The Weekend Read: July 24

Count me among the 'many':

1. Gimme a Blockchain...hold the Bitcoin

The "you can't have blockchain without bitcoin" debate continues...Fred Wilson of USV kicks things off in this short post, in response to a room full of VCs sitting on their hands when asked if they would invest in a Bitcoin startup: "Maybe the distinction is bitcoin vs blockchain. I understand that. But bitcoin and blockchain are joined at the hip. You don’t get one without the other. So I’m still scratching my head."

Ryan Shea of Onename picks up this thread with another short read, making the valid distinction between a blockchain that is permissioned vs permissionless.

Gideon Greenspan wades in with the confident-sounding title Ending the bitcoin vs blockchain debate:

In bitcoin anonymous miners must perform expensive useless computations, and are incentivized to do so by the block rewards (and transaction fees) denominated in the blockchain’s native currency or token. Do we have any other options?

It turns out that we do. We can have a closed list of permitted miners, who identify themselves by signing the blocks that they create. Rules about distributed consensus (or “mining diversity” as we call it in MultiChain) provide a different way of preventing minority control of the blockchain, so long as you can accept that miners are pre-approved. Of course for bitcoin this is not acceptable, because part of the point is to permit anonymous mining, so there is no way to censor transactions centrally. But if, say, we had a highly regulated financial system, in which bitcoin’s model was inapplicable, perhaps we could accept a pre-approved list of miners after all? If we had enough of them, and spread them well enough between institutions, and had legal contracts with all of them, are they really likely to gang up and undermine the network they depend on, when doing so will land them in jail?

We close with the latest post by Richard Brown, riding to the rescue once again to save this debate, with his adapted speech Bitcoin and Blockchain: Two Revolutions for the Price of One?:

So… the blockchain revolution is so fascinating because it could actually be TWO completely different revolutions… both profound in their implications:

  • Censorship-resistant digital cash providing a new platform for open, permissionless innovation driven from the margins
  • And industry-level systems of record driving efficiencies for incumbents.

Neither of these are “sure things”… they are both high risk speculative bets… but they’re also very DIFFERENT bets…

2. Blockchain on Wall St. (cont.)

Greenwich Associates releases their survey Bitcoin, the Blockchain and Their Impact on Institutional Capital Markets, highlighted in this Bloomberg article:

Greenwich Associates found 94 percent of respondents say blockchain -- the ledger that drives bitcoin -- could be used in finance, according to a report to be released Wednesday. The software is touted as a way to speed up and simplify how trades of everything from stocks to loans and derivatives are processed.

“Revolution in the making -- that’s what this feels like,” Kevin McPartland, a co-author of the study with Dan Connell, said in a phone interview. “There’s a real opportunity for some change here.”


Barclays Blockchain (and Beard Groomer) Subject Matter Expert Simon Taylor has a nice, wide ranging piece on the potential of distributed ledgers:

The key gap is education, we often conflate “The Blockchain” and “A Blockchain”. This terminology is especially tricky because the technology is so new, terms are emerging daily to try and understand and make sense of it.

This is a nascent technology and while the opportunities are exciting, certain obstacles will need to be overcome before some of these use cases can come into being. It’s also clear that the security and controls associated with blockchain technology will need development before many of these applications can become mainstream.

That said, the opportunities are so significant that it’s a question of when, not if, these applications will emerge. In order to smooth the way for greater development and adoption, financial service providers and start-ups will need to collaborate closely.

Level39's Eric Van der Kleij backs up the assertion that banks are keenly interested in this interview: "The real powerful work being done in fintech is blockchain. I can tell you now with certainty that every major western bank we’ve spoken to, and some eastern ones, are looking at blockchain technology." Level 39 resident and UBS Crypto 2.0 Lead Alex Batlin gives another excellent rundown of the inherent potential:

Bank’s operating efficiency is also likely to improve as you exercise the previously mentioned inversion of control - technology debt is replaced by common rails. If you couple that with a reduced need for intermediaries due to the smart and distributed nature of blockchain and thus cut market participation costs, you can improve margins and reduce customer fees at the same time.

As a bonus you reduce operational risk, as you no longer have a single point of attack and failure in a peer-to-peer network i.e. safer and more reliable systems that are always there when you need them.

Last but no least, as regulators can now see in near real-time all transactions, they can analyse system risk in a way that has never been possible before. They can also validate that asset's business logic supports regulation as intended.

3. Bitcoin Bull and Bear Corner

r/bitcoin Redditors are cyber-high-fiving over this report from IB Times that BNP is considering adding Bitcoin to one of its currency funds. Meanwhile, the Winklevii have evidently filed for their (still to be opened) Gemini exchange to receive a NY trust charter. Meanwhile, the Justice Department has arrested the founders of Bitcoin exchange Coin.mx, accusing the two gentlemen with "[facilitating] transactions for hackers who would prevent innocent computer users from accessing their devices unless they paid a ransom." Sounds like a fine business model.

4. And in case you missed it

Here is the R3 feature story from CoinDesk. Could have done with another choice of words than 'plot'...makes us sound like Coin.mx employees!