Blockchains and cyberwar: Why the next wave of interbank settlement systems will be decentralised

Currently a number of central banks around the world are exploring two things:

  1. A decentralised interbank payment system
  2. A central bank digital currency

Though often conflated, these are slightly different concepts.  You can decentralise your interbank payment systems without allowing the public to have digital access to the central bank’s balance sheet, and vice versa.

This short post is about the first set of experiments: decentralising the interbank payment systems.

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Three common misconceptions about smart contracts

There is a lot of misleading commentary about smart contracts, leading to confusion about what they are and what they can do. Here are three of the most common myths that I have noticed. This builds on a previous piece, a gentle introduction to smart contracts.

Myth: Smart contracts are self-executing bits of code

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Distributed ledgers: “Confirm-as-you-go”

Following on from the “Blockchain is a solution looking for a problem” narrative of 2016, distributed ledger technology has evolved.

Distributed ledgers – databases with shared control over what and how data is added – can be seen a strategic solution to the “reconciliation” workaround that we have had to put up with until now. This strategic solution is applicable to all industries, not just financial services.

Distributed ledgers: "Confirm-as-you-go"

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Yes, but what’s new with distributed ledgers?

This short post is inspired by a conversation I had recently with a couple of finance professors from top business schools who had some questions about blockchains.

Prof A explained that he had heard all the fuss about blockchains but was unsure whether it was revolutionary or evolutionary (I think the word disruptive was also used). I have written about disruption in Fintech and the Evolutionary vs Revolutionary aspects of distributed ledgers before (hint: it depends, it’s both, and yes, perhaps).

Then he asked, “Yes, but is there anything new?”

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Distributed Ledgers: Shared control, not shared data

In the context of distributed ledgers, I have noticed that many commentators and consultants confuse shared control of data with the sharing of data itself. The difference is crucial, and this common simplification misses the most important aspect of distributed ledgers.

In this post I discuss three ideas:

  1. Sharing of data vs shared control of data
  2. Control of data by rules vs by power
  3. Enforcement of rules by participants

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A gentle introduction to The Hyperledger Project

I have noticed a great deal of confusion when people talk about “Hyperledger”.  I recently gave a talk about this at a meetup hosted in Paypal’s offices in Singapore.  This article summarises the talk.

Hyperledger is a project, not a technology, and you don’t build stuff on Hyperledger.

When people ask, “What is Hyperledger?”, the answer I give is usually “Do you mean the project called Hyperledger run by The Linux Foundation, or do you mean one of the ledger technologies incubated by that project which used to be confusingly called Hyperledger Fabric?”. The first is a group of people, the second other is a bunch of code.

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In a nutshell: Ian Grigg’s Ricardian contracts and digital assets prehistory

I enjoyed listening to Episode 151 of the podcast “Epicenter” (previously “Epicenter Bitcoin”) featuring Ian Grigg, inventor of Ricardian Contracts and blogger at Financial Cryptography. Here are my notes – part transcription, with some edits. This one is a goldmine and covers many topics: bonds, contracts, cash, Chaumian e-cash, DigiCash, financial cryptography, Ricardian contracts, digital signatures, smart contracts, dispute resolution, Ethereum, triple entry book-keeping, oh my!

Misunderstandings and paraphrasing errors are entirely mine.

This gets fairly technical; if this is hard to follow, it may be helpful to read my introduction to smart contracts first.  Hmm, if it’s still hard to follow, also read about blockchains and bitcoin and Ethereum, and digital tokens.

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A gentle introduction to Ethereum

Introduction

Ethereum builds on blockchain and cryptocurrency concepts, so if you are not familiar with these, it’s worth reading a gentle introduction to bitcoin and a gentle introduction to blockchain technology first. This article assumes the reader has a basic familiarity with how Bitcoin works.

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The emergence of blockchains as Activity Registers

This post tries to describe two very different uses for blockchain technology: Digital Token Ledgers that record ownership changes of digital tokens, and Activity Registers that record timestamped proofs of existence of data or agreements about data.  Bitcoin is used for both.

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