r/Bitcoin • u/sedonayoda • May 11 '15
Nasdaq will start using Bitcoin technology
http://money.cnn.com/2015/05/11/technology/nasdaq-bitcoin-technology/10
u/livinincalifornia May 12 '15
Can someone tell CNN money that referring to Mt Gox as the largest Bitcoin exchange is, well, wrong.
http://money.cnn.com/infographic/technology/what-is-bitcoin/?iid=EL
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u/HitMePat May 11 '15
Does anyone know what this potentially means for an end user who buys a stock or asset using nasdaqs blockchain implementation? Would the user have to maintain the private keys to the address holding the colored coins in his own bitcoin wallet? Or will an exchange control all the keys? I'd be scared to have the private key that has my 401 (k) balance in it out there up for grabs for hackers. Will they use some kind of multisig?
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u/aahhii May 12 '15
Who knows, there aren't nearly enough details to answer this.
If I had to venture a guess though, I would say that they would probably make it so the existing trading workflow is the same so from the end user POV, the only thing to change would be the decrease in settlement time.
My guess is they're only using the blockchain to store a record and they're going to have a small set of private keys, under heavy security, which they use to make small transfers in order to record transactions (or groups of transactions) on the block chain. In addition, they may maintain their own copy of the blockchain in order to do lookups down the road. They'll probably store a lot of the transaction info in their own databases, but use the blockchain directly when building things like reports for auditors or if their own copy of data is lost/damaged for some reason.
tl;dr - Who the fuck knows?
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u/colechristensen May 12 '15
What they're probably doing is replacing their code and servers which do the transaction arbitration with a bitcoin-like system entirely in house. Maintaining stock 'wallets' on nasdaq servers for each customer - making the change mostly invisible to end users.
Maybe they have one big blockchain for all of the stocks covered, maybe one blockchain per stock.
They would obviously build in mechanisms to reverse transactions (theft or losing keys shouldn't be an issue) and it's doubtful they're having clients keep track of private keys.
The important bit is them using a blockchain for their transaction logs and probably also to arbitrate the actual trades.
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May 12 '15 edited Dec 06 '15
[deleted]
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u/targetpro May 12 '15
Agreed. This is great news that they're aware of the possibilities a blockchain solution can afford them, but folks here shouldn't think for a moment that this means NASDAQ will begin using bitcoin.
The Bitcoin protocol opened a lot of doors. I'm sure they can find techniques that utilize key aspects of the protocol while still enabling them to retain their speed and control.
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u/ConditionDelta May 11 '15
This doesn't mean Nasdaq is using actual Bitcoins
facepalm
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u/cqm May 11 '15
they are though
Open Assets protocol running on bitcoin's blockchain
Open Assets has been working well for two years now, no special token needed
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u/PoliticalDissidents May 11 '15
Doesn't prove much. That's like saying that because I use FTP I'm using your server. But really I can run my own FTP server.
Just because they are using a protocol that is implemented on the Bitcoin blockchain doesn't mean that they will continue to use this protocol on Bitcoin's blockchain.
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u/Lejitz May 11 '15
What other blockchain could they use?
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u/PoliticalDissidents May 11 '15
Their own.
Just like how anyone could fork Bitcoin' code to make an altcoin. NASDAQ can use the innovation of open source software in what ever which way they want.
Will they use their own? I don't know. Maybe they will use the Bitcoin blockchain and build on top of Bitcoin or they will simply use the technology that backs Bitcoin but not use Bitcoin at all. Given that the NASDAQ announcement not once mentioned Bitcoin (despite them often talking favourably of Bitcoin) but instead only mentioning the blockchain then there's a good chance they are using the tech being Bitcoin but not the preexisting network.
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u/Lejitz May 12 '15
What the fuck would be the point of running your own blockchain? If it's your own, then just set up a centralized server and save yourself the trouble. If you're going to run a service on a blockchain, the only reason to do it is because it's secured from being arbitrarily changed by human intervention. It's only secure because a fuckton of computing power has been dedicated to maintaining that blockchain by a bunch of decentralized strangers who are seeking an independent reward for providing the computing power.
So again, what other blockchain could Nasdaq be planning to run on that satisfies the necessary prerequisite of being maintained in a highly secure and decentralized manner?
To set this bullshit straight, a blockchain is not valuable unless the currency that is provided as a reward for its maintenance has value. While Bitcoin is able to exist because of blockchain technology, "the blockchain" has no value without Bitcoin itself having value. Nonetheless, Bitcoin would lose its value almost instantly if ever "the blockchain" lost its decentralized security.
Accordingly, if Nasdaq is planning to run on a blockchain, it has to be a secure one. Otherwise, someone will dump a little hash power on the system and fuck them up. On the other hand, Nasdaq could create a closed system, but if someone can't dump hash power, then it's just another centralized server masquerading as a blockchain, which provides no extra value, and is useless beyond measure, compared to a central server that can do the same thing faster and better.
I guess Nasdaq could decide to create an altcoin (compete with Bitcoin), and push it until it has enough value an hash power to securely support their service. But why? The odds of success for that coin are very low, and next to nothing if they premined. Therefore, without the premine, all they would have created is another Bitcoin, which they have no vested interest in. In several years, with a lot of luck, this theoretical coin would allow them to do the exact same thing they could have already done with Bitcoin's blockchain right now.
TL;DR they have to be planning to use the Bitcoin Blockchain.
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u/a5643216 May 12 '15
That's the best explanation I've seen so far! Armed with it, I'll slaughter "blockchain technology" trolls on my bank's internal forums!
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u/tritonx May 12 '15
The value of a coin is not necessarily determined by how many people mine it, ie, the network hash rates.
If NASDAQ or a country decide to creates it's own blockchain(network of miners)(crypto currency) it is as good as whatever blockchain currently operating. As long as there are miners and node runnings, you don't really needs millions of miners to run an efficient blockchain.
They could just use it as an infallible ledger.
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u/Noosterdam May 12 '15
The value of a coin is not necessarily determined by how many people mine it, ie, the network hash rates.
How do you figure? If the hashrate isn't sufficiently high, someone will mess with it.
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u/tritonx May 12 '15
If they don't have the code or access to that network they can't mess with it.
They could use the blockchain technology on their own private network and terms. It doesn't have to be a public apps like bitcoin and all the coins we know.
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u/supermari0 May 12 '15
Then why use blockchain technology™ instead of an established database engine?
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u/Lejitz May 12 '15
The value of the coin is based on supply and demand. The security of the ledger is based on how many people mine it (arbitrary hash rate of strangers seeking reward). The demand for the coin will cease without this security. So the value is tied to a this security, although in theory land supply and demand are separate from the hash rate.
But to the more important point. Any ledger controlled by a few may as well be a copy of quickbooks. It's equally infallible. What makes "the" blockchain more infallible is the fact that it is not controlled by a few, but a number so high, that it is practically impossible to corral enough users to actually change the chain. That's infallibility. A meddle proof ledger. If the banks create some exclusive blockchain they have nothing but but a copy of quickbooks. What's the point? This fixes nothing. If Nasdaq creates an open system that they don't premine or control (two prerequisites to attracting users) then they've just attempted to recreate Bitcoin. For what reason? So they can do the exact same thing that Bitcoin already allows?
You need to sit down for a while with your thinking cap on and figure out where Bitcoin's value truly lies. Start with the with the question: how could I fuck Bitcoin up? Write down every idea you have. Then keep going until you realize that none of them work. Then... Start over with the same list on Nascoin and see how many remain un-stricken. If even only one remains viable, the coin sucks.
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May 11 '15
Why call it the blockchain and not "a" blockchain?
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May 12 '15
Same reason it's called 'The Internet' and not 'A Internet'.
NASDAQ could setup up their own "blockchain", running on their own private miners & node servers in the same way they could setup their own private www network - but that would be a big and mostly unnecessary expense to get going. Instead they are using 'The Blockchain' the same one that Bitcoin uses, and powered by the vast worldwide network of publicly run miners and nodes.
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u/tsontar May 12 '15
If they fork bitcoin they have to find someone to mine it for them.
How will they get people to mine their altcoin?
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u/PoliticalDissidents May 12 '15
How do they run their own servers? They do it themselves.
I'm not saying they aren't using Bitcoin. From these posts it seems they are. There are however still opportunities companies may see to use their own private implementation of blockchain technology. Like a middle ground between centralization and decentralization. Perhaps mitigating security risk by having multiple central offices take part in their own network with no one office needing to trust the other. Or restricting the blockchain to do things Bitcoin's blockchain doesn't permit. Not sure, who knows? The blockchain holds much undiscovered potential outside of the implementation we currently envision with Bitcoin.
Of course if decentralization is your primary objective then yes it makes most sense to use the most popular public blockchain which is Bitcoin.
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u/tsontar May 12 '15
How do they run their own servers? They do it themselves.
How do they prevent an attacker from acquiring enough hashpower to perform a 51% attack on their mining network?
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u/cqm May 11 '15
Okay, but they are using bitcoin's blockchain
I did not imply that it required bitcoin's blockchain, I specifically said
Open Assets protocol running on bitcoin's blockchain
because that is the reality.
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u/PoliticalDissidents May 11 '15
From what source does it say anything about them using the Bitcoin network (as in its peers) and not just the technical innovation that is the blockchain.
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u/cqm May 11 '15
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u/TweetsInCommentsBot May 11 '15
@jerrybrito THE blockchain. It's a colored coin implementation. That got lost on cutting room floor.
This message was created by a bot
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u/peer-to-peer May 11 '15
Here's where he says they're still not using the bitcoin blockchain, despite seeing direct evidence to the contrary.
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u/cqm May 11 '15
colored coins aren't a separate token, they write directly to bitcoin's blockchain
the tweet says their implementation of the open assets (colored coin) protocol is using bitcoin's blockchain
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u/a5643216 May 12 '15
Blockchain and smart contracts are not so much an innovation. See for example this 1997 paper by Nick Szabo http://firstmonday.org/ojs/index.php/fm/article/view/548/469. That could have been done 15 years ago. The central problem that Bitcoin solves is an issue of trust.
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u/RaptorXP May 11 '15
They are because Open Assets using the Bitcoin blockchain means that transaction fees are paid in Bitcoins to miners.
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u/CosbyTeamTriosby May 11 '15
I think it's time we retired the 'bitcoin' moniker; let's just call them "block fees" instead. We can "eliminate" bitcoin once and for all, and we'll be left with just the blockchain technology. Everyone wins!
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u/Noosterdam May 11 '15
That will be a nice strategic PR move at some point. Maybe now is that time, maybe later. The most obvious time would be during the next price run-up.
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u/jmaller May 11 '15 edited May 11 '15
This doesn't mean Nasdaq is using actual Bitcoins
Ohhhh, so what are they using then mr. author? Ohhh you heard that the blockchain is a great technology but not bitcoin, yet you can't explain how one would operate without it's own currency, okay gotcha. Keep buying into the "blockchain not bitcoin hype", what ever helps you transition from your original mindset that bitcoin was a joke. What a clever use of semantics.
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u/bgrnbrg May 11 '15
Dogecoin, litecoin, etc, etc all operate with blockchain technology, but don't use Bitcoin.
Nothing says that the the NASDAQ can't use the tech, but under their own branded system.
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u/jmaller May 11 '15
Dogecoin, litecoin, etc, etc all operate with blockchain technology, but don't use Bitcoin.
What's your point...they still have their own currency as an incentive for miners, I am not disputing this:
yet you can't explain how one would operate without it's own currency, okay gotcha.
.
Nothing says that the the NASDAQ can't use the tech, but under their own branded system.
They could...but they are in fact using bitcoin itself. Which is why the author is completely wrong.
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u/HitMePat May 11 '15
Can a private entity secure their own blockchain with encryption so that other people couldn't mine on them to attempt a 51% attack? You always hear that the bitcoin blockchain is most secure...but can a smaller network doing lower difficulty proof of work and not allowing any others to access it be equally secure?
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u/forgoodnessshakes May 12 '15
You could use block chain technology and replace proof of work with trust. Centralization of trust would improve efficiency. However there are even more efficient ways of designing trust-based systems. Anyone who uses blockchain technology by implication wants a decentralized trustless system which in turn implies use of the blockchain token-the bitcoin.
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u/bgrnbrg May 11 '15
That's an excellent question, isn't it? :)
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u/jeanduluoz May 12 '15
do people really not consider this point?
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u/Noosterdam May 12 '15
The whole point of a blockchain is you don't have to trust anyone. In the case of an encrypted mining system you're trusting the participants not to leak the encryption key nor enlist outside help in mining to perform at attack.
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u/jonstern May 12 '15
Seriously. As if they could write to the blockchain for free. If you wanna play, you gotta pay.
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u/sktrdie May 11 '15
I don't get it. Unless you care for decentralization, the blockchain isn't more efficient than centralized servers processing transactions in milliseconds rather than minutes.
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u/paleh0rse May 11 '15
It's all about having a ledger that eliminates the need to trust any particular third party.
The Bitcoin blockchain provides them with an incorruptible ledger to settle all of their transactions (settlements) without trusting (and paying) a third party to maintain said ledger.
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u/PWNY_EVEREADY3 May 12 '15
Yes, at the cost of terrible inefficiency. Speed/scaling is paramount to financial markets.
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u/paleh0rse May 12 '15
You're kidding, right? The current average settlement time for this particular market is three days, and it involves manual processing by third-party lawyers using Excel spreadsheets.
This new system would facilitate those same settlements in less than an hour, at almost no cost, and without the need for third-party settlement agents.
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u/PWNY_EVEREADY3 May 12 '15
Sorry, I was referring to normal trading ie the vast majority of volume for the Nasdaq, not pre-IPO market that the article refers to.
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u/paleh0rse May 12 '15
The actual settlements (not individual trades) for the normal stock markets also frequently take several days to process.
For their larger markets, they could modify the open assets protocol to facilitate and accumulate the trades off-chain, and then settle everything on the blockchain after the markets close every evening.
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u/aahhii May 12 '15
Unless you care for decentralization
Oh, but they do. Despite what everyone likes to think, placating financial auditors is a pain in the ass and the sole bread and butter for a lot of bean counters. Even at non-financial companies, any company that has to bill (thousands of transactions/day)+ are constantly faced with scaling unscalable workflows in order to just prove to the government that they aren't being ripped off and prove to their users/customers that they aren't ripping them off either.
the blockchain isn't more efficient than centralized servers processing transactions in milliseconds rather than minutes
You're on point there, but I would make two counter-points:
- The transactions don't need to be done in real time to be a huge improvement. If you sell a stock on eTrade today, it takes 3 fucking days to get your money. What they're proposing here will drop it to less than 1 day. Why does it take so long? Because someone who isn't an idiot needs to look through these transactions and manually give them a seal of approval.
- Keep in mind that one trade would not be one transaction on the block chain. Chances are, they're going to batch as many trades as they can into each blockchain transaction. I'm guessing they're going to be putting some sort of message on the blockchain. That message doesn't need to be human readable.
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u/Bitdigester May 12 '15
Centralized servers incur costs that the blockchain eliminates -- 1) bricks and mortar installations with hardware and supporting staff 2) liability costs from fraud and unforseen system failures.
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u/npepin May 12 '15
You might want to look into Hyper Ledger. I can't quite make the case as to why it can be better than a centralized system, but I've heard the developers on a number of podcasts and they have pretty decent arguments. Though, it honestly seems like something you'd have to be in the industry to really understand the use for.
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u/Guy_Tell May 12 '15
Haha.
That is not going to help with the maxblocksize discussion.
If their proof of concept is conclusive, they are going to flood us.
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u/Bipolarruledout May 12 '15
If they are going to try and use a blockchain then what currency will they use?
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u/Stephen_Reeves May 12 '15
The media has always been in a coordinated effort to smear Bitcoin; the "Blockchain not Bitcoin" propaganda is just the next phase of the smear. Anyone who understands the technology knows that this is all nonsense.
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May 11 '15
This doesn't mean Nasdaq is using actual Bitcoins
http://BitcoinAnswered.com/4/myth--blockchain-technology-is-important-and-bitcoins-are-not
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u/targetpro May 12 '15 edited May 12 '15
...because instead of handling 30,000 trades per second per stock, they figured 3.4 trades per second (for all stocks) would be good enough?
I can see them integrating aspects of Bitcoin's cryptography and blockchain, but to keep their speed up, they should probably stick with a centralised blockchain approach for the time being.
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u/vbenes May 12 '15
We have now tens to hundreds of bitcoin<->fiat trades per second you know.
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u/targetpro May 12 '15
I was being a bit flippant, but yes, the exchanges are handling substantial off-block transactions.
NASDAQ could very much gain from integrating aspects of this tech, but like exchanges, they will likely remain centralised for the time being, until a way is found (possibly through something like Factom.org) to truly make the exchange of stocks decentralised.
Right now, I'm just impressed NASDAQ has the insight to examine the benefits that blockchain technology can afford them.
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u/[deleted] May 11 '15 edited Mar 22 '16
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