This lengthy interview with Dr Lee Braine of Barclay's Investment Bank CTO Office clearly highlights the opportunities (and challenges) for the application of shared ledgers and smart contracts within financial markets. The piece is well worth a careful read, as Dr. Braine's overview of the essential requirements for shared ledgers echoes what we hear at many of our partner banks. Yet he goes a bit further, intimating that we should not take as a given the need for global distributed consensus in all cases:
"If there is potential from greater sharing of data, we then need to consider the range of architecture options. For example, what if you consider fully-replicated shared copies, so every bank has its own copy of the entire set?
"Well, there are challenges around that in terms of duplicate storage, duplicate processing, etc. And then there are alternatives, such as partitioning the data so participants have only the data that is relevant to them; that could have efficiencies in terms of storage and processing and it may also mitigate challenges around data sharing and privacy for example.
"There is a variety of views in the industry around the pros and cons in each of those design points. And the industry needs to take account of those as it comes up with open standards and open protocols – and heads towards the future state..."Whether you are looking at permissioned or permissionless ledgers, it's obviously necessary to ensure security, reliability, performance, etc. I think experimentation will explore all those options. There are clearly tremendous opportunities for startups in the blockchain space. For investment banking, blockchain-inspired solutions such as shared ledgers and smart contracts should aim to meet the enterprise-scale architectural non-functional requirements."
2. Blockchain on Wall Street
MIT Technology Review has a nice run down this week about Wall Street's recent firm embrace of all things blockchain, entitled Banks Embrace Bitcoin’s Heart but Not Its Soul:
One such project became public last week, when New York City startup R3 announced that it was partnering with nine banks including Goldman Sachs, UBS, and JP Morgan to develop blockchain software that could ease the transfer of financial assets between institutions. If an asset’s ownership is recorded by cryptographic software in a blockchain recognized by multiple banks, it can be transferred between them more rapidly than today, says Richard Gendal Brown, R3’s head of technology.
In theory, a system like that could be built on top of Bitcoin. But some of its features are not a good fit for the financial industry, such as how its blockchain is public, says Brown. “Customers tend not to want their private financial transactions visible to everybody.”
Richard gets another shout out in an interview with Dr. Gideon Greenspan, founder of Multichain: (ed. note: Dear IB Times: PLEASE stop embedding auto-playing video in your stories, it is driving me mad...)
Greenspan compared this to work that was done decades ago in laying the theoretical foundations for the relational databases that run the world today. He added: "I wouldn't say that either banks or startups were intrinsically qualified or otherwise to work out these fundamentals. Rather, I think this is work that should be done by experienced computer scientists and system architects, wherever they might happen to be. The hiring of Richard Gendal Brown by R3 is I think a recognition of this fact, and a very positive step."
3. CFTC loves/hates Bitcoin
Following up from last week's announcement on Bitcoin-as-commodity, the CFTC announced that they had filed and settled charges against Tera Exchange, accusing the exchange of performing a wash trade during their first (only?) BTC SEF transaction last year. Meanwhile, the recently departed Commissioner Wetjen has joined exchange-in-waiting LedgerX as a board member.
4. The Internet loves/hates on Coinbase and 21
Coinbase stoked the ire of Redditors everywhere with their announcement that they have filed 9 patent applications on business processes related to the Bitcoin protocol. Brian Armstrong, CEO of Coinbase, tried to lay out the case for Coinbase as one of necessity:
Our ultimate goal in obtaining bitcoin related patents is to keep them out of the hands of bad people, use them defensively to protect Coinbase from patent trolls, and help ensure the bitcoin ecosystem continues to grow.
Yet no story this week produced a hotter internet flame war than the Amazon pre-sale of 21.co's 21 Bitcoin Computer (or Energy-Arb-as-a-Service for the snarky). 21's CEO Balaji Srinivasan describes the device as a 'devkit' that is the first step in returning "economic power to the individual" by making Bitcoin micro-payments embedded into digital workflow.
One excited blogger compares this release to the Altair 8800 and the dawn of a new internet:
Next, link unforgeable bitcoin private keys with biometric identification. And… *waves hands vigorously* You just killed:
And removed a ton of hassle and frustration and waste.
While others weren't so complimentary...The most eloquent take-down came from Izabella Kaminska of the FT, calling the 21 RPi+ASIC "a machine built to burn your real world money." She also weaves in Colombian drug trade, Kennedy Airport and the phrase "Keynesian coal mine" in the very entertaining blog post:
Which brings us back to our original point about 21 grammes being the weight of your soul.
What 21 Inc is really doing is recasting the classic story of the Faustian bargain for the digital age. In this retelling of the narrative, however, 21 grammes is the weight of your digital data, $0.03 is the value the digital economy wishes you to get per day and the true breadth and scope of the contract you sign with Balaji Srinivasan, 21 Inc’s CEO, is revealed in the terms and conditions outlined above, and is definitely worth more than $399.99 to 21.