Bitcoin Bits: blockchains, breakthroughs and the big picture

Some of the most interesting Bitcoin-related articles from the past few days:

Beyond the Blockchain – by Marcus Swanepoel, via Medium

If you want more insight on what blockchains are, their limitations and their potential uses (and who doesn’t?), this is the article to read. Written by Marcus Swanepoel, founder of exchange BitX, it not only offers interesting observations, but also provides links to a host of other informative writers on the subject.

“A confused market doesn’t move”. These are some wise words once spoken to us by the leader of one of the most influential financial institutions in the world, and we observed it in reality over and over again. With all the new ‘blockchain’ solutions coming out, it’s becoming increasingly confusing for CTOs to make decisions around which technologies to use: Ripple, Ethereum, Sidechains, R3CEV, Bankchain, TRUST, Hyperledger, and even our own FALCON, to name but a few of the publicly disclosed alternatives. There is also a whole pipeline of new ones that will create even more confusion. There is no safe ‘buy IBM’ option, so we struggle to see any CTOs signing off on major blockchain projects in the foreseeable future.”

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by Jonathan Bean for Unsplash
by Jonathan Bean for Unsplash

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The Dangers of a Blockchain Monoculture – by Toni Acieri, via Coindesk

Another (long) look at the question “what is a blockchain”, that points out that the original white paper doesn’t even mention them.

“So as far as I’m concerned, as soon as we remove the “consensus-by-lottery” using proof-of-work part of the “blockchain”, it ceases to lose meaning and lapses into a much more general set of ideas which solve a similar class of problems but have been in use for decades, are distinct from bitcoin, and are in no way “blockchain technology”.”

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Bank consortium R3CEV successfully tests Bitcoin tech in traditional bank transactions – by Nicky Capella, for The Stack

Speaking of which, is this a big breakthrough? Or an example of hype? I think it looks promising, but with a difficult to predict end-use and rollout.

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Debates on Blockchain eclipse talk of Basel III at Davos – by Izabella Kaminska and Gillian Tett, for The Financial Times

Bitcoin finally takes the stage at Davos, although not in a leading role and not with unbridled support:

“The issue of the blockchain, for example, is particularly problematic because of the controversy that surrounds the virtual currency, bitcoin. “We know that bitcoin itself is a complete failure and shows the number one law of programming and software: that anything that can be programmed can be hacked. So nothing is completely secure,” said Willem Buiter, Citi’s chief economist and former member of the Bank of England’s rate-setting committee.”

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Virtual Currencies and Beyond: Initial Considerations – by the International Monetary Fund

In time for their presentation at Davos, the IMF released their first ever report on virtual currencies, which recognized that they could offer significant advantages, but raised the concern that they could destabilize the financial system (by which I assume they mean monetary policy). This is not a danger in the short term, the report clarifies, due to the insignificant (?) size of the virtual currency markets, but could become a factor over time. Indeed.

“VCs offer many potential benefits, including greater speed and efficiency in making payments and transfers—particularly across borders––and ultimately promoting financial inclusion. The distributed ledger technology underlying some VC schemes—an innovative decentralized means of keeping track of transactions in a large network––offers potential benefits that go far beyond VCs themselves.”

Interestingly, the report acknowledges the difficulty of regulation:

“The development of effective regulatory responses to VCs is still at an early stage. VCs are difficult to regulate as they cut across the responsibilities of different agencies at the national level, and operate on a global scale. Many are opaque and operate outside of the conventional financial system, making it difficult to monitor their operations.”

…and calls for coordinated global regulation that does not stifle innovation. One can dream.

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Have an amazing and thought-provoking weekend!

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