Chain Blog

The block chain offers the following unique benefits for asset transfer:

- Assets move directly between entities — transfer and settlement are one-and-the-same — eliminating counterparty risk (https://en.wikipedia.org/wiki/Credit_risk#Counterparty_risk)

- Assets move instantly, and settlement time is ~10 minutes (settlement can also be instant if the parties trust the other won’t “double spend”)

- The transfer mechanism is public infrastructure and is always improving — everyone has a shared incentive to make it better, similar to Internet protocols like email and http

- Assets and end-user data are privately controlled, and strong security for assets can be achieved by using multiple signing keys across several parties

- Policy rules about the movement of assets can be enforced programmatically — whether those are “terms and conditions” or regulatory requirements

- Assets are fungible and play nice together — e.g., you can use reward points to buy mobile minutes

- A single transaction can include multiple entities and assets, on both sides of the transaction — e.g., you could execute a merger of two companies in a single transaction, with the inputs to the transaction being all stockholders across all share classes for both companies, and the outputs being all the newco shares going to all the new stockholders (again, no escrow service needed)

- Every transaction is added to an immutable record which, while anonymous, can be used to construct a perfect audit trail…

I think you make some very valid points. To be clear my view isn't that blockchain is going to make banks obsolete (this blog post sums that up pretty well: https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80). For example, certain activities that you mention, like M&A, are not going to be easily improved by just introducing a blockchain.

What a blockchain is useful for is eliminating the need for a centralized, trusted third party. Where I could see this being very helpful, and a potentially disruptive force is in areas like IPOs, mitigating counterparty risk, reducing conflict of interests, etc.

For example, if companies can raise capital and create liquidity for themselves with ICOs, the demand for IPOs will decrease. If investment banks break the "Chinese" wall and engage in market manipulation, then having public companies put their accounting on a public ledger will reduce the dependence on quarterly earnings reports. If more players are able to access the financial systems because they are on public ledgers rather than private ones, it will make it harder to banks to engage in oligopolistic behavior.

None of these things are guaranteed to happen, and certainly they won't all happen overnight. I do see though, the potential for these types of changes to slowly chip away at some of the revenue streams that banks have enjoyed for a long time.

Here[0] is a great article about what a blockchain is and isn't good for for. The tldr is that blockchains make tradeoffs that are bad for most things.

In fact, on almost every dimension, decentralized services are worse than their centralized counterparts:

They are slower

They are more expensive

They are less scalable

They have worse user experiences

They have volatile and uncertain governance

And no, this isn’t just because they are new. This won’t fundamentally change with bigger blocks, lightning networks, sharding, forks, self-amending ledgers, or any other technical solutions.

That’s because there are structural trade-offs that result directly from the primary design goal of these services, beneath which all other goals must be subordinated in order for them to be relevant: decentralization.

[0]https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80

"I can calculate the movement of stars, but not the madness of men,"

- Newton after he lost everything investing in the south sea bubble for a second time, just before it popped.

This has gained mainstream attention and no-one knows what they’re investing in any more, there is no there there to justify the price. Consider the trajectory of chain - a bitcoin startup that has gone from being about bitcoin to about block chains to about distributed ledgers to being about distributed applications (note these last things don’t care what they’re denominated in).

A founder wrote one of the best write ups of this space I’ve seen, and even he is pretty skeptical:

https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80

All it needs now is for ordinary people to get nervous and start trying to realise their gains all at once for prices to plummet once again.

Strange to not cite the origin of the confidential transactions scheme.

an early writeup: https://people.xiph.org/~greg/confidential_values.txt

http://diyhpl.us/wiki/transcripts/gmaxwell-confidential-transactions/ which is a transcript of https://www.youtube.com/watch?v=LHPYNZ8i1cU

The actual borromean ring signature paper (compiled into pdf): http://diyhpl.us/~bryan/papers2/bitcoin/Borromean%20ring%20signatures.pdf

Confidential transactions was later extended to confidential assets: https://blockstream.com/bitcoin17-final41.pdf and https://blog.chain.com/hidden-in-plain-sight-transacting-privately-on-a-blockchain-835ab75c01cb