How to explain the value of replicated, shared ledgers from first principles

Finally, a coherent explanation of distributed ledger technology aka the blockchain.

Richard Gendal Brown

“Digital currencies” aren’t needed to explain why distributed ledgers are important.

In this post, I develop an argument for replicated shared ledgers from first principles. It is intended to be an “education piece” aimed at those, particularly in the finance industry, who prefer explanations of new technologies to be rooted in a description of a real-world business problem rather than beginning with a description of a purported solution.  So, in this piece, you’ll find no mention of digital currencies, etc., because it turns out you don’t need them to derive an argument for distributed ledger technologies!

(Note to regular readers: see the end of the piece for some context)

We’ll start with banking systems

Start by thinking about today’s banking systems. In what follows, I use a bank deposit and payments example. But the same logic applies everywhere you look, as I’ll argue later.

Let’s imagine a world with three banks: Bank…

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Is Iran rational?

In the end, it’s all about trust, recognition of common aspirations, and respect of difference.

Fareed Zakaria

By Fareed Zakaria
Thursday, April 9, 2015

At the heart of the concerns surrounding the deal with Iran is a simple question: Is Iran rational? For many critics, the answer is self-evident. The Iranians are “apocalyptic,” Israeli Prime Minister Benjamin Netanyahu has often said, warning that you can’t “bet on their rationality.” Sen. Lindsey Graham (R-S.C.) has declared, “I think they’re crazy.” Israeli Defense Minister Moshe Ya’alon restated his opinion recently that the Iranian government is a “messianic and apocalyptic regime.”

And yet, these same critics’ preferred policy is one that relies on Iran’s rationality. The alternative to the deal forged by Iran and the six great powers is not war, they insist, but rather to ratchet up pressure and demand more concessions from Tehran. So, this crazy, apocalyptic band of mullahs, when faced with a few more sanctions, will calmly calculate the costs and benefits and yield in a…

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Bitcoin – what is the use case DEC_TECH

The Bankwatch

The lecture by Andreas Antonopouloswas highly entertaining with anticipated shots at banks. In the audience of 400+ there were 6~ bankers so we were an easy target.

Apparently banks are busy developing strategies he surmises for use of the blockchain without the currency, or with normal currency. He poo pooed that idea noting that the bitcoins and the blockchain were inseparable.

Having said all that and thoroughly enjoyed his talk I am still no wiser for the use case, let alone the business case for Bitcoin. Some facts mentioned tonight are well known:

  • bitcoin is unsupervisedwith no centralized authority
  • Fintrac have indicated that standard KYC and AML checks are required on Bitcoin service providers
  • Volatility; no real answer. Reality of large surges in demand.
  • Standards: there is no similar standard to PCI/DSS
  • Block chain is a ledger
  • Bitcoin is 100% confidential although this is at odds with the stance…

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The socio-cultural challenge in the gun-control debate

Obama Shooting Skeets

It has been a while since last post, but what draws me back to comment is the the current gun control debate in the US. This is another example of that unprecedented cultural divide that dis-unites the US today and which I wrote about in a previous post.

Similar to abortion and gay rights, gun-control is an emotional flashpoint in US politics, enormously distracting to actual policy making such as fiscal reform or economic incentives. These issues represent huge socio-cultural divisions that need to be taken under consideration when planning  policies for the future.

So it was with some interest that I saw the White House announcement today which accompanied a photo of Obama shooting clay pigeons at Camp David

Whilst proposing a series of changes including mandatory background checks and a ban on assault rifles, Obama also advises gun-control advocates to listen more; to understand the traditions, so tied up with American identity and history, that explain the US  “love of guns”. He advises steering the debate within the framework of people for whom the hunting tradition is strong and finding common ground with those who support the second amendment but agree with its proposed changes. In an interview with New Republic Obama said;

“Part of being able to move this forward is understanding the reality of guns in urban areas are very different from the realities of guns in rural areas. And if you grew up and your dad gave you a hunting rifle when you were ten, and you went out and spent the day with him and your uncles, and that became part of your family’s traditions, you can see why you’d be pretty protective of that.”

In sociological terms, emotional attachments to ideas and opinions are what determine their endurance. When the emotional attachment fades, so too does the once fast-held belief. If the gun-control debate is to remain civil, the emotional attachment to guns needs to be explored and examined as much as the rational arguments for changing the current laws. Cultural changes happen slowly, but the beginning of change is usually after a tipping point, when enough individuals stand up to say “No More” and find courage to challenge the status quo. That point was the massacre in Newtown, and the realization that something in the US needs to change.