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Technology to End Banking

posted by Dopefish on Monday February 24 2014, @11:00AM   Printer-friendly
from the money-in-the-mattress dept.

mrbluze writes:

"An interesting blog post by Charles Hugh Smith on Why Banks Are Doomed: Technology and Risk.:

The funny thing about technology is that those threatened by fundamental improvements in technology attempt to harness it to save their industry from extinction. For example, overpriced colleges now charge thousands of dollars for nearly costless massively open online courses (MOOCs) because they retain a monopoly on accreditation (diplomas). Once students are accredited directly--an advancement enabled by technology--colleges' monopoly disappears and so does their raison d'etre.

The same is true of banks. Now that accounting and risk assessment are automated, and borrowers and owners of capital can exchange funds in transparent digital marketplaces, there is no need for banks. But according to banks, only they have the expertise to create riskless debt.

...

One last happy thought: technology cannot be put back in the bottle. The financial/banking sector wants to use technology to increase its middleman skim, but the technology that is already out of the bottle will dismantle the sector as a function of what technology enables: faster, better, cheaper, with greater transparency, fairness and the proper distribution of risk.

There may well be a place for credit unions and community banks in the spectrum of exchanges, but these localized, decentralized enterprises would be unable to amass dangerous concentrations of risk and political influence in a truly transparent and decentralized system of exchanges.

It's still early days, but can new electronic currencies such as Bitcoin become mainstream without the assent of governments?"

 
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  • (Score: 1) by beckett on Monday February 24 2014, @10:46PM

    by beckett (1115) on Monday February 24 2014, @10:46PM (#6346)

    It seems like it would allow a few nefarious blockchain maintainers to manipulate the blockchain simply by setting their fees very low.

    i believe the transaction fee is built into the protocol, so someone would have to be nefarious enough to infiltrate the development team and change the TX fee in the source. since you can still compile your own wallet, i'm sure any changes would be tracked and discussed openly.

    contrast this with the recent LIBOR scandal, that saw the US Fed and multinational banks manipulate the interbank lending rate [telegraph.co.uk], affecting consumer spending and market liquidity at a fundamental level. in the case of the LIBOR manipulation there was no source code, and there was little recourse. banks are still lending after being slapped on the wrists.
     
     

    What would a functional (self correcting for collusion etc.) market for transaction fees look like?

    currently it is the sender's choice whether to include a transaction fee or not [bitcoin.it]. there is incentive for nodes to process the transactions that are paid, rather than the ones with no transaction fee. the current fee is 0.0001 BTC per 1000bytes of information. a typical transaction takes 500bytes, so almost everyone pays the 0.0001 BTC.
     
     

    Techies seem to love the crypto component of bitcoin, but they seem to miss the problems.

    seems like a bit of a strawman. i find that most people that invest in an asset (company stock, savings bond, mattress) take little effort to learn about their investment. this has nothing to with bitcoin, and has everything to do with people's laziness. whether the investment is bitcoin, higher education, or $1000 on "santa's little helper" in the 3rd race: the same personality types end up gambling their money away rather than taking the time to research where they should put their money. you're describing irrational exuberance, which is a human failing and not exclusive to the "techies" that invest in cryptocurrencies.