https://twitter.com/ProfJeffJarvis/status/601746626328276992 Many thanks to Chris Skinner and the team at Breaking Banks podcast for inviting me to join their show this week. For those that missed it, not to worry! You can stream from the show page here or via the show's iTunes link. Tim Swanson and I join the fun around the 22 minute mark. (Pair this with the video from The New York Public Library Bitcoin Discussion and you won't have to read a thing).
1. Bitcoin vs. Blockchain debate continues
As discussed in the podcast above and last week, the debate around bitcoin vs blockchain continues...including the debate on whether that is a valid way to frame the debate! American Banker continues to explore the meaning of last week's Nasdaq announcement here. Adam Ludwin from Chain lays out a very interesting case for why blockchain+bitcoin is the future for the management of digital assets:
Bitcoin is the oil in the machine. When creating or transferring a digital asset, you use a standard bitcoin transaction as the mechanism, which requires bitcoins to pay the fee that keeps the network secure. But very little bitcoin is needed for any given asset transaction. Even if the issuance or transfer involves billions of dollars of value, only pennies worth of bitcoin are used. It’s like a postage stamp on an envelope full of assets.
Robert Sams of Clearmatics takes the opposing view, with a must read post entitled No, Bitcoin is not the future of securities settlement:
But the idea that we should “colour” nominal quantities of bitcoin to represent security interests and piggy back a distributed ledger of financial assets on top of a politically decentralised digital cash system is completely mad. [snip] The financial system and its regulators go to great lengths to ensure that something called settlement finality takes place. There is a point in time in which a trade brings about the transfer of ownership–definitively. At some point settlement instructions are irrevocable and transactions are irreversible. This is a core design principle of the financial system because ambiguity about settlement finality is a systemic risk. Imagine if the line items of financial institution’s balance sheet were only probabilistic. You own … of … with 97.5% probability. That is, effectively, what a proof-of-work based distributed ledger gives you. Except that you don’t know what the probabilities are because the attack vectors are based not on provable results from computers science but economic models. Do you want to build a settlement system on that edifice?
Of course not. And you don’t have to because there are many ways to design distributed, shared ledgers, depending on your goals. And I’ll venture to guess that censorship resistant securities transactions is not the reason why financial institutions are looking at distributed consensus tech. Their goals are rather different from Satoshi’s. Increased transparency is one, largely driven by the belief that regulators will grant concessions on capital charges for trades cleared through settlement systems that offer this. Efficiency through automating the back office is another. But probably the main goal is increasing the speed of trade settlement.
2. Company news
21 (nee e6) unstealths their business plan (and Balaji channels FDR) in A bitcoin miner in every device and in every hand. WSJ profiles the announcement here (including some spicy quotes from Mr. Swanson). And you can find plenty of geek snark on the Hacker news roundup here.
3. Digital Gold
Yet another bitcoin inspired book hit the shelves this week by Nathaniel Popper of NYT: Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money. For the curious-but-cheap, below are a few links sharing excerpts and reviews:
- How Wall Street got into the wild business of Bitcoin
- When Goldman Sachs Began Flirting with Bitcoin
- Five takeaways from “Digital Gold”
- Book review: Digital Gold by Tim Swanson (strap in, it's a long one)