VISA

[SharperDingaan]

Two, simple, banking examples where this is game changing.

 

Securities clearing: Change the currency unit to a CUSIP number (unique security identifier) & add front-end digital interfaces. You have just eliminated most of the trade confirmation & settlement process, cut the staffing component by at least 50%, & transformed the custodianship business. If you are not already in this business, you have no choice but to invest heavily in the option - or lose your market share.

 

Payment clearing: When both buyer & seller use the digital currency, you have just eliminated the need to use the clearing system at all. And as the transaction cost is minimal, every store front merchant has a very strong incentive to move to digital, & move off the clearing system. Widespread job loss, collapse in Visa fees, & permanent value destruction.

 

If you wished to enter banking today; you would do it as an entirely digital business with NO brick & mortar, & very few staff. To get your customers you would target the zombie banks, & offer the regulator a standing option to transfer accounts at zero cost. Retain just 10% of the transferred accounts & you have attained critical mass.

 

SD

 

[merkhet]

I think parts of this discussion about BitCoin and BitChains is above my head  -- I'd appreciate any reading that people could provide that might elucidate the issues/technology/process for me.

 

My question is the following:

 

You need both the seller and the buyer to use the digital currency, right? How likely is it that we will change consumer preferences to utilize digital currency rather than cash or credit cards? And, implicit in my question, how likely is it that someone on this board would use the digital currency to buy, say, an Apple Watch versus someone in rural Alabama using the digital currency to run up a bar tab?

[deadspace]

I think parts of this discussion about BitCoin and BitChains is above my head  -- I'd appreciate any reading that people could provide that might elucidate the issues/technology/process for me.

 

My question is the following:

 

You need both the seller and the buyer to use the digital currency, right? How likely is it that we will change consumer preferences to utilize digital currency rather than cash or credit cards? And, implicit in my question, how likely is it that someone on this board would use the digital currency to buy, say, an Apple Watch versus someone in rural Alabama using the digital currency to run up a bar tab?

 

Well I think you hit the nail on the head as there is essentially no incentive for the average consumer to change which is absolutely necessary to break the network effects of the major credit card companies.  For all its elegance this issue is likely to be the downfall to mass acceptance

 

There are other issues of course.  Security - a digital wallet can be "stolen" while a Visa card theft will not be charged to the consumer.  Now defenders of crypto currency talk about the many ways to defeat these issues but that adds cost and removes the major advantage.  You end up just recreating what is already there with the major credit cards. 

[Mephistopheles]

Also, there's the issue of not having secured purchases with digital currency. Once you make the purchase, there's no chance in getting your money back no matter what, unless the seller refunds you.

 

I think parts of this discussion about BitCoin and BitChains is above my head  -- I'd appreciate any reading that people could provide that might elucidate the issues/technology/process for me.

 

My question is the following:

 

You need both the seller and the buyer to use the digital currency, right? How likely is it that we will change consumer preferences to utilize digital currency rather than cash or credit cards? And, implicit in my question, how likely is it that someone on this board would use the digital currency to buy, say, an Apple Watch versus someone in rural Alabama using the digital currency to run up a bar tab?

 

Well I think you hit the nail on the head as there is essentially no incentive for the average consumer to change which is absolutely necessary to break the network effects of the major credit card companies.  For all its elegance this issue is likely to be the downfall to mass acceptance

 

There are other issues of course.  Security - a digital wallet can be "stolen" while a Visa card theft will not be charged to the consumer.  Now defenders of crypto currency talk about the many ways to defeat these issues but that adds cost and removes the major advantage.  You end up just recreating what is already there with the major credit cards. 

[HJ]

You need both the seller and the buyer to use the digital currency, right? How likely is it that we will change consumer preferences to utilize digital currency rather than cash or credit cards? And, implicit in my question, how likely is it that someone on this board would use the digital currency to buy, say, an Apple Watch versus someone in rural Alabama using the digital currency to run up a bar tab?

 

The assumption is this will all be through cell phone, or whatever mobile device you carry that has sufficient computing power to facilitate processing at the backend.  While the technological aspect of this whole discussion is interesting, the business aspect of it is perhaps more important, and your question kind of gets to it.  How did we end up with the current payment system for all the various transactions in the society?  With a mix of cash, card, mobile, Western Union, etc at the consumer level; through this whole DTC / Euroclear system in securities transactions, and ACH / bank wires, etc in other commercial transactions.  Why was Paypal successful, for example, what purpose did it serve?  Why does it seem like it's run to its limit, or maybe it hasn't?  Seem to me it's invariably a combination of convenience, security considerations vs. cost, and ultimately, a trust factor which the banks inevitably underwrite at the back end. 

 

Most innovations so far (PayPal, ApplePay, etc) have chosen to ride the existing rails, and innovate on the edge, which seems to me, to be very well considered decisions.

[SharperDingaan]

The best way to research Blockchains is to google .. & go from there. Agreed that what is out there is very promotional, but there are 1-2 good research papers which give the rough mechanics. You will not see anything application related, but you will see who is working on it - & who is backing them. ie: The UK, Level 39 incubator.

 

We routinely use digital currency already - every time we pay with plastic or a debit card. Crypto currency in NA is still alien, but in Europe it is much more accepted. More importantly, it is largely only the cool places (Berlin bars, etc.) that currently accept it. To sell a new drug you sell to the cool people first - & then trickle it out to the masses. Not unlike the speakeasy during the prohibition era.

 

The various payment/clearing systems we currently have do the job, but are largely at their limits; horse & buggy net benefit as compared to the standard gas guzzler benefit we all enjoy today. They are also captive to their oligarchs, & beyond innovation because there is no net benefit to disrupting the status-quo.

 

To make gains here you have to chaotically disrupt the game, then replace it with a better & cheaper technology overnight. And with such a big prize going to the winner, there are going to be lots of wolves eying the sheep. Continuous improvement can only take you so far, & every year the gains diminish; every now & again it is time for a new game, & the US is very good at it.

 

This type of thing is also routine & nothing unusual; the early history of US mortgage securitization being a recent example. 

 

SD

 

[rishig]

The best way to research Blockchains is to google .. & go from there. Agreed that what is out there is very promotional, but there are 1-2 good research papers which give the rough mechanics. You will not see anything application related, but you will see who is working on it - & who is backing them. ie: The UK, Level 39 incubator.

 

We routinely use digital currency already - every time we pay with plastic or a debit card. Crypto currency in NA is still alien, but in Europe it is much more accepted. More importantly, it is largely only the cool places (Berlin bars, etc.) that currently accept it. To sell a new drug you sell to the cool people first - & then trickle it out to the masses. Not unlike the speakeasy during the prohibition era.

 

The various payment/clearing systems we currently have do the job, but are largely at their limits; horse & buggy net benefit as compared to the standard gas guzzler benefit we all enjoy today. They are also captive to their oligarchs, & beyond innovation because there is no net benefit to disrupting the status-quo.

 

To make gains here you have to chaotically disrupt the game, then replace it with a better & cheaper technology overnight. And with such a big prize going to the winner, there are going to be lots of wolves eying the sheep. Continuous improvement can only take you so far, & every year the gains diminish; every now & again it is time for a new game, & the US is very good at it.

 

This type of thing is also routine & nothing unusual; the early history of US mortgage securitization being a recent example. 

 

SD

 

The best way to research Blockchains is to google .. & go from there. Agreed that what is out there is very promotional, but there are 1-2 good research papers which give the rough mechanics. You will not see anything application related, but you will see who is working on it - & who is backing them. ie: The UK, Level 39 incubator.

 

We routinely use digital currency already - every time we pay with plastic or a debit card. Crypto currency in NA is still alien, but in Europe it is much more accepted. More importantly, it is largely only the cool places (Berlin bars, etc.) that currently accept it. To sell a new drug you sell to the cool people first - & then trickle it out to the masses. Not unlike the speakeasy during the prohibition era.

 

The various payment/clearing systems we currently have do the job, but are largely at their limits; horse & buggy net benefit as compared to the standard gas guzzler benefit we all enjoy today. They are also captive to their oligarchs, & beyond innovation because there is no net benefit to disrupting the status-quo.

 

To make gains here you have to chaotically disrupt the game, then replace it with a better & cheaper technology overnight. And with such a big prize going to the winner, there are going to be lots of wolves eying the sheep. Continuous improvement can only take you so far, & every year the gains diminish; every now & again it is time for a new game, & the US is very good at it.

 

This type of thing is also routine & nothing unusual; the early history of US mortgage securitization being a recent example. 

 

SD

 

A few thoughts and questions:

(1) For most people when they get paid, the money goes into a bank account often as a direct deposit.

(2) Also, for most people, when they pay for expenses, they do it in using a check, debit card, credit card or cash. Three out of four of these are associated with a bank account.

(3) Sure, over time, most people will always be connected on their phone. Are we saying that most people will put an app on their phone that will allow them to pay for expenses that bypasses their bank through a blockchain technology or some other new technology?

(4) If so, how does money from the bank account show up in this new technology account? It requires consumers to go into the app and say here is my ACH account. Please debit money from here when I transact.

(5) Here is a question: Why would most people do this? Do you enter your ACH account on random apps installed on your phone. Is there a particular problem that most people are facing today with the system of using card/check/cash that is being solved by this new technology from a consumer point of view to force people to do this? What is this problem being solved? In my opinion, we are creatures of habit. We don't change our habits unless there it is an absolute necessity. New technology gets adapted widely when it offers a much superior experience to an existing experience. Within the engineering community, this is known as innovation for 10x improvements.

(6) In my opinion, there is nothing wrong with the current system. The bank is in fact giving massive incentives to use the credit and debit card. Fraudulent transactions can be contested pretty easily + part of the interchange fees they make from the retailers is being passed to the consumer in the form of points. Sure, the system of carrying a plastic card around will go away. Banks will adopt these technologies. But that's day and night difference from saying the entire system of processing transactions will disappear and be replaced with something new.

(7) OK, then the argument is may be the banks will adopt this system and disrupt Visa/MasterCard. Really? Banks jointly used to own Visa/MasterCard. There is a reason they don't want to be in this business. Setting interchange fees was viewed as a massive regulatory risk. The banks were being litigated for colluding through their ownership of Visa/MasterCard on setting the interchange fees. So why would they want to do this jointly again? Or worse, why would they want to do this individually? Via Visa/MasterCard they get the leverage to negotiate with the large retailers. Through the existing system, they make most of the benefit via interchange fees and a tiny bit is passed to Visa/MasterCard. Don't believe me? When the Durbin Amendment was passed, the FED published data that is publicly available that shows that Visa/MasterCard is making less than a cent on debit transactions when banks like JPM make 12c on the debit transactions.

(8) OK, then the argument is that may be the banks will not want to charge an interchange fee. They'll just let the consumer use their ACH account for performing such transactions. Really? Propose this to Jamie Dimon.

[Jurgis]

The bank is in fact giving massive incentives to use the credit and debit card. Fraudulent transactions can be contested pretty easily + part of the interchange fees they make from the retailers is being passed to the consumer in the form of points.

 

This is true in USA, but not so true in (a lot of?) other countries. People have to pay for credit/debit cards, disputing fraudulent transactions is not easy, etc.

 

I don't think this negates your points, but just FYI. :)

[rishig]

The bank is in fact giving massive incentives to use the credit and debit card. Fraudulent transactions can be contested pretty easily + part of the interchange fees they make from the retailers is being passed to the consumer in the form of points.

 

This is true in USA, but not so true in (a lot of?) other countries. People have to pay for credit/debit cards, disputing fraudulent transactions is not easy, etc.

 

I don't think this negates your points, but just FYI. :)

 

This is true in most of the developed world. But say for a country like India where 90% of transactions are in cash (as per RBI), you don't any of these fancy technological solutions. You need a simple peer to peer payment system like mpesa that bypasses the bank (http://www.bloomberg.com/bw/articles/2013-03-06/what-africa-can-teach-us-about-the-future-of-banking).

 

However, to put this into perspective, will this be how the 90% cash transactions be transacted? I think the unbanked population doesn't wish to be unbanked. And now Mr. Modi, the Indian prime minister, wants to solve this problem. (http://in.reuters.com/article/2014/08/27/india-modi-banks-idINKBN0GR1OQ20140827). So over time, the unbanked will move over to the ways of the developed world.

 

In the end, investing is all about probabilities. Question is at current prices are we paying too high a price that these long tail outcomes can cause permanent impairment of loss? MasterCard is trading at 28x P/E on a trailing basis. EPS is compounding at 20%. If the stock stays exactly where it is for the next 5 years, then it will be trading at 11x given that EPS will be 2.5x of today. Can these long tail outcomes become real in the next 5 years? And if it does, will paying 11x then EPS be too high a price to pay?

[Hielko]

Every IT system in the world backs up the days transactions every night & adds them to a master file. The data is typically screened on the way in through a series of buffers to remove the viral threats, then stored in isolated silos; that progressively re-test under tighter criteria, & eventually merge over time (hours to days to weeks to months to years). Static data, isolated, & very hard to corrupt.

 

Intraday transactions are typically stored in buffers, until they back up to the master file. Nothing prevents more frequent back-up, & nothing says the backed up file has to immediately go to the master file. Store the intraday transactions in multiple servers & you have distributed security; change the backup frequency, & you change the security level.

 

Most IT systems (telephone) take data strings, store by component, & reassemble via an algorithm. Nothing prevents storage of multiple versions of components over random servers, & then testing the copies against each other to verify veracity - prior to back up. Routine, automated, tick & bob - that computers are extremely well suited to.  Hard to reliably corrupt.

 

This is the simple 3G type stuff - & nothing that we do not know how to routinely do already; processing power is not a problem.

 

SD

Not sure what your point is: How does this relate to block chain security?

[SharperDingaan]

Block chain security derives from storing data over a very large network, & independently checking the existing integrity of the block chain against other distributed data points, prior to adding another transaction to the chain. It is easy to alter a specific copy of the block chain, but to successfully change the systems version of that block chain - I have to alter EVERY copy of that block chains data, EVERYWHERE. The bigger and more distributed the network, the harder that is to do - & the more secure the block chain.

 

Save a copy of the block chain in a secure location, plus add a reference call-up - and that block chain massively shortens.

 

The existing charge card business case rests on the economy of scale of existing entrants. It is too expensive for a new competitor to enter by building from the ground up, & there is too low an industry ROE to support entry by acquisition. As long as the only way you can do your transaction is through either via cash, or plastic, the banks have little to worry about - because to get your cash or plastic, you have to go through them. ie: they control the distribution.

 

BitCoin was essentially an app, that could be accessed by any device. You identified who you were, could see your BitCoin balance at any time, & transacted in Bitcoin. You got the BitCoin by either buying it in cash, or selling goods & services denominated in BitCoin. In the early days almost everybody bought BitCoin for cash as they did not have any; hence it looked very much like a game. Once it got going though - cash purchases were far less prevalent, & transactions entirely within the cyberspace, the norm. In the later days it was possible to borrow small amounts in BitCoin to pay bills. You were able to pretty much do what you could already do with a charge card - albeit not very well. For a proof of concept, 2G application - most would say it did very well.

 

Dad & grandpa use cash & credit cards, younger folks use debit - & many don't even carry cash. You also cannot get a bank account, or any kind of tax slip denominated in crypto currency - so very cool, & very attractive to almost everyone working under the table - or illegally. Every sci-fi movie in the last 30+ years has also indirectly pushed crypto currency; nobody EVER saw the characters use physical cash to pay for anything - its always by debit or credit through some kind of device.

 

Charge card command over the distribution channel is waning, & it is only a matter of time until it is gone entirely. If I attach a P/E of 22x to todays earnings, I am also saying that I expect todays oligarch earnings to continue pretty much as is - for the next 22 years. It is NOT going to take 22 years for a viable & robust crypto-currency to take root in NA - therefore these multiples can only compress going forward. For the charge card share prices to go up, they need earnings growth to far outstrip the future compression rate; an unlikely sustainable occurrence.

 

SD

 

[Hielko]

I'm still waiting for an explanation why a block chain isn't inherently inefficient and/or why that isn't a problem.

[rishig]

Block chain security derives from storing data over a very large network, & independently checking the existing integrity of the block chain against other distributed data points, prior to adding another transaction to the chain. It is easy to alter a specific copy of the block chain, but to successfully change the systems version of that block chain - I have to alter EVERY copy of that block chains data, EVERYWHERE. The bigger and more distributed the network, the harder that is to do - & the more secure the block chain.

 

Save a copy of the block chain in a secure location, plus add a reference call-up - and that block chain massively shortens.

 

The existing charge card business case rests on the economy of scale of existing entrants. It is too expensive for a new competitor to enter by building from the ground up, & there is too low an industry ROE to support entry by acquisition. As long as the only way you can do your transaction is through either via cash, or plastic, the banks have little to worry about - because to get your cash or plastic, you have to go through them. ie: they control the distribution.

 

BitCoin was essentially an app, that could be accessed by any device. You identified who you were, could see your BitCoin balance at any time, & transacted in Bitcoin. You got the BitCoin by either buying it in cash, or selling goods & services denominated in BitCoin. In the early days almost everybody bought BitCoin for cash as they did not have any; hence it looked very much like a game. Once it got going though - cash purchases were far less prevalent, & transactions entirely within the cyberspace, the norm. In the later days it was possible to borrow small amounts in BitCoin to pay bills. You were able to pretty much do what you could already do with a charge card - albeit not very well. For a proof of concept, 2G application - most would say it did very well.

 

Dad & grandpa use cash & credit cards, younger folks use debit - & many don't even carry cash. You also cannot get a bank account, or any kind of tax slip denominated in crypto currency - so very cool, & very attractive to almost everyone working under the table - or illegally. Every sci-fi movie in the last 30+ years has also indirectly pushed crypto currency; nobody EVER saw the characters use physical cash to pay for anything - its always by debit or credit through some kind of device.

 

Charge card command over the distribution channel is waning, & it is only a matter of time until it is gone entirely. If I attach a P/E of 22x to todays earnings, I am also saying that I expect todays oligarch earnings to continue pretty much as is - for the next 22 years. It is NOT going to take 22 years for a viable & robust crypto-currency to take root in NA - therefore these multiples can only compress going forward. For the charge card share prices to go up, they need earnings growth to far outstrip the future compression rate; an unlikely sustainable occurrence.

 

SD

 

You haven't responded to my primary question. Why do large number of people change what they do today to using bitcoin to transact? What problem is this new technology solving for the common man. I understand it is very cool and great for under the table transactions. The common man doesn't care if the cost of transaction is lower for someone else or if it is very cool. But we are talking about disrupting the current processing system at a massive scale.

[SharperDingaan]

I'm still waiting for an explanation why a block chain isn't inherently inefficient and/or why that isn't a problem.

 

Agreed that as at today, block chain IS inefficient, and that IS a problem - but it is NOT a show stopper. The solutions mechanics are  routinely applied in other applications.

 

SD

 

[wachtwoord]

I'm still waiting for an explanation why a block chain isn't inherently inefficient and/or why that isn't a problem.

 

Agreed that as at today, block chain IS inefficient, and that IS a problem - but it is NOT a show stopper. The solutions mechanics are  routinely applied in other applications.

 

SD

 

It is NOT a problem it's a feature.

[Hielko]

I'm still waiting for an explanation why a block chain isn't inherently inefficient and/or why that isn't a problem.

 

Agreed that as at today, block chain IS inefficient, and that IS a problem - but it is NOT a show stopper. The solutions mechanics are  routinely applied in other applications.

 

SD

There is no solution - and I doubt that there ever will be - and they are certainly not routinely applied in other applications. You fail to understand that the block chain is only secure because of its inefficiency, and distributed security/trust is the only thing the block chain does. They are two inseparable properties.

[SharperDingaan]

Cost. There is zero net new benefit to how anybody already does things - and there does not have to be; it just has to be competitive. In practical terms you would simply charge cost, and spread that cost over the total global transaction volume, to drop it as low as possible; you would then split the transaction cost 50% between both buyer & seller. As with music - charge nothing for the new song but a lot for the concert ticket. Nothing per transaction, but a lot for the cyber currency account itself.

 

A vendor currently pays 1.5-3.0% of the transaction (visa card), &/or 25c (debit card) per transaction. In many cases the card holder pays $100/yr + card insurance. If it costs each side 3c/transaction (generous) & $50/yr per cyber account, we will not have plastic for very long. Zero net transactional benefit to the buyer & seller, but now it comes at a far lower cost.

 

The industry moat floats on how well the industry can dissuade would be users, & how strong an R&D option it can get over the tech development process. No different to a manufacturer investing in various platform options so that they can handle future business needs.

 

SD

 

[SharperDingaan]

Opinions differ.

 

Agreed the block chain inefficiency is its security, but it is so process intensive that it cannot grow. To get widespread acceptance it has to grow, & do it almost exponentially. The current architecture will not do it - and that is the problem.

 

In todays 2G architecture we need distributed security. Change the architecture to Hub & Spoke, house the hubs at central banks &/or the major financial bodies (IMF, ECB, etc.) - and arguably we get movement again, and even better security. 3G.

 

Even if you put the ultrafast CRAY computers behind the Hubs, they are still limited (though not for a long time). How we deal with it will be the 4G iteration.

 

SD

[Rainforesthiker]

You might want to do some digging into Blockchains ... how they work, features, where they have been used. It is a game changer - right up there with how the internet and computers fundamentally changed the way we do business. The VISA moat is nowhere near what it used to be.

 

. . . . .

 

Re disclosure, I am currently doing a research thesis on the currency replacement side of BlockChains. The BitCoin was a proto-type & a simple 2G version of what can be done; the 3G & developing 4G versions are truly game changing.

 

SD

 

I would be very careful here of a particularly pernicious form of bias (which I have just made up) called academic consistency bias.  When you spend a lot of time researching a topic or technology, esp. in an academic setting, you are inherently biased to think that it is a bigger deal than it is, perhaps going as far as thinking it is revolutionary.  This is because otherwise you would have to admit you spent a lot of time researching and writing a thesis on something that had little value, and thus you wasted a lot of your time (and in my experience much of academic research is a waste of time).  I am not really saying here that blockchains are not important - they might be.  I am just pointing out the inherent bias that comes from spending so much time being forced to research something for academic reasons.  I do think though when someone says what they are researching is as important as the introduction of computers and the Internet, that is a potential sign of academic consistency bias. 

 

And SD I am not saying this to be mean in any way.  I truly think that one of the biggest hurdles to clear thinking is the various biases and cognitive defects that we are subject to.  The best way to prevent such things from corrupting our thinking is simply to be aware of their existence.

[rishig]

You might want to do some digging into Blockchains ... how they work, features, where they have been used. It is a game changer - right up there with how the internet and computers fundamentally changed the way we do business. The VISA moat is nowhere near what it used to be.

 

. . . . .

 

Re disclosure, I am currently doing a research thesis on the currency replacement side of BlockChains. The BitCoin was a proto-type & a simple 2G version of what can be done; the 3G & developing 4G versions are truly game changing.

 

SD

 

I would be very careful here of a particularly pernicious form of bias (which I have just made up) called academic consistency bias.  When you spend a lot of time researching a topic or technology, esp. in an academic setting, you are inherently biased to think that it is a bigger deal than it is, perhaps going as far as thinking it is revolutionary.  This is because otherwise you would have to admit you spent a lot of time researching and writing a thesis on something that had little value, and thus you wasted a lot of your time (and in my experience much of academic research is a waste of time).  I am not really saying here that blockchains are not important - they might be.  I am just pointing out the inherent bias that comes from spending so much time being forced to research something for academic reasons.  I do think though when someone says what they are researching is as important as the introduction of computers and the Internet, that is a potential sign of academic consistency bias. 

 

And SD I am not saying this to be mean in any way.  I truly think that one of the biggest hurdles to clear thinking is the various biases and cognitive defects that we are subject to.  The best way to prevent such things from corrupting our thinking is simply to be aware of their existence.

 

+100

[Guest Schwab711]

You might want to do some digging into Blockchains ... how they work, features, where they have been used. It is a game changer - right up there with how the internet and computers fundamentally changed the way we do business. The VISA moat is nowhere near what it used to be.

 

. . . . .

 

Re disclosure, I am currently doing a research thesis on the currency replacement side of BlockChains. The BitCoin was a proto-type & a simple 2G version of what can be done; the 3G & developing 4G versions are truly game changing.

 

SD

 

I would be very careful here of a particularly pernicious form of bias (which I have just made up) called academic consistency bias.  When you spend a lot of time researching a topic or technology, esp. in an academic setting, you are inherently biased to think that it is a bigger deal than it is, perhaps going as far as thinking it is revolutionary.  This is because otherwise you would have to admit you spent a lot of time researching and writing a thesis on something that had little value, and thus you wasted a lot of your time (and in my experience much of academic research is a waste of time).  I am not really saying here that blockchains are not important - they might be.  I am just pointing out the inherent bias that comes from spending so much time being forced to research something for academic reasons.  I do think though when someone says what they are researching is as important as the introduction of computers and the Internet, that is a potential sign of academic consistency bias. 

 

And SD I am not saying this to be mean in any way.  I truly think that one of the biggest hurdles to clear thinking is the various biases and cognitive defects that we are subject to.  The best way to prevent such things from corrupting our thinking is simply to be aware of their existence.

 

http://matt.might.net/articles/phd-school-in-pictures/

[wachtwoord]

I believe the value and applicability of blockchains is overestimated grately like Hielko says.

 

If you look at what it actually DOES accomplish it's revolutionary though (the Byzantine general problem it solves is a very old problem), worty of at least a Nobel prize (and seeing how those deflated in recent years several).

 

The importance of Bitcoin on the other hand is vastly understated which is most directly shown through it's still extremely low market cap (it's a better version of gold and so will ultimately replace it for all it's non-industrial and non-jewelry purposes).

 

BTW maybe this whole OT chain should be moved.

[SharperDingaan]

I hear you, and I thought the Phd in pictures was spot on!

 

Going by my advisor, I am quite probably the worst doctorate (finance) student ever, and far too commercial for the rarified air of academia. I take it to be an auspicious observation!

 

In my eyes, the biggest finance innovations over the last decade have been the anti-fragility of Taleb, and the block chain. Both are dirty words in many parts of academia. Not invented here.

 

It is probably going to be many years before the masses accept crypto-currency. It is also highly likely that it will be predicated upon successful intermediate implementations elsewhere. As with all currencies throughout history, it will ultimately be managed by central banks.

 

In its present form, block chain capacity constraints preclude its use as a widespread crypto-currency. The highest and best industrial use of the existing technology will very likely exploit its traceability virtue, and be in the food or drug industry applications where transactional volume can be segmented, and is relatively limited. A drug industry application might be 1 chain tracing components through to product manufacture, and a 2nd chain tracing movement of the product by batch, from factory through to end user. All very unsexy.

 

The highest and best arts use of the existing technology will very likely also exploit its traceability virtue. An auction house, or art gallery application, might use 1 provenance chain per significant painting (ie: Mona Lisa) tracing ownership from painter through to current owner. Again, very unsexy.

 

In all these potential applications block chain does not do anything that is not already being done; it just does it differently, and cheaper. The cost per transaction also declines, and system security improves; the more industry adopts the technology. Each successful application, strengthens the case for crypto currency, and its next generation.

 

The underlying concern is the unemployment this technology would create. However, given the growing shortage of working age youth in the west, I do not think it is the problem many fear it is.

 

My interest is in the industrial and arts applications, via the next MicroSoft. Unfortunately, my background in capital markets, tends to push me to the crypto currency applications.

 

All said - you cannot commercialize, until you know exactly how it works … which is apparently the antitheses of the rarified air of academia!

 

... I also concur that the whole OT chain should be moved.

 

SD

 

[orthopa]

With Visa Europe wrapped up looks like China is the next frontier. I'm willing to pay a "fair" price for a good business but this valuation is hard to swallow.  Hopefully when some of the Visa Europe excitement wears off there will be an opportunity.

[SharperDingaan]

We're a little biased, but this may well not turn out the way many would hope.

 

Google Pay. You don't need a credit card to do the transaction, it is a lot cheaper & faster for both payer & receiver to use Google Pay.

It is an easy thing to link the payment to a cheap line of credit; paying by Google is also a lot cooler than paying by antiquated plastic.

It is relatively straight forward to put Google Pay on an Apple watch, use biometric ID, & remove the wallet entirely.

Run Google Pay on block chain smart contract technology (ie: fin tech.) - & security goes up dramatically.

 

Fin tech is already here, the major global banks have begun investing, & the layoffs have begun. We are in the early stages of the 2nd portion of the new product development cycle, & China is now rivaling the US in terms of global economic importance.

 

Block chain is vulnerable to attack by super-fast CPU processing, but only so long as the next fastest CPU processor is relatively slow. At least 1 of fastest CPU processors in the world resides in China, and it can process at > 30 petaflop/second. It is highly unlikely the PRC is going to allow rivals.

 

Visa is just a physical application approaching sunset, following a good run.

Still a lot of juice in it, but the horse & buggy producer in a world moving to automobiles.

 

SD