I was reading Matt Levine’s Money stuff today and was struck by a thought. He writes:
“A national customs agency, for instance, might be happier approving shipments on an auditable open blockchain than in the proprietary database of a particular shipping company.”
This is interesting, but I want to take it one step further. Blockchain or not, a record of events that have been cryptographically digitally signed, with references to previous transactions could be very useful.
If you are a company, and a regulator or agency asks you for your view on what happened, and you give the regulator an Excel spreadsheet or a normal database extract saying “Here’s what happened, I promise”, this is very weak evidence and can be tampered easily by deleting rows, or removing key words like the names of sanctioned countries, etc.
In 2013-15 it was trendy for online merchants to pretend to accept bitcoin as payment. It was a very cheap way to get positive media mentions and seem innovative. Overstock, Dell, Tiger direct… they were all at it after they realised it was all media upside. Even Virgin Galactic accepted bitcoin as payment for trips to space at some point (Note: I think paying for a trip to space with bitcoins is actually quite cool).
I’ve been at a few events recently where people talk about the “market cap(italisation)” of utility tokens issued in ICOs, and comparing them to the market cap of cryptocurrencies or (even worse) listed companies. This is truly dreadful and misleading, perhaps sometimes intentionally so. In this post I introduce two useful metrics for comparing across ICOs: the Reserve ratio, and the Commitment ratio.
Important note: If you own more than $1,000 worth of cryptocurrency then you should definitely be using a hardware wallet instead of keeping coins on exchanges. I recommend a Ledger Nano (S or Z) which you should buy directly from their website and never second hand.
Every few days I hear the argument “If x% of the money in gold (or other asset class) moved into bitcoin, a single bitcoin should be worth $y”. This article explains why this argument is utter nonsense.
The (flawed) reasoning is as follows: the total value of gold in circulation is estimated at US$8 trillion. If some small fraction of the people holding gold (say, 5%) sold their gold for US Dollars (releasing $400 bn), and the USD proceeds were used to buy bitcoins, the total value of bitcoins (commonly referred to as “market capitalisation”) would increase by that amount of dollars ($400bn), and because we know the total number of bitcoins in circulation, we can derive a price per bitcoin.
I’m absolutely thrilled to be able to write about the open sourcing of Project Ubin Phase II, a key project that our team has been working on for the past seven months with the Monetary Authority of Singapore (MAS), ten banks, and our partnerAccenture.
What is Project Ubin? It’s probably the most advanced starter kit out there for anyone wanting to explore blockchains for banking:
Over the past couple of years, R3 has worked closely with a number of central banks to explore if distributed ledgers could support their policy goals, and I have had the privilege to participate in a number of these projects.
What have we learnt? What is important? What do central banks care about? While I can’t speak directly for individual organisations, I have collated my own thoughts, and wanted to share these ahead of the Singapore FinTech Festival this year (13-17 Nov) when the results of Singapore’s “Project Ubin” experiments will be announced.
There has been a lot of hype around central banks, interbank payments, blockchains, and central bank digital currencies (CBDCs), but the narrative has become confusing and often misses the point. What’s going on? Actually two independent things are being actively explored:
Decentralisation of interbank payment systems
Wider access to digital central bank money (Central Bank Digital Currencies – CBDCs)
How do banks pay each other? In most countries, when banks want to transfer money to each other, perhaps upon instruction from a customer, they don’t put bundles of banknotes in vans, they pay each other digitally. How does this work?
This post is intended as a primer about payment systems and explains correspondent banking, nostros, real time gross settlement (RTGS) systems and deferred net settlement (DNS) systems. It supports other posts where I discuss decentralisation of these systems using distributed ledgers.