins' blockchain "ambitions" which is considered by many a solution to de-centralize the "internet" or services depending on third parties.

[0] In computing, the Two Generals Problem, is a thought experiment meant to illustrate the pitfalls and design challenges of attempting to coordinate an action by communicating over an unreliable link: https://en.wikipedia.org/wiki/Two_Generals%27_Problem

[1] https://www.youtube.com/watch?v=sYduOfRLHq0

[2] https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...

EDIT: format, clarification

UPDATE: [3] just saw the linux foundation page, this might actually be a good thing, forgive my ignorance

sanswork20• 11 years ago

blockchain aims to solve the "Two Generals' Problem"[0] short explanation in video[1]

PoW aims to solve that. Blockchains are just a way to store data in an agreed format with immutability and known ordering.

On what the article says, transactions not relying on the first bitcoin blockchain are more vulnerable to 51% attacks

51% attacks are an issue for PoW systems. Private chains don't need PoW so aren't vulnerable to them.

brighton3617• 11 years ago

It's a buzzword, its a database, but with better marketing behind it.

jordigh• 11 years ago

So what is going to replace miners? What incentive will people have to verify the integrity of this new blockchain? Is it still vulnerable to 51% attacks?

joeyspn2• 11 years ago

https://en.wikipedia.org/wiki/Proof-of-stake ?

dacox2• 11 years ago

https://en.bitcoin.it/wiki/Altcoin#Proof_Of_Stake

  Because these attacks exists, including Peercoin[3] and Blackcoin[4] proof of stake cryptocurrencies have "master" public keys that control the blockchain.

I wonder who would control that ;)

  This class of cryptocurrency is either insecure or centralized, however proof of stake (based on a PoW currency) is useful in some systems because gaining stake is costly, but it isn't workable for bootstrapping distributed consensus.

This would be an interesting though experiment. If they implemented proof of stake based on a proof of work currency, like Bitcoin, what would happen if the new currency took off and Bitcoin started to die? Now there's a threat model that requires unmotivated miners to still secure the network, both networks.

dacox2• 11 years ago

The pessimist in me says nothing, but we'll see.

wmf• 11 years ago

https://www.stellar.org/blog/stellar-consensus-protocol-proo... ?

But seriously, "OBC currently offers two implementations of PBFT (Practical Byzantine Fault Tolerant) consensus, as a means to validate transactions".

sanswork20• 11 years ago

When you know the participants PoW is just a waste. You can use something like round robin to determine who gets to add the next block. That means that no it's not.

brighton3617• 11 years ago

Why do you even need blocks? If you trust each other, what's wrong with signed messages?

mbgaxyz2• 11 years ago

For consortium chains, one possible solution is mining diversity which enforces round-robin mining/creation of blocks.

http://www.multichain.com/qa/13/multichain-blockchain-mining

yarrel• 11 years ago

Jettisoning any advantage to using the blockchain rather than a centralised database.

This is the snake oil phase of cryptocurrency. Or, more charitably, the not-inhaling phase.

mpeg3• 11 years ago

There are a lot of misunderstandings about blockchain technology.

One of the most common is believing that everyone who uses their own chains are not using the bitcoin Blockchain, which is usually not the case (apart from some notable examples like Ripple or Ethereum), you can use the Blockchain with marked bitcoins or other mechanisms to essentially "convert" them to other currencies in a provable way.

Another is that everything that needs to be distributed should be done in blockchains, whether there is trust between peers or not.

nissimk2• 11 years ago

Here is the press release:

http://www.linuxfoundation.org/news-media/announcements/2015...

And the website:

https://blockchain.linuxfoundation.org/

Please post if there is any more information.

sa5• 11 years ago

There are some more technical details at https://www.ibm.com/developerworks/community/blogs/gcuomo/en...

logfromblammo3• 11 years ago

"Ditching" Bitcoin? Wouldn't that imply that they had previously adopted Bitcoin to some meaningful extent?

Bitcoin is merely proof of concept for the underlying technology. I expect that there will be many more offshoots in the future, beyond the pieces used by the existing banking system. But I won't really care about any of them, until one of them allows me to work, buy, and sell without being forced to trust any third party that I find to be intrinsically untrustworthy--including governments, banks, cartel enforcers, mobsters, miner brigades, and Anonymous.

Not there yet. This isn't even a step in that direction.

But what I do like about this is that it may have the potential to simplify mutual insurance, interbank settlement, and securities exchanges. It would be nice if the funds from an electronic transfer to my spouse could be made available faster than writing out a paper check and depositing it at a branch ATM. I would also be particularly interested if it could end certain semi-fraudulent practices, such as short positions that are not appropriately matched against a long counterparty, or speculative phantom commodities contracts that are never actually redeemed by delivery.

fapjacks• 11 years ago

Nice username, bub!

jsprogrammer• 11 years ago

I don't see what advantage an offshoot would have. The current blockchain is the longest; there's no reason to ditch it.

logfromblammo3• 11 years ago

No reasons?

The nature of the Bitcoin's SHA-256 POW means that individuals can no longer meaningfully contribute to the integrity of the chain, and this responsibility is increasingly held by fewer individuals with access to (relatively) expensive specialized ASIC machines.

The Bitcoin system has (relatively) few legit trade opportunities yet, but is well used by scammers and black marketeers.

The median person has little use for Bitcoin as it is now.

MtGOX showed that exchanges are a point of vulnerability.

Silk Road seizure showed that Bitcoin is vulnerable to rubber-hose cryptanalysis and reminded everyone it is only pseudoanonymous.

Governments have already moved to attack Bitcoin or users of Bitcoin. Mostly these are proactive attempts to defend domestic currency controls, or concerns over money laundering.

The "dust DoS" attacks have called into question whether Bitcoin can scale much larger than its current extent.

You can't use Bitcoin with Apple Pay or Google Wallet. You actually can't get an app approved for Apple's App Store if it includes the ability to send Bitcoin. Google play doesn't allow in-app purchases in Bitcoin.

There's no reason to ditch it if you have already adopted it, but there's also no particular reason to adopt it in the first place, if something better might come along within a year or two. The banks aren't buying in. I haven't either.

macns2• 11 years ago

Reading the participants' comments below the announcement, most of them speak of an open/distributed ledger, not Bitcoin's blockchain. So it seems they really are ditching the original blockchain.

IBM intends to contribute tens of thousands of lines of its existing codebase and its corresponding intellectual property to this open source community. Digital Asset is contributing the Hyperledger mark, which will be used as the project name, as well as enterprise grade code and developer resources. R3 is contributing a new financial transaction architectural framework designed to specifically meet the requirements of its global bank members and other financial institutions. These technical contributions, among others from a variety of companies, will be reviewed in detail in the weeks ahead by the formation and Technical Steering Committees.

malandrew2• 11 years ago

    "enterprise grade code"

What does that even mean? I read that and think to myself "cowboy generated spaghetti code with more bugs and more technical debt".

ethbro• 11 years ago

IBM... "enterprise grade code"

Java.

l3m0ndr0p• 11 years ago

Outsourced

mikekchar• 11 years ago

Without being sarcastic, I think it means scalable so that it can be deployed in a situation where you have tens of thousands of seats. Generally it also means that you have some way of monitoring that it is working across the network. Finally, it usually means that it is an integrated turnkey system that doesn't require you to separately install and maintain a lot of third party support systems that it depends on.

You can think of the opposite of "enterprise" software as realizing that if you use independent packages a,b, and c and tie them together with some shell script that it will do what you want. It's only been tested by one or two guys, but you can't see any reason why it wouldn't work for the 10,000 people on your site (famous last words...). You spend a week patching it together and roll it out on the weekend with no way to roll back if it doesn't work, etc.

Still not a fan of enterprise software, but I don't work for enterprise companies any more ;-)

malandrew2• 11 years ago

I just hope that any solution adopted doesn't aid or reinforce cartel-like behavior. We already have a financial system where the incumbents can easily block the entrance of a new, nimbler upstart that would disrupt existing institutions and increase productivity.

The article even mentioned at least one existing institution that has an incentive to preserve the problem to which they are the solution:

    "Indeed, some companies involved in the project may feel 
    threatened by existing efforts to reinvent the financial markets 
    with the blockchain. State Street bank, for instance, stands to 
    lose if companies start using Overstock’s technology to borrow 
    stock. In the US, the stock loan business is a $954 billion 
    market; State Street, known as an agent lender, is a big part of 
    that. Its future depends on getting ahead of the game.

Relevant: "The Shirky Principle" by Kevin Kelly

http://kk.org/thetechnium/the-shirky-prin/

SoyNut• 11 years ago

entrepreneur: "About your open blockchain project, sir." IBM PR correspondent: "Yes, what about?" entrepreneur: "Well, it's closed source. I don't see public repositories anywhere for it." IBM PR correspondent: "No it's not closed source! It's just not available to you or anyone who doesn't have access to our network. Just ask our business partners if it's open." The Linux Foundation: "Of course it's open! Open to US!"

nissimk2• 11 years ago

Here's the github link :-)

https://github.com/hyperledger/hyperledger

TLDR: there's no code in that repo.

stymaar2• 11 years ago

Richard Stallman approves ;)

DennisP3• 11 years ago

It makes sense for the banks to do this, because they have different requirements.

Bitcoin is great because it works with an unknown set of untrusted entities, and there's no counterparty risk because the ledger is the currency.

Banks have a known set of semi-trusted entities, and want to track off-chain assets. They'll still have counterparty risk, but if they see a way to use chained blocks and something like Byzantine Paxos to speed up interbank settlement, more power to 'em.

paulhodge• 11 years ago

Yup. The actors don't even need to trust each other that much, because they each still need to use their public key to execute a transation. The level of trust is just that everyone will play nicely, such as not purposefully ignoring transactions.

The Bitcoin model is good at incentivizing actors to play nicely. Banks have no need to create this incentive, it's already in their interest. The Bitcoin mining system also solves another problem: how to evenly distribute new money in a fair way. Banks have no need for that either.

Mtinie• 11 years ago

The Bitcoin mining system also solves another problem: how to evenly distribute new money in a fair way.

I was going to disagree with this, but I reconsidered my initial comment and will offer this modification:

"The Bitcoin mining system also solves another problem: how to evenly distribute new money in a provably fair way to those with the resources to participate."

stymaar2• 11 years ago

The Bitcoin mining system also solves another problem: how to evenly distribute new money in a fair way.

That is not the problem that mining is addressing. Mining is an incentive for people spending resources to check the integrity of the blockchain.

This has nothing to do with «fairness».

mbgaxyz2• 11 years ago

Yep. Here's an example of creating a private blockchain, issuing and sending assets (all in 90 seconds).

https://makebitcoingreatagain.wordpress.com/2015/11/26/creat...

brighton3617• 11 years ago

And why is this better than MySQL?

ubersync• 11 years ago

This is just a glorified DBMS.

nickpsecurity6• 11 years ago

Append-only, distributed, fault-tolerant filesystem + standard, financial protocols anyone?

ihsw• 11 years ago

It should be noted that there is a far more interesting implication -- tech and banking giants ditch SWIFT for their own blockchain.

The blockchain and SWIFT are very similar in spirit and in actuality, and it stands to reason that there is consensus that a private blockchain network would be more robust, fast, and secure than SWIFT.

nickpsecurity6• 11 years ago

My thoughts exactly given I've designed, but not developed, tech specifically aiming to replace SWIFT. What they do need not cost so much or be so difficult. I was thinking highly secure endpoints and link encryptors to authenticate otherwise P2P traffic with optional 3rd party involvement where extra accountability is needed.

joveian• 11 years ago

I don't know how financial stuff works and hadn't heard of SWIFT, but searching came up with an announcment of them joining this effort: http://www.swift.com/about_swift/shownews?param_dcr=news.dat...

roymurdock2• 11 years ago

For anyone who needs a (very simplified) primer on the blockchain and why it's relevant for banks:

A blockchain is a ledger (piece of paper that records transactions) with perfect memory of every single transaction that has ever occurred within a certain network. This makes double spending within the network impossible as you can trace every single coin in the network back to its origin, verifying that your trading partner does, in fact, have the coin he claims to. This removes the need for a trusted third party to oversee/verify transactions.

This is important for banks because currently they pay a 3rd party clearing house to process transactions and transfers between them. They cannot trust each other because their transactions are not linked together in one shared network.

If they all agree to get on a shared blockchain (ledger), they can split the costs of continuously verifying the validity of the blockchain (leder) between them, rather than paying a 3rd party for the same service. This would reduce fees within the industry and reduce time between transfers.

I used to be very excited about blockchain technology and its implications for creating micro/private currency networks. Something about the financial industry's interest has really turned me off the blockchain and its possible implementations.

johndevor• 11 years ago

Something about the financial industry's interest has really turned me off the blockchain and its possible implementations.

What exactly? And don't you think banks will be more apt to use Bitcoin once things like the lightning network roll out (offering much greater transaction volumes)?

roymurdock2• 11 years ago

I think I was turned off because I envisioned a much grander future for blockchain tech than a glorified clearinghouse for big banks.

Banks will never use a public network (like Bitcoin) to manage inter-bank transfers. They'll take the underlying technology and create a custom, private network where they can tweak protocols to their liking.

The hard part will be for the banks to form a board to oversee the network, because they'll each have to contribute members and those members will have to work together and trust each other not to make sneaky or unfavorable changes to the underlying codebase of the private network. There will be lots of politics based on relative bank size and power within the network. Should be interesting to see how it plays out.

Hermel• 11 years ago

Note that in practice, this 3rd party clearing house often is owned by the banks (as joinz venture), reducing your implied incentive to obsolete them.

nickpsecurity6• 11 years ago

Not to mention them getting credit fees. They love current system: it's a cash cow. Any work on blockchains will be to benefit them.

jon_richards• 11 years ago

How do the banks ensure that aren't outmined? One of the key components of a blockchain is that no one mines more than half that chain.

If you have too many blockchains, then you split the miners between the chains and open the doors for a big player to come in and overwhelm the other miners on that chain.

I suppose you could somehow implement private blockchains where only those with the private key can participate, but I don't know whether this has been done or not.

ant6n• 11 years ago

They will use a private network with their own custom protocol, just reusing the idea of block chains to not require a central entity.

tibbon2• 11 years ago

I was wondering the same. What's the incentive for me to mine (verify transactions) on their blockchains?

sanswork20• 11 years ago

Banks don't need mining for their chains.

I suppose you could somehow implement private blockchains where only those with the private key can participate, but I don't know whether this has been done or not.

This is what everyone is talking about. They aren't talking about mined chains.

rburhum• 11 years ago

This makes sense. What bank would want to have a public ledger effectively advertising their customer data?

mpeg3• 11 years ago

Both Nasdaq omx [0] and Overstock t0.com [1], mentioned in the article, seem to use the Bitcoin Blockchain to peg their internal currency against, they're sidechains, not completely separate blockchains...

[0] https://coincenter.org/wp-content/uploads/2015/06/SecondLett...

[1] http://www.sec.gov/Archives/edgar/data/1130713/0001047469150...

kanzure• 11 years ago

Timestamping isn't enough to make something a sidechain: https://blockstream.com/sidechains.pdf

... unless you are using "sidechain" in a very loose, diluted sense.

mpeg3• 11 years ago

I guess you mean the t0.com chain, I do agree it's not the common case where you can transfer btc in and out of the sidechain.

Would it be considered a completely separate chain, since it needs to publish the timestamped hashes on the bitcoin blockchain ? (Or any other, sure, but right now bitcoin is the one with the widest adoption)

Zigurd• 11 years ago

The regulators get friendly relations with the regulated, and the regulated get to decide how much cryptocurrency they get to skim because they started another blockchain that's friendly to regulators. A crony cryptocurrency. The bet is that regulators will be more comfortable with an indirectly captive blockchain and will use it as a wedge to lever bitcoin out of banking.

mkj• 11 years ago

So this is more like a git/mercurial chained hash where the head hash proves the existence of all previous revisions? Makes sense. And call it "blockchain" just to keep enough buzzwords.

DennisP3• 11 years ago

That plus some kind of consensus algorithm. Proof-of-work prevents Sybil attacks when you don't know who anybody is, but if you have known entities you can use more efficient mechanisms.

sanswork20• 11 years ago

So this is just a chain of blocks that each verify the existence of all previous blocks? I can't believe they are calling it a block chain. Clearly it's a chained hash.

brighton3617• 11 years ago

Yep, exactly

mongol• 11 years ago

The Economist article on this I found good.

"The notion of shared public ledgers may not sound revolutionary or sexy. Neither did double-entry book-keeping or joint-stock companies. Yet, like them, the blockchain is an apparently mundane process that has the potential to transform how people and businesses co-operate. Bitcoin fanatics are enthralled by the libertarian ideal of a pure, digital currency beyond the reach of any central bank. The real innovation is not the digital coins themselves, but the trust machine that mints them—and which promises much more besides."

http://www.economist.com/news/leaders/21677198-technology-be...

brighton3617• 11 years ago

This article was a PR release for factom which is an obvious scam (they sell checksums). Notarization for the underserved is not a real idea.

paulsnx2• 11 years ago

Brighton36 is Factom's favorite troll. Searching brighton36 and Factom will yield more information about our project than nearly any other you might use.

This idea of selling "checksums" is his current favorite smear, but it is of course obvious nonsense.

kolanos• 11 years ago

Ripple Labs [0] have been trying to do something like this since 2011. From what I can tell, it has been a hard sell.

[0] http://www.ripple.com

Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain

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