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Re: How do bank payments actually work?

From: Fabio Barone <holon.earth@gmail.com>
Date: Tue, 26 Jan 2016 15:56:34 -0500
Message-ID: <CAOL8i_=G+kUOiQeHPKf7s9N6E-7+sZQcbVJnOFJEVOBYqEAtwQ@mail.gmail.com>
To: Joseph Potvin <jpotvin@opman.ca>
Cc: Web Payments <public-webpayments@w3.org>, Interledger Community Group <public-interledger@w3.org>
Thanks for your note Joseph.

I allow myself to re-send my questions as a new thread as per Evan's

2016-01-26 15:49 GMT-05:00 Joseph Potvin <jpotvin@opman.ca>:

> RE: Will we see a proliferation of different blockchains?
> Permit me to re-send a comment I offered in 2013...
> *---------- Forwarded message ----------From: Joseph Potvin* <
> jpotvin@opman.ca>
> Date: Fri, Sep 13, 2013 at 12:58 PM
> Subject: Fwd: Looks like the US will be very competitive in the ASIC miner
> market.
> To: Web Payments CG <public-webpayments@w3.org>
> Bitcoin is scarce but an infinite number of technologically identical
> derivative crypto-currencies can be created. So is it not true to say
> that Bitcoin is only scarce based on brand loyalty? If/when Gitcoin
> and Hitcoin and Titcoin also come on the market, then what does the
> mathematical scarcity of Bitcoin really come to?
> This is all fine, in my assessment, however. There's no way that contrived
> scarcity of an intangible could ever play the economic role of genuine
> scarcity of a tangible foundation for money. On another thread in this
> list, also in 2013, I suggested the units like a BTC or an XRP should have
> a monetary value of precisely zero in themselves. They should come into
> virtual existence and then expire just to serve a mundane functional
> purpose. (There's a lengthy discussion on the thread about that, and it's
> not my intention to restart it here. I'm just mentioning this perspective
> again as a response to Fabio's note.)  The blockchain method remains
> interesting and useful. Hype about the units has been a distraction. Maybe
> that's a tiny minority opinion.
> BTW, I removed Tom Blomfield from this thread. It was me who added him,
> but he's not replied, so I'd rather not quasi-spam him.
> Joseph Potvin
> Operations Manager | Gestionnaire des opérations
> The Opman Company | La compagnie Opman
> jpotvin@opman.ca
> Mobile: 819-593-5983
> LinkedIn <https://www.linkedin.com/pub/joseph-potvin/2/148/423>
> On Tue, Jan 26, 2016 at 3:17 PM, Fabio Barone <holon.earth@gmail.com>
> wrote:
>> Important clarifications Evan, thanks.
>> Maybe that would be a different thread (I am happy to start a new one if
>> people think so),
>> but what do people here think about the potentially incumbent collapse of
>> bitcoin as a crypto-currency itself and the block-size issue?
>> The question is related to the blockchain itself, not bitcoin.
>> Block size is ultimately a "political" decision of the community, and
>> there appears to be a scism because of that.
>> Not wanting to discuss that in itself (it's probably being discussed
>> elsewhere),
>> but what do you guys think this means for blockchain technology itself?
>> Will we see a proliferation of different blockchains, making ILP even
>> more interesting and important?
>> Could this be a blow to blockchain technology itself (unlikely IMHO),
>> because limitations of this technology are becoming apparent?
>> What developments do you foresee happening in this field, also maybe not
>> underestimating a potential collapse of the global economy this year?
>> On a side note, I like Ethereum's basic tenets but I am worried about a
>> lock-in of some sorts...
>> 2016-01-26 14:56 GMT-05:00 Evan Schwartz <evan@ripple.com>:
>>> Interledger is a protocol for secure payments across different ledgers
>>> or systems that track accounts and balances. It is designed to be used for
>>> cross-currency and cross-asset payments, including fiat currencies,
>>> cryptocurrencies, and other types of transferrable resources.
>>> Regarding the differences between the values and designs of different
>>> ledgers: in the interledger model it is the "connector" that offers to
>>> trade one asset for another. Connectors will have different reasons and
>>> rates for trading between different assets, but the idea is that as long as
>>> there is someone willing to trade the units of one system for the units of
>>> another, there should be a way to route a payment through them.
>>> One of the key points of ILP is that if each of the ledgers -- no matter
>>> how different their design is -- can support conditional transfers based
>>> upon cryptographic conditions, multi-hop payments can be made risk-free for
>>> the sender and recipient.
>>> Hope that helps. Keep the questions coming!
>>> On Sat, Jan 23, 2016 at 7:23 PM, Melvin Carvalho <
>>> melvincarvalho@gmail.com> wrote:
>>>> On 23 January 2016 at 19:37, Fabio Barone <holon.earth@gmail.com>
>>>> wrote:
>>>>> Please bear me with me for my ignorance...
>>>>> ..but I would like to understand this a tad better:
>>>>>    - I have seen similar ideas in complementary currency spaces, the
>>>>>    idea being that value can be exchanged over different currency circles
>>>>>    - It never took off because the underpinning values systems differ
>>>>>    too heavily - there's no way to , bridge a local money X with another Y,
>>>>>    there's too much difference in money design and value systems
>>>>> Now, my questions for these interledger exercices, are you guys
>>>>> talking about interledger,
>>>>>    - but based on the SAME currency as value exchange? Or different
>>>>>    ones?
>>>>>    - based on fiat currency, and/or bitcoin?
>>>>>    - no currency at all, "just" sync records?
>>>>>    - generic interledger which would work no matter what resource the
>>>>>    ledger is actually focused on?
>>>> Personally, I would like to be able to cover all 4 cases, in different
>>>> layered workflows, that sit at a layer above the ledger technology.  ie
>>>> loose coupling between the ledger and the ledger communicaton ... that's
>>>> what im working towards
>>>>> Maybe my questions are completely off, if I in fact would have
>>>>> understood things completely wrong.
>>>>> Would welcome a brief clarification, thanks.
>>>>> 2016-01-23 10:04 GMT-05:00 Joseph Potvin <jpotvin@opman.ca>:
>>>>>> Two comments on the published description...
>>>>>> 1. "Banks pay a few pence per transaction, although no bank currently
>>>>>> charges customers for this service."
>>>>>> It's worth noting that this charging structure is suitable for
>>>>>> transactions greater then, say, about 2£. It would require a different
>>>>>> transaction fee structure to handle micropayments.
>>>>>> 2. "Three times a day, VocaLink will send a message to all
>>>>>> participant banks informing them of their position. To “settle” the funds,
>>>>>> participant banks have accounts at the Bank of England. They will either
>>>>>> make a single payment to FPS (if money has flowed out of their bank), or
>>>>>> receive a single payment (if the net transfer of funds is in their favour).
>>>>>> This payment at the Bank of England is just another double-entry in a
>>>>>> ledger; the bank’s settlement account is debited and the FPS account is
>>>>>> credited with the same amount."
>>>>>> I think perhaps this is mis-stating the operation by using words
>>>>>> "make a single payment to FPS" and "receive a single payment". I'm fairly
>>>>>> certain these are accounted for as loans, to which the "Bank rate of
>>>>>> interest" is applied. Please correct me anyone thinks I'm wrong about how
>>>>>> this particular settlement system works. I think that while the mechanics
>>>>>> remain true that it's "just another double-entry in a ledger", these show
>>>>>> up in the books as off-setting loaning and borrowing by the Central Bank,
>>>>>> and they include an interest rate which needs to be taken account of.
>>>>>> http://www.investopedia.com/terms/b/bankrate.asp
>>>>>> For those of you creating test environments, taking account of this
>>>>>> factor complicates the model in two ways. First directly, you would need to
>>>>>> attach some sort of index (the interest rate) to the inter-bank
>>>>>> transactions. Second, you would need to create an policy-motivated actor
>>>>>> (agent) who makes decisions about that index.* [I'll proceed a bit
>>>>>> off-topic here just to illustrate...] This is because this  "the Bank Rate"
>>>>>> which is the benchmark by which a Central Bank motivates increases or
>>>>>> decreases for all interest rates of the given currency zone. The 'fun'
>>>>>> start to happen when a central bank decreases an interest rate in order to
>>>>>> simultaneously incentivize capital investments (its cheaper to borrow) and
>>>>>> decrease forex traders' demand for that currency (better returns on static
>>>>>> deposits are found elsewhere) in a period of competitive currency
>>>>>> devaluations, all of which artificially stimulates that country's export
>>>>>> market. Well, they've all been doing that for a while, and have run out of
>>>>>> room at the bottom. But they keep going!
>>>>>> http://www.bloombergview.com/quicktake/negative-interest-rates
>>>>>> <http://www.bloombergview.com/quicktake/negative-interest-rates>  *
>>>>>> [Back on-topic...]  Any model of payment must be a simplication of
>>>>>> complex reality, so this is not a critique of the published description as
>>>>>> far as it goes. I just raise a caution that with a title like "How do bank
>>>>>> payments actually work?", this summary of some of the mechanics of the
>>>>>> system inevitably has to leave out much of how bank payments actually work.
>>>>>> I've c.c.'d the author, Tom Blomfield, in case he'd like to comment.
>>>>>> Joseph Potvin
>>>>>> Mobile: 819-593-5983
>>>>>> On Wed, Jan 20, 2016 at 6:03 PM, Melvin Carvalho <
>>>>>> melvincarvalho@gmail.com> wrote:
>>>>>>> Interesting post on the inter ledger element of banking.
>>>>>>> https://getmondo.co.uk/blog/2016/01/20/how-do-bank-payments-work/
>>>>>>> Im thinking of simulating this on a testnet for people to play
>>>>>>> around
>>> --
>>> Evan Schwartz | Software Architect | Ripple
>>> [image: ripple.com] <http://ripple.com>
Received on Tuesday, 26 January 2016 20:57:03 UTC

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