The Blockchain Revolution Gets Endorsement in Wall Street Survey

http://www.bloomberg.com/news/articles/2015-07-22/the-blockchain-revolution-gets-endorsement-in-wall-street-survey

by herendin • 11 years ago

41 31 11 years ago

paulsutter• 11 years ago

Given that most Bitcoin mining is done behind the Great Firewall[1], what happens if a midlevel bureaucrat partitions the network? (inadvertently or not) Seems there'd be a greater partion behind the firewall, and a lesser partition outside the firewall.

How does the protocol deal with that? Assuming it's partitioned for days, weeks, or months?

[1] Chun Wang comment from http://comments.gmane.org/gmane.comp.bitcoin.devel/8001

"Ignorant. You seem do not understand the current situation. We suffered from orphans a lot when we started in 2013. It is now your turn. If Western miners do not find a China-based VPN into China, or if Western pools do not manage to improve their connectivity to China, or run a node in China, it would be them to have higher orphans, not us. Because we have 50%+."

drcode• 11 years ago

All it would take is a SINGLE bitcoin user in all of China to figure out a way to sneak 50mb of data a day through the wall to prevent such a network partition.

tlrobinson• 11 years ago

Indeed, information wants to be free.

There is already talk of launching satellites to disseminate block headers (though initially that's more to protect against Sybil attacks than to connect miners) https://groups.google.com/forum/#!forum/bitsat-project

jackgavigan• 11 years ago

This is one of the reasons why the Bitcoin Blockchain is not necessarily the best choice as a platform for non-Bitcoin purposes. That's why most of the interest from banks is in blockchain technology - i.e. they're looking at creating their own blockchains.

patio113• 11 years ago

Assuming a complete net split? Then you have chain B in China and B' outside it, each a valid ledger of a different set of transactions. When they're reunited all the transactions only on B' get briefly invalidated as B' nodes reorganize to support the valid chain. (B is more valid than B' because it is presumably longer.).

This will likely expose the network to double-spend attacks, where e.g. you take an output spent 2 weeks ago on B' and get a transaction to a B node which moves it internally in your wallet (or to a confederate). This will cause Bitcoin to forget the B' transaction and every subsequent transaction tainted by it. Your goal as the attacker is to have 1+ of these transactions give you economic value prior to your counterparty recognizing the reversal.

Good news, though: a net split forking China off Bitcoin would probably result in Bitcoin's central authorities strongly recommending everyone stop processing transactions until they came back.

JohnDoe365• 11 years ago

Speed trading automated by smart contracts

sjcsjc• 11 years ago

This is obviously a trivial point, but the word blockchain seems to have lost its definite article.

eg (from the linked article): "Last month, Symbiont, which plans to use blockchain to make ..."

"Other firms investigating finance-related uses of blockchain ..."

philrapo• 11 years ago

exactly. Wall Street is enamored with distributed databases, i.e. "shared replicated ledgers". Not the specific bitcoin blockchain or cryptocurrency.

Blockchain as a term has become a bit like Kleenex. It's just a generic term to describe a distributed database

onion2k• 11 years ago

Saying you think something is possible is not an endorsement. When Wall Street professionals actually try it, that is an endorse.

patio113• 11 years ago

The actual Bitcoin network (7 transactions per second maximum worldwide) is insufficiently fast enough to conduct settlement of one player of a stock market simulation trading with 5 bots in a tutorial level. Reports of Wall Street adopting it for settlement purposes seem slightly optimistic.

rattray• 11 years ago

7 transactions per second maximum worldwide

What is the reason for this? Source?

patio113• 11 years ago

The Bitcoin "protocol" (for reasoning on the scare quotes search HN for me and that word) allows blocks to get up to 1 MB in size, currently. A block is mined once every ten minutes. The smallest transaction legal in the protocol is ~224 bytes. You can do the math from here.

There's a contentious proposal in the community right now to raise the block size and hence the implicit maximum TPS of the network. Why is that contentious? Oh boy, long story.

joosters• 11 years ago

The blockchain generates one new block roughly every 10 minutes.

Each block is currently limited to around 1MB (but for lots of reasons, the blocks might be smaller)

Each transaction in a block takes up some amount of space. Depending on the number of inputs and outputs, a transaction can vary in size from around 200 bytes to several kilobytes.

Assuming a 1024kb block and (say) 256 bytes per transaction, that's 4096 transactions every 600 seconds, or roughly 7 a second.

abledon• 11 years ago

https://imgur.com/SbOzKdJ

nissimk2• 11 years ago

You are correct regarding the low tps and the incompatibility with stock market transactions, but the rest of wall street dwarfs the stock market in market capitalization. The bank debt market they discussed in the article is very low transaction volume but high value and it would most definitely benefit from bitcoin or 'blockchain' technology. Recording and transferring ownership of securities is really just the tip of the iceberg. If interest payments could be made through the ledger then default status would just be a query into the public database. With smart contracts you could also produce automated structured securities where the waterfall rules are encoded and executed in the network. The main difficulty is the border where the network interfaces with the real world. The network cannot enforce collateral transfers, foreclosures, seizures or similar transactions that occur on physical assets so you still need a system of courts and sheriff's.

danbruc2• 11 years ago

The bank debt market [...] would most definitely benefit from bitcoin or 'blockchain' technology.

Why?

williamcotton2• 11 years ago

You can batch any number of signed transfers of digital assets in to a single hash that is embedded in the blockchain in a single transaction every 10 minutes.

blockchin4• 11 years ago

Reports of Wall Street adopting it for settlement purposes seem slightly optimistic

Here is just one example: (and I'm aware of many more pilot programs)

http://www.nasdaq.com/press-release/nasdaq-launches-enterpri...

the 1MB blocksize limits are rapidly being tested. However with some of the recent proposals, blocksize would double every 2 years, so something like this:

  2016 8MB 0.1Mb/s 26Tx/s
  2018 16MB 0.2Mb/s 53Tx/s
  2020 32MB 0.4Mb/s 106Tx/s
  2022 64MB 0.9Mb/s 213Tx/s
  2024 128MB 1.7Mb/s 426Tx/s

Right now there is a theoretical ceiling of 604,800 bitcoin transactions that could be undertaken every day. By 2016 that could be 2.2 million, by 2018 4.57 million, 2020 9 million , and 2024, 36 million.

There's a lot of space to grow and a lot of time to pass in which numerous innovations could come to existance, sidechains, lightning networks are a few 'transaction offloading schemes we've seen recently.

In addition, the blockchain proper only needs to be used as a periodic settlement platform, where tx's are farmed together into blocks. and not as a trading engine. (non PoW-based permissioned ledgers are a better fit for that)

amalcon• 11 years ago

I'm not sure I understand the point of using a blockchain in securities trading? I mean, it's not like it would actually have any of the advantages of Bitcoin[1]. You'll still need to settle accounts periodically (transfer money/stock certificates/etc). Those things aren't going to go away.

Once the parties need to trust each other for that, they might as well cut costs by pooling money and buying a centralized order-matching system. That is, make exactly the thing they already have today.

[1]-I don't think those advantages are all that great either, but that's beside the point. The point is they don't even apply here!

williamcotton2• 11 years ago

https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...

Once you look in to how we're currently able to clear and settle say stock trades, I think you'll agree that there is some room for improvement not only technically but from a trust perspective.

chollida12• 11 years ago

Eighty-four percent of respondents said blockchain could reduce the risk a trade won’t settle and the time that process takes, while 74 percent said it could alleviate the chance your counterparty to a trade won’t make good on the deal.

Karma to anyone who can explain this to me. How does the blockchain reduce counterparty risk. The counterparty can either produce the required shares or they can't.

And to be honest, currently cash equities settle on a T + 3 days basis and options settle on a T + 1 day basis. Most people view that as a feature not a bug.

If the markets wanted instantaneous settlement of cash equities they could do it, no one does.

blockchin4• 11 years ago

Any asset can be created on top of the bitcoin with meta-layers such as CounterParty [1] (which is what Symbiont is basing their solution off of) Colored coins [2] or a hybrid approach [3] recently demoed by Deloitte

[1] http://counterparty.io/ [2] http://coloredcoins.org/ [3] http://rubixbydeloitte.com/

(These platforms have received recent backing by NYSE and NASDAQ, respectively)

Assets created through Colored coins must use a gateway in a quasi-centralized fashion, however Assets created via counterparty can be traded p2p without a middleman, as they can be natively escrowed by a protocol which enforces atomic swaps and a fair deterministic order matching engine.

DTCC's status quo is T+3(days), if there are trades that can be settled on a blockchain, that can be reduced to T+1(hr) or less.

IMO Bitcoin is a horribly inefficient trading platform, (aside from the 'advantage' of HFT bots being on equal footing as retail investors) but an ideal settlement/netting/clearing layer. As a minimum there are huge transparency gains to be gleaned.

The introduction of Smart contracts potentially opens up the field for a whole new paradigm of smart securities, as well. There are a whole host of established entities researching on blockchain securitization and/or smart contracts at the moment, a subset of them are below:

  CBW Bank
  ANZ
  Westpac
  Commonwealth Bank of Australia
  BNY MELLON
  LHV Bank
  Barclays
  UBS
  Goldman Sachs
  ABN Amro
  ING
  RoboBank
  SWIFT
  Santander
  Standard chartered
  DBS
  USAA
  BBVA
  KPMG
  InfoSys Finacle
  CitiBank
  DTCC
  Deutsche Borse
  Markit
  EuroCCP
  CME

chollida12• 11 years ago

I appreciate the effort but I can't see how this in anyway answer's the question I asked below.

How does the blockchain reduce counterparty risk. The counterparty can either produce the required shares or they can't.

Let's simplify. I buy 100 MSFT from you. How does the blockchain help settle this trade. At some point I still need to deliver 100 shares to you.

The Blockchain Revolution Gets Endorsement in Wall Street Survey

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