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    • New Open Europe Report: No Deal – The economic consequences & how they could be mitigated October 15, 2018
      In a new macroeconomic study, ‘No Deal: The economic consequences & how they could be mitigated’, Open Europe finds that a UK withdrawal from the European Union without a preferential trade deal would be sub-optimal and would entail material costs. However, this medium-term cost would be limited in absolute terms, but also relative to other […]
    • Several Cabinet members object to PM’s new backstop proposal October 12, 2018
      Prime Minister Theresa May faces objections from several Eurosceptic members of the Cabinet over her new proposal for a backstop to avoid a hard border on the island of Ireland. The Daily Telegraph reports that at least three ministers are prepared to resign over the plan, which involves the UK staying in a customs union with the […]
    • Sobering Results in the Land of Oktoberfest? A Primer on the 2018 Bavarian Elections. October 11, 2018
      As the German state of Bavaria goes to the polls on Sunday, the results of the vote are likely to have wider repercussions. Open Europe’s Leopold Traugott explains what is at stake. The post Sobering Results in the Land of Oktoberfest? A Primer on the 2018 Bavarian Elections. appeared first on Open Europe.
    • DUP could vote down the Budget over Brexit deal October 11, 2018
      Northern Ireland's Democratic Unionist Party (DUP), on whose 10 MPs the Government relies upon for its majority, could vote down the Budget in Parliament later this month if the Government’s Brexit plans cross their red lines, according to the BBC and Sky. One DUP source told BBC Newsnight: "If we are not happy with what […]
    • Event summary: After Salzburg what next? October 10, 2018
      Open Europe held an event on October 9 in the House of Commons to discuss the next steps in Brexit negotiations after the Salzburg EU leaders informal summit. Below is an overview of the discussion.The post Event summary: After Salzburg what next? appeared first on Open Europe.
    • Brexit Secretary: Any extension to customs union membership must be temporary October 10, 2018
      Speaking in the House of Commons yesterday, the Brexit Secretary Dominic Raab told MPs that any extension of Britain’s participation in the customs union beyond the end of the transition period would have to be “temporary, limited and finite.” Raab added that any divorce deal would have to include clarity on the future UK-EU relationship, […]
    • UK Government downplays rumours of breakthrough in Brexit talks October 9, 2018
      The UK Government yesterday downplayed rumours of an imminent breakthrough in Brexit negotiations with the EU. A Government spokesperson said, “There is a difference between people talking optimistically about a deal and a deal being done,” adding, “There can be no withdrawal deal without a precise future framework.” He said that the government was “working […]
    • SNP would oppose Brexit deal based on Chequers proposal, says Scottish First Minister October 8, 2018
      Speaking ahead of the Scottish National Party (SNP) Conference in Glasgow, Scotland’s First Minister Nicola Sturgeon said that the SNP MPs in the House of Commons would not vote for a Brexit deal based on the Government’s Chequers proposal, telling the BBC’s The Andrew Marr Show, “We’ve always said our bottom line is membership of […]
    • Donald Tusk: EU offers UK a “Canada+++” deal October 5, 2018
      Speaking in Brussels yesterday, European Council President Donald Tusk said, "The EU wants a relationship with the UK that is as close and special as possible. From the very beginning, the EU offer [for a Brexit deal] has been not just a Canada deal, but a Canada+++ deal. Much further-reaching on trade, on internal security and […]
    • Why is the EU Irish backstop proposal unacceptable to the UK Government? October 4, 2018
      Open Europe's David Shiels appeared on TRT World News on October 4 to discuss progress on the Irish backstop in Brexit negotiations.The post Why is the EU Irish backstop proposal unacceptable to the UK Government? appeared first on Open Europe.

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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