Skip to content

Major Banks make a move on Blockchain: Prices to go higher?

At the start of September the Bitcoin markets have been on a tear and prices continue to feed off positive sentiment in the market. A few of the stories catching the attention of bitcoin investors have to do with major commercial banks and their various plans to implement blockchain technology. As adoption affects the market sentiment, this news has the potential to catapult prices much higher. Let’s take a closer at how these banks plan to integrate blockchain technology.

BNY Mellon is backing up transactions using Blockchain

BNY Mellon has come up with a test system that relies on blockchain technology to create backups of transactions. While the existing system records only brokerage transactions, work is under progress on further applications. The new system operates alongside BNY’s existing transaction records system. It aims to provide an operational buffer in the event that the first layer of transaction records becomes unavailable. Developed as part of the bank’s broader blockchain efforts, the resiliency solution is dubbed as ‘BDS 360’. Their internal projects collaborated with financial institutions as part of the R3 distributed ledger consortium, announcing the “settlement coin” project. BNY CIO Suresh Kumar framed the effort as a way for the bank to test “the strengths and weaknesses” of the technology. He said

“Assume your primary system is down. Do you have the information that you need so that you are able to conduct business, have an account for transactions that you know of, so that you can settle transactions? So that’s what we tried to do.”

BNP Paribas opens Blockchain Lab

BNP Paribas has opened a new FinTech laboratory at its New York headquarters. This lab would primarily focus on building blockchain solutions to employee problems. This was announced at a blockchain hackathon held by the French multi-national bank. Eventually, the lab will house the work of six task forces, which will also work on AI and big data. BNP’s chief operating officer of commercial investment banking, Bruno d-Illiers, stated that the lab is open to all company employees and not just cryptographers and leadership. Needless to say, the employees in France were happy about this

Barclays completes finance transaction through Blockchain

Barclays reported that two partners, Ornua and Seychelles Trading, were able to successfully transfer trade documentation via blockchain platform. This platform was created by Barclay’s accelerator program graduate, ‘Wave’. The Israel-based startup was using custom technology on top of a blockchain to facilitate the transfer of trade documents.

In statements, Barclays head of trade Baihas Baghdadi said that this is a crucial step for trade settlements. The project confirms that adding multiple parties to a distributed ledger system can remove one of the biggest “headaches” associated with global trade, the movement of the paper documents that track and authenticate the transactions.

wave-gif

Hong Kong’s Central Bank to Test Blockchain:

Hong Kong’s de-facto central bank intends to launch an innovation hub that will test blockchain and distributed ledger solutions.The Hong Kong Monetary Authority (HKMA) revealed yesterday it has begun work on the initiative with the Hong Kong Applied Science and Technology Research Institute (ASTRI). This is an initiative founded by the government to enhance its competitiveness in technology. Additional activities that are expected to take place at the innovation hub include the testing of solutions; discussions between regulators, incumbents and startups; and the testing of solutions that could be adopted by the HKMA.

One Million Sold. Bitland Initial Offering is Hot

Bitcoin investors are increasingly looking to support projects that enhance the ecosystem. Some opportunities are better than other (read: no gambling sites ) This weeks’s spotlight is on a very capable project called Bitland.

Blockchain Initiative Bitland Launches

Blockchain-based organization Bitland launched their official ICO crowdfunding campaign with Danish CCEDK and decentralized cryptocurrency exchange, OpenLedger in order to address the unregistered land issue in West Africa.

Bitland Believes

Prosperity and property rights are inextricably linked. The importance of having well-defined and strongly protected property rights is now widely recognized among economists and policymakers.

What is Bitland?

Bitland is an organization that aims to provide services to allow individuals and organizations to survey land and record deeds onto the Bitshares Blockchain. The pilot project is located in Kumasi, Ghana, and the team is currently looking at other areas on the African continent. The team is looking look to build infrastructure in developing countries with the hopes unlocking billions of dollars in property rights.

BItland_EN by netexplo

How Can I Invest In Bitland?

Bitland Initial Coin Offering (ICO) is live and the company’s token is called the Cadastral, It is available for purchase through the Bitland Global website or on  Denmark’s startups service provider OpenLedger ApS formerly known as CCEDK.com and its Crowdfunding 3.0 of ICO OpenLedger (ICOO)

The Cadastral is a coin that not only helps fund Bitland projects but more importantly, it is a token designed to store all land title transactions on its blockchain.

CCEDK and its partner organization OpenLedger both support global projects like Bitland because they are game changers in mainstream adoption, and support projects that aim to better the world overall.

Bitland CEO Chris Bates said

“Bitland is not only involved in land title registration. We have many other elements to our development project. We are actively preparing to pilot various facets of this program in different regions. One of the benefits of installing different pilots is that each individual case-study can address the concerns of each location’s diverse array of demands that can be met with simultaneous protocol testing.”

Why People Still Mine Bitcoins

Background on the Halving

“The Halving” describes the 50% reduction in subsidy for Bitcoin miners for every block that is mined and sealed. To simplify, the reward that Bitcoin miners receive for their work is cut in half. “The Halving” occurs every four years, built into Satoshi Nakamoto’s Bitcoin model to control the total output of currency. The first halving of Bitcoin occurred in the early stages of growth for the currency. On July 9th 2016, the second halving of Bitcoin occurred. Since Bitcoin is more established in 2016 than it was in 2012, it may be easier to separate the effects of “The Halving” from the fluctuations of a less mature currency.

Halving’s Impact on Bitcoin mining

To date, Bitcoin has generally avoided drastic effects from the second halving. To the surprise of industry experts, Bitcoin value and hash rate have not noticeably deviated from their previous levels. Most surprisingly, the hash rate, which is a measure of computing power dedicated to mining, has not responded to the change in reward. As a brief overview, Bitcoin miners dedicate computing power to unlocking blocks. Miners are rewarded in Bitcoins for each block they unlock. Logically, since the reward for mining has decreased, it is a puzzle as to why mining levels remain similar to those prior to the halving.

hash-rate-for-why-people-mine-bitcoins
Hash rate chart for past year.  Sourced from Blockchain Info.

Economic Theory

Although the mining levels are initially puzzling, economic theory offers a possible explanation.

I begin with the assumption that prior to the second halving, the Bitcoin market was in equilibrium. In other words, it would not be profitable for new miners to enter the market, since the cost to a new miner would exceed the benefit from mining. This assumption makes rough sense, because it assumes that if opportunity existed, people would take advantage of it.

Miners require a tremendous amount of infrastructure, in particular, computers. These computers are a fixed cost. Once miners have purchased computers, they have a different set of costs to compare with benefits. Fixed costs aside, they consider variable costs. Variable costs are typically related to power usage, operating space, etc. Variable costs alone are less than variable and fixed costs together.

fixed-and-variable-costs

Now consider the second halving. While it may be to expensive to become a miner and create infrastructure, especially given the reduced mining reward, existing mining operations can still function with their Bitcoin rewards exceeding their costs. For readers familiar with first-mover advantage (cite Wikipedia), this describes the explanation of hash rate levels. This phenomenon is common to industries with high fixed costs to entry.

Accordingly, it makes sense that the hash rate will remain constant, or decrease, as Bitcoin subsidy reduces every four years, holding other factors constant. People with mining operations will continue to mine at current levels, until the operational costs exceed benefits.

If other factors change, this could impact the hash rate. If costs, fixed or variable, are reduced, the hash rate could increase. For instance, if the cost of purchasing computing power decreases, the hash rate could increase, since miners would be motivated to create new infrastructure. If the variable costs, such as power, increase, this could reduce hash rate as costs outweigh benefits.

Images from Blockchain Info and Prelounge.