As a result, a small group of ... hmmm ... free software anti-authoritarians seized the opportunity to promulgate an alternative which is now known as bitcoin. This consists of 3 elements
The significance behind CryptoSigma is that all bitcoin wallets are owned by the recipient, unlike accounts in banks (or any other service like mobilephone ENUM), thus granting individual control over financial records, transaction history and value apportion into as many subaccounts as desired. The downside is of course if you lose your key or grant access of wallet to untrustworth party, you are totally screwed. You can predict in the long-term, if everyone has a personal wallet accessed via mobile phone, transaction patterns would move towards a peer-to-peer paradigm as exemplified by the topology on the right. This has profound implications, not only security-wise but would scare the living heebeejeebies out of your stodgy traditional bank which requires separate applications to open accounts and insist on wrap services to claw from savings if your kid plunders your credit card. The technoeconomic implications (hey that's my dayjob since I analyse emerging tech trends) are also noteworthy as it pushes the infrastructure costs from a centralised big-iron datacentre towards personal wear/bring-your-own-device.
Otonomos uses the blockchain to store physical records, in their case company formation data. including shareholdings. Here lies the wonders of a scripting language embedded into the blockchain as with the recent timing protocol extension, you can designate transfers upon a certain date, threshold value or trigger event (as supplied by another wallet). This allows share registries to effectively become their own private exchanges through there are constraints imposed by the language. The company claims that this can be used to improve corporate governance through how far that goes in practice remains to be seen. Coming from a legal background I'd note that things are always easy when companies are profitable and growing, it's when financial disaster or distressed capital calls come that disputes arise for which no dumb contract is worth their two-bits in resolving the issues. In addition, there are technology constraints, blockchain confirmations are usually on the order of minutes up to an hour which are not necessarily what you want in a high volume transaction. In fact, for comparison, the bitcoin network on average processes 7 transactions per second compared with (from memory) VISA peak throughput of nearly 50,000 per sec. But it does fill a niche in privately held corporations which in the case of HK, allow you to operate with only one director (unlike SG requirement for as least one PR/cit + external auditor). Hence it will drive the cost down for passive holding companies.
Whilst still early days, I believe these two companies are typical of what I label the emerging dataflow economy (cf attention economy of the naughties). For people interested in this topic, I'd try to answer any questions on this forum whilst stuck in Singapore.
Lawrence
http://www.linkedin.com/in/drllau
The Sydney manager of Ripple (cross-border settlement on top of blockchain) gave a talk last night. Firstly you have to understand the stack (loosely analogous to IaaS, PaaS, and SaaS). The ripple network is a consensus forming curated set of nodes that maintains a global snapshot of currency ledgers. Details for the curious
So at the origination of the tech are firms such as Ripple who construct the Network/Infrastructure as a service, in this case a global quasi-private market of multi-currency liquidity providers. The next stack layer would be platform firms like Bluzelle (a Canadian tech outfit just relocated to Singapore) who craft specific payment gateways and robust processes, then the last layer are the financial providers (banks, B2B trading firms, P2P remittance, etc). So you see the analogy to toll roads, on-ramps and car-fleets from stack perspective.
So much like the open internet was built on the LAMP stack (Linux, Apache, MySQL, PHP/Python), the next financial generation is shaping up on similar stacks only we're now at a formative stage. Hence all the VCs keen interest in placing bets and tech companies jostling to establish their stack position as well as other startups trying to grow an audience (not to mention existing financial firms defending their turf). Exactly what does it mean for startups? ... I suppose it depends on where you want to sit on the value stack, but I'd point out that
In the case of ripple, they've identified 10 global gatekeepers who act as FX clearance but the industry takes 2+ days to settle (with lifting costs) adding $1.6T cost overheard (aka friction), and even then, 4% of wire transfers fail. By switching to a global ledger, they deliver value through transacting instantly and directly with end2end visibility and control. Just like google created a competitive market with their AdSense bidding, Ripple forces competition amongst the FX market makers which means the gatekeeper role loses its pricing power which means the cost savings are captured elsewhere,