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Blythe Masters, Inventor of the Credit Default Swap Believes Bitcoin Can Save Banks & Society Billions

Picture credit: Thierry Ehrmann

Blythe Masters is a genius economic engineer.

She began her career studying at the University of Cambridge and then quickly joined JP Morgan Chase. Her education made her an expert on risk. Her talent turned her education into genius. She invented a quick way for banks to handle risk with insurance, ensuring internal resilience for JP Morgan’s systems.

Risk is the chance that a transaction will not be completed. Each of us, as institutional entities, interact with the financial web where we build a reputation. When you settle your debts quickly, you become a trusted actor. When you don’t pay your debts quickly or efficiently, you are high risk.

The equation of risk takes into account the time it takes for a transaction to settle. The more time it takes, the greater the risk. The chances of you defaulting are regularly calculated based on an infinite number of data points calculated by computer software. When collections of these debts are bundled together, the risk is spread across the whole portfolio. Now, imagine, you want to take out insurance that the loans will be paid back.

You’d pay a premium for that insurance, right?

This way of managing risk, in a nutshell, is the credit default swap. Blythe Masters designed them at JP Morgan Chase in a career marked by innovation. Today, JP Morgan is known for managing risk well. While other banks failed from mismanaging risk up to the 2008 crisis, JP Morgan continues to lead. Why? Well, Masters knows how to create tools that work and knows how to wield them well. This ability frees up internal bank capital to be used elsewhere in the institution, which in turn flows into the larger economy as a whole.

However, Masters was ridiculed as “The Woman Who Built Financial Weapons of Mass Destruction”  This statement is like saying whoever invented the knife is responsible for all murders caused by knives , while discounting all the nourishing meals that knives help us create. After the dust had settled with the 2008 crisis, Masters thought of ways to undo the damage done by those who had used her tools for evil at less than stellar banks. Naturally, as an economic engineer, she turned to technology to explore these solutions in depth.

Cutting red tape in transactions could free up large amounts of capital for banks to make more loans to society as a whole, open more markets, and create transparency in a largely darkened part of institutional dealing. Instead of transactions marked by slowness of 20 business days, an institution can settle accounts within 10 minutes with previously unknown entities. Can you imagine all the lawyers and escrow services that will no longer be in business?

Blockchain technology, upon which Bitcoin is built, programs trust into the transaction

Like email was to the postal service, so is Bitcoin for the financial system. Masters, after researching this in depth, now runs a firm to create the products banks need to use this technology internally. Now, the tools that Masters and her team create will free up capital more quickly and be used without as much risk.

Instead of mastering risk, banks can focus on performing the function they were mainly created to perform by dispersing money like hearts pumping capital into the arteries of society. Making investments more efficient, quick, and laying out the landscape changes everything for sophisticated actors like banks but also for the average person. Blythe Masters now works to create a stronger immune system for financial markets through distributed technology based on the Internet of finance as Bitcoin. Technology allows us to move into a more collaborative system with incredible resilience through transparency.

The Digital Asset platform uses distributed ledger technology

It allows the mutualization of financial market infrastructure across distinct market participants. It does this while maintaining confidentiality and scalability, both vital for large, regulated markets. The DA Platform eliminates discrepancies between disparate but duplicative siloed data records, reducing the current errors, latency, risk, cost and capital requirements involved in processing financial transactions. Participants in the Platform share a single source of truth which provides continuous data integrity, any desired or mandated degree of transparency and the opportunity for rapid innovation.

The above is an excerpt from the non-technical white paper. You can read it in full here.

Week in Review: Bitcoin has Positive Start for the Month, Scalability Tackled

The last couple of weeks towards March’s end saw Bitcoin fighting off scalability issues and ETF rejections that staggered prices. Just when things picked up from the Winklevoss ETF rejection and prices were looking optimistic, the blocksize debate has slipped up the prices again bringing the price to just under $1000 levels. However, in the first week of April, things look very optimistic for the cryptocurrency as Bitcoin prices have increased by 8% with the digital asset trading over $1,100. (Read more reviews about Bitcoin investments here.) Fundamentally there have been many positive re-enforcers during the week for the change in the winds. Let’s dive deep into the most significant positives for the week.

Mexico recognizes Bitcoin as a digital asset

Mexico has had problems arising due to unstructured economic planning. Added to that, it is also the 4th highest country for inflow of remittances. These characteristics have created an ideal environment for Bitcoin to step up and thrive constructively on these positives. While the idea is certainly positive, the Mexican Government has signed a bill that classifies Bitcoin as a ‘Digital Asset’ and sets forth rules for Bitcoin exchanges. The wide consensus has been noticed in support of the bill among disparate political parties with an eye towards benefits for the economy triggering more foreign investment to help local industries and businesses grow.

Bitfinex redeems its tokens


On August 2nd, 2016, the leading bitcoin exchange by USD volume Bitfinex has suffered a major hack where 119,756 bitcoins were stolen. This forced the exchange to issue “Recovery Rights Tokens” as an IOU to customers. These tokens were set to be traded as BFX tokens and are to be paid back as soon as they hit $1 which is their underlying value. Bitfinex has made good on their promise and as of 4th of April, the exchange announced that it is now paying off debts in full. Redemption started late last year with BFX tokens trading well below the $1 value and being termed as a scam to buy more time. However, the exchange intermittently reimbursed hacked customers, proving their commitment towards the services they provide.

Forking has reached consensus

After two years of heavy debating, the scalability issue that has plagued Bitcoin in phases has finally found a solution. Bitcoin developers both from Core and Unlimited will merge within two weeks to a maximum block size increase to 4MB.  This will then further increase by 25% yearly until 32MB. 4th of July is the designated date on which Bitcoin will hard fork and any node left on the original Bitcoin network would be cut off. All the nodes are expected to upgrade by this date with the requisite hardware that makes this possible set in place. Since the debate has now become harmless, bitcoin prices are now soaring high and look good for weeks to come.

Decentralized Marketplace OpenBazaar Integrates ShapeShift, Allowing Payment with Any Digital Asset

OpenBazaar, which launched in April 2016, is an open source project with the goal to create a decentralized network for peer-to-peer online commerce using bitcoin. The platform allows buyers and sellers of goods to directly create shops and sell goods without fees, restrictions or accounts. Prior to the company’s Shifty Button integration, OpenBazaar was only available to those who had Bitcoin to deposit. Sellers can now accept dozens of digital assets.


“Enabling users to pay for OpenBazaar purchases with bitcoin and dozens of other cryptocurrencies was always something we wanted to do and ShapeShift enabled us to do that quickly and easily,” said OpenBazaar CEO and Project Lead Brian Hoffman. “Our community has been very eager for this feature and we’re happy to be able to provide it through a great partner.”

The ShapeShift Shifty Button provides websites the option of accepting dozens of leading digital currencies by generating an easy-to-implement snippet of code. The Button’s code is free and open source and has been integrated by dozens of bitcoin-friendly merchants to broaden customer payment needs quickly and easily.

“We feel a distinct kinship with the OpenBazaar project, both companies foster permissionless exchange between anyone, anywhere on Earth,”

said ShapeShift CEO and Founder Erik Voorhees.

As one of the most talked about commerce projects in the blockchain space in 2016, OpenBazaar took home three of five awards during the 2016 Blockchain Awards in New York City in May including ‘Best New Startup,’ ‘Bitcoin Champion of the Year’ and ‘Most Promising Consumer Application.’ They announced $3 million in new funding this month, led by BlueYard, a Berlin-based VC, with participation from Andreessen Horowitz and Union Square. The integration with ShapeShift follows the pattern of connections being rapidly formed between “fintech” companies as they innovate within the new payments and digital money industry.


ShapeShift is a crucial piece of infrastructure in the world of Bitcoin. From start to finish, users can exchange blockchain tokens in seconds, with no account required. No emails or passwords. No lengthy sign­up process. No accounts. No bid and ask orders. No friction. ShapeShift’s goal is the fastest, safest, and most convenient way to swap digital assets. See more at:

About OpenBazaar:

OpenBazaar is an open source project to create a decentralized network for peer to peer commerce online—using Bitcoin—that has no fees and no restrictions. It’s a different way to do online commerce. Instead of visiting a website, you download and install a program on your computer that directly connects you to other people looking to buy and sell goods and services with you. This peer to peer network isn’t controlled by any company or organization – it’s a community of people who want to engage in trade directly with each other. Learn more here: