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    • How much regulatory divergence can we have within the UK? October 23, 2018
      Open Europe's Henry Newman examines what proposals for a Northern Irish-specific backstop on regulations might mean for future regulatory divergence within the UK.The post How much regulatory divergence can we have within the UK? appeared first on Open Europe.
    • UK must be out of any transition extension before end of parliament, says Theresa May October 23, 2018
      Prime Minister Theresa May yesterday told the House of Commons, "There are some limited circumstances in which it could be argued that an extension to the implementation period might be preferable if we were certain it was only for a short time," adding, "But in any such scenario we would have to be out of this implementation period […]
    • Dominic Raab: Brexit transition period extension an “alternative” to the backstop October 22, 2018
      Writing in the Sunday Telegraph, Brexit Secretary Dominic Raab said regarding the backstop protocol, “we won’t sacrifice Northern Ireland, and we must have finality to any backstop – whether through a time-limit or a mechanism that enables the UK to leave, in case the EU doesn’t live up to its promise to get the future […]
    • European Council President: “Not enough progress has been made” to call November Brexit summit October 19, 2018
      Speaking after yesterday’s summit of EU27 leaders, European Council President Donald Tusk said, “I stand ready to convene a European Council on Brexit if and when the EU negotiator [Michel Barnier] reports that decisive progress has been made, and we should be clear that for now, not enough progress has been made.” On proposals to […]
    • Parliamentary constraint is key problem for Theresa May October 18, 2018
      Open Europe's David Shiels spoke to TRT World News on October 17 about the deadlock in Brexit negotiations, saying that it is important for the EU to realise that the UK Prime Minister faces several constraints in Parliament.The post Parliamentary constraint is key problem for Theresa May appeared first on Open Europe.
    • French government releases draft legislation for No Deal preparation October 18, 2018
      The French government yesterday published the full text of a draft legislation which would allow the executive to take emergency measures in the event of a No Deal Brexit scenario. On the rights of British citizens currently resident in France, the draft law states, “The [French] government is paying very close attention…to the rights of […]
    • This month’s Eurobarometer shows some troubling results October 17, 2018
      Open Europe's Henry Newman examines the latest Eurobarometer survey on public attitudes towards the EU.The post This month’s Eurobarometer shows some troubling results appeared first on Open Europe.
    • EU needs to move on the Irish backstop issue in Brexit talks October 17, 2018
      Appearing on TRT World News, Open Europe’s Dominic Walsh examined the prospect of solving the Irish border backstop issue in Brexit negotiations at this week’s European Council summit.The post EU needs to move on the Irish backstop issue in Brexit talks appeared first on Open Europe.
    • Donald Tusk: Only new UK proposals can break Brexit deadlock October 17, 2018
      European Council President Donald Tusk yesterday said that the state of Brexit negotiations “gives [him] no grounds for optimism” and that he will ask Prime Minister Theresa May “whether she has concrete proposals on how to break the impasse. Only such proposals can determine if a breakthrough is possible.” Tusk called for new thinking on […]
    • Brexit deal is achievable, says Theresa May October 16, 2018
      Prime Minister Theresa May yesterday told the House of Commons that despite the lack of agreement on issues such as the Northern Irish backstop to avoid a hard border on the island of Ireland, "I continue to believe that a negotiated deal is the best outcome for the UK and for the European Union. I continue to […]

About Blockchain

Bitcoin and Blockchain

 

When bitcoin broke into public consciousness in 2013, it couldn’t have been sexier: a digital currency being used to buy everything from drugs to cupcakes. Then the excitement shifted to an aspect of bitcoin that is a bit less sexy: public online ledgers. Blockchain — the technology used for verifying and recording transactions that’s at the heart of bitcoin — is seen as having the potential to reshape the global financial system and possibly other industries. Both bitcoin and its blockchain are gaining imitators as well as adherents, along with plenty of critics, including Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. This year’s wild price surge has given ammunition to both.

The Situation

The price of bitcoin rocketed in 2017 as the debate raged on whether the cryptocurrency — whose total value neared $300 billion in early December — should be considered a legitimate financial asset. It got a huge boost when Cboe Global Markets Inc., started futures trading tied to the digital currency and CME Group Inc. and Nasdaq Inc., said they would follow suit. Futures trading will push bitcoin closer to the mainstream by making it easier to trade without the hassles of owning bitcoin directly. Bitcoin began to look almost traditional compared with the new cryptocurrencies whose explosive growth has drawn warnings from regulators around the globe. More than $3.5 billion was raised through initial coin offerings through mid-November. The bitcoin community came together (mostly) in November to reject a proposed software change that had threatened a split. Meanwhile, more than 100 banks are working within the R3 consortium, created to find ways to use blockchain as a decentralized ledger to track money transfers and other transactions. Australia’s stock exchange plans to start using blockchain to process equity transactions. Blockchain is also being tested by retailers like Wal-Mart Stores Inc. for ensuring food safety, as industries explore what advantages the technology might hold over traditional databases.

 

The Background

Virtual currencies aren’t new — online fantasy games have long used them — but the development of a secure digital currency without a central issuer rightly turned heads. Mysterious spikes and drops in the price of bitcoin since its birth helped build an early reputation for the currency as a tool for selling drugs and laundering money. Its history also featured arrests for Ponzi schemes. The person or people who created the bitcoin system under the pseudonym Satoshi Nakamoto solved a problem central to any currency —preventing counterfeiting — and did it without relying on a government’s authority. The software also solved one specific hurdle for digital money — how to stop users from spending the same unit of currency twice. The breakthrough idea was blockchain, a publicly visible, anonymous online ledger that records every single bitcoin transaction. It’s maintained by a network of bitcoin “miners” whose computers perform the calculations that validate each transaction, preventing double-spending. The miners earn a reward of newly issued bitcoin. The pace of creation is limited, and no more than 21 million will ever be issued.

The Argument

Since bitcoin first boomed, there’s been no shortage of critics to call its rise a bubble and to argue that the currency has no intrinsic value. In September, Dimon called bitcoin a “fraud.” But a month later his chief financial officer followed rivals at Goldman Sachs Group Inc. and Citigroup Inc. in expressing openness to working with cryptocurrencies.  Entrepreneurs in the field say that focusing on the price of bitcoin is missing the point — its value is as proof of concept for a new kind of payment system not reliant on third parties like governments, big banks or credit-card companies. Others say blockchain advocates are hyping what amounts to no more than a new kind of database. Proponents of ether, the second most commonly used digital currency, respond that the etherium blockchain does far more than let bitcoin users send value from one person to another. Its advocates think it could be a universally accessible machine for running businesses, as the technology allows people to do more complex actions in a shared and decentralized manner.

The Reference Shelf

Blockchain Education

The difference between Bitcoin and blockchain for business

Are Bitcoin and blockchain the same thing? No, they aren’t. However, they are closely related. When Bitcoin was released as open source code, blockchain was wrapped up together with it in the same solution. And since Bitcoin was the first application of blockchain, people often inadvertently used “Bitcoin” to mean blockchain. That’s how the misunderstanding started. Blockchain technology has since been extrapolated for use in other industries, but there is still some lingering confusion.

How are Bitcoin and blockchain different?

Bitcoin is a type of unregulated digital currency that was first created by Satoshi Nakamoto in 2008. Also known as a “cryptocurrency,” it was launched with the intention to bypass government currency controls and simplify online transactions by getting rid of third-party payment processing intermediaries. Of course, accomplishing this required more than just the money itself. There had to be a secure way to make transactions with the cryptocurrency.

Bitcoin transactions are stored and transferred using a distributed ledger on a peer-to-peer network that is open, public and anonymous. Blockchain is the underpinning technology that maintains the Bitcoin transaction ledger. Learn more here and watch the video below for an overview:

LEARN MORE ABOUT BLOCKCHAIN FOR FINANCIAL SERVICES

How does the Bitcoin blockchain work?

The Bitcoin blockchain in its simplest form is a database or ledger comprised of Bitcoin transaction records. However, because this database is distributed across a peer-to-peer network and is without a central authority, network participants must agree on the validity of transactions before they can be recorded. This agreement, which is known as “consensus,” is achieved through a process called “mining.”

After someone uses Bitcoins, miners engage in complex, resource-intense computational equations to verify the legitimacy of the transaction. Through mining, a “proof of work” that meets certain requirements is created. The proof of work is a piece of data that is costly and time-consuming to produce but can easily be verified by others. To be considered a valid transaction on the blockchain, an individual record must have a proof of work to show that consensus was achieved. By this design, transaction records cannot be tampered with or changed after they have been added to the blockchain.

How is blockchain for business different?

The blockchain that supports Bitcoin was developed specifically for the cryptocurrency. That’s one of the reasons it took a while for people to realize the technology could be adapted for use in other areas. The technology also had to be modified quite a bit to meet the rigorous standards that businesses require. There are three main characteristics that separate the Bitcoin blockchain from a blockchain designed for business.

Assets over cryptocurrency

There is an ongoing discussion about whether there is value in a token-free shared ledger, which is essentially a blockchain without cryptocurrency. I won’t weigh in on this debate, but I will say this: blockchain can be used for a much broader range of assets than just cryptocurrency. Tangible assets such as cars, real estate and food products, as well as intangible assets such as bonds, private equity and securities are all fair game. In one business use case, Everledger is using blockchain to track the provenance of luxury goods to minimize fraud, document tampering and double financing. Now, over one million diamonds are secured on blockchain.

Identity over anonymity

Bitcoin thrives due to anonymity. Anyone can look at the Bitcoin ledger and see every transaction that happened, but the account information is a meaningless sequence of numbers. On the other hand, businesses have KYC (know your customer) and AML (anti-money laundering) compliance requirements that require them to know exactly who they are dealing with. Participants in business networks require the polar opposite of anonymity: privacy. For example, in an asset custody system like the one being developed by Postal Savings Bank of China, multiple parties, including financial institutions, clients, asset custodians, asset managers, investment advisors and auditors are involved. They need to know who they are dealing with but one client or advisor doesn’t necessarily need to be able to see all transactions that have ever occurred (especially when those transactions relate to different clients).

Selective endorsement over proof of work

Consensus in a blockchain for business is not achieved through mining but through a process called “selective endorsement.” It is about being able to control exactly who verifies transactions, much in the same way that business happens today. If I transfer money to a third party, then my bank, the recipient’s bank and possibly a payments provider would verify the transaction. This is different from Bitcoin, where the whole network has to work to verify transactions.

Why will blockchain transform the global economy?

Similar to how the internet changed the world by providing greater access to information, blockchain is poised to change how people do business by offering trust. By design, anything recorded on a blockchain cannot be altered, and there are records of where each asset has been. So, while participants in a business network might not be able to trust each other, they can trust the blockchain. The benefits of blockchain for business are numerous, including reduced time (for finding information, settling disputes and verifying transactions), decreased costs (for overhead and intermediaries) and alleviated risk (of collusion, tampering and fraud).

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