Blockchain officially confirmed as slower and more expensive

Hat tip to Joe Weisenthal on Bloomberg to flag the following shocker from the Bundesbank Wednesday (our weight):

A trial project using blockchain to transfer and settle securities and money showed said it was more expensive and quicker than the traditional way, said the German central bank president.

The experiment, launched by the Bundesbank together with Deutsche Boerse in 2016, concluded at the end of last year that the prototype "basically met all the basic regulatory functions of financial transactions." Although distributed management technology lawyers say it has potential for To be cheaper and faster than today's settlement mechanisms, said Jens Weidmann that the Bundesbank project did not have them.

For context, here is FT Alphaville, March 1[ads1]9, 2015:

First, we are not convinced that blockchain can ever be shared from a coupon or token installment component without compromising on the sea system's purity. Secondly, we are not convinced that the blocking economy is going out for anything other than a few high-intensity use cases. Thirdly, blockchain will become more expensive than a central clearer because several agents have to do the processing job instead of just one, making it a premium clearing service – especially if it is delinked from an equity voucher – not cheaper

And here is FT Alphaville quoted Axel Pierron from Opimas back on November 22, 2017:

Even in markets where "blockchain" hype can help implement standardized operating systems, such as FX, it is worth asking how troubled it is will be in the long term, especially on a cost-saving front.

If there is more update than paradigm shift, the blockchain investor market may be disappointed.

Despite this, Pierron believes predictions that blockchain will reduce IT and infrastructure spending by up to 30 percent can be exaggerated. For the most part, these estimates represent that blockchain will see today's back-office systems replaced with ledger-based alternatives. However, whether this actually reduces costs will depend on the interoperability of the systems as a whole.

And here is FT Alphaville and cites Martin Walker, director of banking and finance, center for evidence-based management, April 13, 2018: 19659002] Distributed conductor technology is "inherently slower" than the one used in all the fast floating markets such as FX , shares, government bonds. But the legal mechanism by which settlement takes place at the same time as the trade is too fast for markets used to settle business in a time delay.

Here are some Tweets.

The only blockage models I believe have potential

– Izabella Kaminska (@izakaminska) March 11, 2015

@dominic_w If you say that it will be much more fintech , I don't doubt it, but it won't b blockchain who wins out, coz its ineffective

– Izabella Kaminska (@izakaminska) January 8, 2015

Here's some blurb about our view of blockchain in and bid debate.

Here are some things from Martin Walker (and FT Alphaville) testimony to the UK Treasury Select Committee hearing on the September 2018 crypto case:

In their written evidence of the committee, Kaminska and Walker acknowledged that "a It has been many different claims […] about the potential benefits of using blockchain […] technologies in the financial sector. "61 But they claimed that in most cases" how blockchain [would] specifically solves problems or generally makes things better [is] not explained. "62. By discussing examples of the wider use of blockchain in the financial services sector, Kaminska and Walker noted that many of these do not distribute cryptoservices, limit the number of entrants to the general ledger and" have a central body […] responsible for maintenance. of the big box and […] gives access to it. " 63 They added that in many cases these examples were "so different from the original block chain, it becomes meaningless to refer to it as blockchain." 6

And here is an excerpt for a freelance piece Alphaville did for the Berlin Biennale directory for artist Simon Denny.

. . . It is not clear whether private block chains can improve the cost or efficiency of today's system. There is also no reason to believe that a block chain would be any more successful in introducing a single regulatory package of industry standards than regulators or governments to date. On the contrary, it's all the risk we end up with a system of competing cartel networks that can't come together. Or, in the event that they do so, even in such a high standardized, synchronized and interoperable environment, the predictability of the system is exposed to entirely new types of network security risks, which have not yet been recognized or accounted for by anyone. Lastly, it underestimates the challenge of capturing the entire financial system in a transparent ledger by ignoring the continued incentive for parallel "off-grid" banking services to get into informal environments (such as babysitting chambers) and in jurisdictions offering safe haven to darkness. network and the black market.

And just to conclude, here are some more from the Bundesbank:

"The Blockchain solutions did not improve in all respects: the process took a little longer and resulted in relatively high calculation costs, Weidmann said in Frankfurt on Wednesday." Similar experiences have been made elsewhere in the financial sector. Despite many tests of blockchain-based prototypes, a real breakthrough in the application lacks so far. "

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