Bitcoin news 29 july 2017inching closer to
CME is making a product because bitcoin's now at a level where investors might want the ability to either invest in it outright, or use it to hedge their other investments. This is the finance world's equivalent of getting invited into their secret society. Bitcoin is now part of the club.
CME isn't even the first one. LedgerX, a smaller company than CME, has been offering products tied to bitcoin since mid-October— and they're selling. High demand for crypto ETNs in Europe. There are other efforts to make it even easier to invest in bitcoin without having to go through the trouble of setting up a digital wallet.
Bitcoin ETFs exchange traded funds , which are simple, cheap investment tools are expected to gain the necessary government approval and begin trading. That would make buying an exposure to bitcoin as easy as buying a stock.
This does two things. First, it makes it easy for anyone smart or: Second, it provides the tools necessary for big money to start investing in the future of bitcoin.
That means things like major funds that each handle hundreds of billions of dollars in things like pensions and retirement funds. A bit of your money could easily end up with some exposure to bitcoin this way. The prospect of this money getting into bitcoin is huge. The biggest knock on bitcoin has been that it is not generally seen as having value except by the people who value bitcoin.
That's some circular logic, but that's pretty much how value works. Things have value if everyone agrees they have value. Bitcoin's value was limited and scary because there weren't enough people agreeing to its value. Now, the opposite could be true. Bitcoin is in line to end up exposed to the global economy just like every other investment asset. Whereas bitcoin was insulated within its own market for a long time, now it will face a variety of other economic forces that can swing its value.
One economic implication of widespread blockchain adoption is that the institutional structure of society could shift to one that is computationally-based and thus has a diminished need for human-operated brick-and-mortar institutions. Blockchain distributed ledger technology is a network software protocol that enables the secure transfer of money, assets, and information via the Internet, without the need for a third-party intermediary such as a bank Swan, Transactions are validated, executed, and recorded chronologically in an append-only tamper-resistant database, where they remain available on the Internet for on-demand lookup and verification.
A digital money system such as Bitcoin is the first and perhaps the most obvious application of blockchain technology. Money can be transferred immediately in real-time from one continent to another, at very low costs, and in a matter of seconds or minutes, instead of waiting days or weeks, and paying high commissions, as is the case with current international money transfer and remittance solutions.
Just as the simple mail transfer protocol SMTP constitutes the underlying protocol by which Internet users can send an email to each other in a seamless and interoperable way, regardless of their email provider, likewise, the Bitcoin protocol allows people to seamlessly transfer money to one another, regardless of their bank. However, digital currency is but one application enabled by blockchain technology.
The four main kinds of applications in development are real-time money transfer and payments, property registries, contractual agreements, and identity confirmation. The terms blockchain and distributed ledger technology are often used interchangeably. Distributed ledger is the general form of the technology, and blockchain is a specific form with an additional technical detail. Both refer to the concept of a ledger— a file that keeps track of who owns what.
A distributed ledger has four salient features: There are two kinds of blockchains: Anyone may use public blockchains such as Bitcoin and Ethereum , and identity is not known. Private blockchains are analogous to a corporate intranet, used by industry consortia and governments, where users are known and credentialled. Cybersecurity could be one of the biggest drivers of blockchain adoption.
Recent breaches — the private data of an estimated Centralized databases provide an attractive target for hackers, whereas it is possible that decentralized storage records protected by cryptographic signatures on blockchains might dramatically improve network cybersecurity.
Greater user control and permissioning of personal data is an expected feature of decentralized solutions. Blockchains are smart networks that confirm and transfer value directly, without third-party intermediaries. The result is a trustless system in that the human counterparties and institutions involved do not need to be known and trusted. Instead, trust is placed in the computational smart network system, which could help to create next-generation cybersecurity solutions.
Following digital currencies and money transfer, one of the biggest blockchain applications in development is digital asset registries. The same distributed ledger technology provides the means to record and transmit digital goods over the Internet, while ensuring that these goods cannot be copied or multiplied thereby addressing the double-spending problem that has been an issue with digital currencies previously. A digital asset registry is a listing of smart assets also referred to as smart property.
Digital asset registries might use blockchains extensively as a system to record, transfer, and verify asset ownership. This could include titles for automobiles, homes, and land. Some countries have pilot programs underway, notably Georgia, Ukraine, Sweden, and Ghana Reese, There are property transfer issues and also legal implications. A blockchain can be used as a digital registry to record, transfer, and verify asset ownership home, auto, stocks, bonds, mortgages, and insurance , and also to preserve the integrity and authenticity of sensitive documents or records e.
One of the highest-impact applications of blockchains could be as a leapfrog technology for global financial inclusion. It does not make sense to build out brick-and-mortar bank branches to every last mile in a world of digital services. Even without phone-based banking, low-cost debit cards might effectively service the unbanked Rogoff, The leapfrog impact could be significant as banking services are bundled together with identity services and land registries.
The United Nations estimates that 1. Land titling and property transfer systems have been identified as a crucial step for economic development de Soto, The adoption challenges are perhaps not always technical as much political given that solutions are only possible to the extent that power elites are willing to implement them Chua, A demonstration case of digital financial services as a leapfrog technology is the mobile payments market in China.
Debit cards and credit cards were not offered and adopted in China to the same extent as in other countries, and thus an alternative to cash such as mobile payment has been widely adopted. In an era of blockchain-based digital finance, credit could be a consumer service that is much more transparent, widely available, and synchronized across country boundaries. For example, there could be open-source FICO scores, blockchain-based credit bureaus, and blockchains as the backbone of the first international credit agency Swan, Just as blockchain-based electronic medical records can be accessed securely anywhere in the world, so too could credit scores.
The impact could be opening up credit markets to retail customers on a global basis. There could be advantages such as individuals not having to build credit histories from scratch when living in a different country. But there could also be drawbacks, as not everyone might want to join a global credit system although one that is more transparent and user-controlled might be more welcome.
The long-tail argument is that, in digital marketplaces, it is possible to sell lower quantities of more items Anderson, Researchers confirm long-tail economics in digital marketplaces, finding that niche books account for They argue that power laws as opposed to Pareto distributions are a better model for digital marketplace sales for books, music, and software downloads.
For the blockchain economy, the key point is that not only are long-tail markets economically viable, but also that there is demand for personalized products and services that cater to individual needs. Previously, one size had to fit all in financial and government services due to economies of scale and other barriers.
However, in a network economy with blockchain-based asset transfer, personalized financial and government services might be better tailored to individual needs and wants. An example of personalized economic services where one size does not fit all is that, instead of a standard year mortgage, a borrower might prefer a year mortgage that better corresponds to personal life events such as a planned home downsizing once children are grown.
Amazon, eBay, and Craigslist are digital marketplaces that allow the long tail of economics to meet in the sense of the buyer of a particular rare item being able to find a seller of that item in a way that would not be possible in a mass-market retail store.
The point is that, in digital marketplaces, buyers and sellers can transact more granular personalized business than is economically feasible in the brick-and-mortar format.
The implication of algorithmic trust, and funds locked or escrowed with smart contracts, is that any two long-tail parties can meet and transact in a secure blockchain-based environment, without having to know each other. Personalized banking, credit, and financial services could become routine, and also personalized governance services, for example, a closer link between the public services funded and consumed by individuals.
Early evidence of long-tail markets for blockchain services is a September transaction that purports to be the first real asset transfer with a blockchain. US-based TechCrunch founder Mike Arrington purchased a Ukraine-based residence using Propy, a global decentralized property store on the Ethereum blockchain Masse, One of the most intriguing ideas being developed in the blockchain industry is payment channels.
A payment channel is a financial contract executed over time in three steps: The idea arose for micropayments, such as video bandwidth consumption, where piecemeal transactions do not make sense and an automated contractual arrangement can support aggregate consumption.
Contracts close and roll over at regular intervals. Either party may elect to close the payment channel early, in which case the net settlement would be booked and the contract would end. Another benefit of payment channels is easing blockchain scalability by only booking the opening contract and the final amount as opposed to interim transactions, while being contractually obligated and protected all along the way. Payment channels are a speculative concept that is under discussion, but the conceptual implications are provocative.
First, the radical implication of peer-to-peer networks is that any node can deliver services to other nodes, for a small transaction fee. This is already how the Bitcoin network operates, with 9, worldwide peer nodes hosting the transaction ledger.
The mining operation to confirm and log transactions is another network peer-based activity. Storage and news hosting are newer network services, and the implication is that payment channels have the requisite functionality to allow peer nodes to offer banking services Dryja, The question arises as to how to treat payment channels from an accounting and legal standpoint.
For accounting purposes, is a payment channel a deferred payment or an installment sale? When during the contract is revenue to be recognized, and what are the balance sheet liability obligations? Legally, do payment channels constitute assignments of claims or forward-looking IOUs? A contingent three-part financial contract over time is a new instrument, especially when considering that transfers might exist across multiple hops parties in a directed graph structure of layered contingencies that is based on distributed computing network architectures as opposed to traditional modes of financial exchange.
Other conceptual implications are similarly striking. The idea of economic activity based on net settlement versus gross settlement is intriguing. What if many more operations in the economy were to transition to a net payments basis? Industry consortia such as interbank daily settlements are tabulated on a net basis.
However, what about opening up net clearing functionality to individuals? The idea is essentially an enhanced version of paycheque direct deposit plus auto-pay bills, just formalized into a multi-party payment contract. Personal monthly inflows and outflows could be orchestrated by a payment contract that nets salary against expenses and builds in a savings remainder.
With money and payments digitized, and activity being securely forward-committed by payment contracts, the implication is that net flows instead of gross flows might be transferred. An economy based on net clearings or contracts for difference is quite different than the current system, and the risks and benefits would need to be evaluated.
A further implication of digitized money and payments is that the standard amounts at which we do business could be much more granular. This granularity could possibly allow progress in reconceiving the debt juggernaut impacting individuals and institutions alike.
Streaming money could be disgorged in much smaller chunks that are more closely tied to costs and repayment possibilities Antonopoulos, We could similarly reconceive economic modes of consumption and the related financing options. There could be a reconstitution of mechanisms for pre-paid consumption a small part of current overall economic activity against the much larger portion of activity that is post-paid and based on credit and terms.
Digitized streaming money and payment channels could be techniques to quicken the 30—60—90 day terms and uncollectible debt problem in supply chain finance, and facilitate a just-in-time economy for money. The potential economic benefits of blockchain distributed ledgers are offset with several key challenges. The first challenge is that the technology is complicated. Even the basics are difficult to understand, both conceptually and technically, and this is a barrier to effective decision making and the ongoing implementation and use of the technology.
Second, a variety of challenges have to do with the technical aspects of the technology. Bitcoin is the largest open blockchain in a field where private blockchains are also starting to be in use. Others counter that this is not a long-term risk as the mining operation would likely become more globally diversified as the use of the currency grows.
Another concern is that there seem to be a variety of unresolved technical issues. However, it is important to note that Bitcoin is an open source software project, and that it is helpful, not detrimental, that all of the issues are publicly debated by worldwide developers. So far, changes to the software have been proceeding democratically, with all network participants involved in decision making the five big constituencies are developers, miners, exchanges, wallets, and merchants.
A recent example of this is the hard fork for the Bitcoin blockchain to incorporate SegWit2x, a new standard increasing scalability, with the decision made in August for implementation in November Higgins, Others worry about hacking scandals, and these would likely persist in the ongoing development of blockchain ledger systems, while cybersecurity responses will also continue to develop in lockstep.