事實上, 上述的說法並不完全正確, 資料不能被刪除這點基本上不容置疑, 然而, 上載者的身分卻不一定能完全隱藏。

區塊鏈能隱藏身分, 亦能追查身分

我們必須了解, 區塊鏈是世界上保存得最完整的交易記錄, 每筆記錄詳細列明了金額、日期、付款地址和收款地址, 而且全部資料公開透明, 任何人也可以輕易追查每一筆交易的流向。以上載警員資料的網民為例, 由於上載資料需要支付以太幣(Ether)作為手續費, 故此, 執法部門有可能透過以太幣的交易流向找到其他和該網民有關的地址, 一但任一個地址涉及到個人訊息的話, 該網民的身份也就無所遁形了。

哪麼, 在什麼情形下鏈上數據會涉及到個人訊息呢?

1. 中心化交易所
2. 中心化錢包(為改善用戶體驗, 有一些錢包應用會要求使用者以電郵或其他個人訊息注冊)
3. 過往曾經公開使用過有關地址 (例如曾在網上出售物品, 並以有關地址收款或付款)

舉例來說, 如果在交易所A注冊帳號並購入以太坊, 然後提取代幣到你的個人錢包並參與了違法行為, 執法部門絕對有能追查到交易所A並要求交易所A提供你的個人資料。

完全隱藏使用者的身分並不容易

要完全隱藏區塊鏈使用者的身分, 主要有下面幾個方法:

1. 切斷鏈上鏈下的聯繫
2. 使用Mixer
3. 使用匿名加密貨幣(如 Monero / Zcash等), 再加上去中心化的交易所
4. 使用不記名的中心化交易所

切斷鏈上鏈下的聯繫

例如所擁有的加密貨幣為陌生人的捐贈, 或是直接通過挖礦得來的。這樣的話執法部門最多只能找到捐贈者, 宜且一但捐贈者人數太多, 追查難度亦會大大提高。

使用Mixer

Mixer的作用是把交易地址打亂, 一般來說Mixer 要多人同時使用才有義意, 而以太坊上比特幣網絡上有不少商業用Mixer。由於Mixer 經常被用於不法用途, 2019年5月歐洲刑警組織聯通荷蘭執法部門下令關閉歐洲其中一個主要的Mixer Bestmixer.io, 隨後有關網站展示了下面的閉站告示。

使用匿名加密貨幣(如 Monero / Zcash等), 再加上去中心化的交易所

正如前段所述, 加密貨幣/區塊鏈, 會完整的保留所有交易記錄, 任何人也可以輕易追查每一筆交易的完整流向。而匿名加密貨幣則是一種特殊加密貨幣, 故名思義, 這些特殊的加密貨幣隱蔽了錢包地址與交易金額，除了交易雙方之外，其他人無法得知交易的詳細內容。因此, 即使一開始的加密幣是存放在記名交易所或錢包中, 只要通過下面方法便可以隱藏使用者的身分:

i. 從交易所提出以太幣(可追查)

ii. 在去中心化交易所用以太幣購入匿名加密貨幣(可追查)

iii. 用匿名加密貨幣進行匿名轉帳(不可追查)

iv. 在去中心化交易所用匿名加密貨幣購入以太幣(不可追查)

經過上述4步, 本來可以追查的以太幣便變得不可追查。顯然, 這項特點除了能更有效的保護個人私隱之外，也成為犯罪分子洗錢的工具。

使用不記名的中心化交易所

不記名的中心化交易所的作用其實和Mixer 差不多, 都是通過資金池中混合自己和他人的加密貨幣來達至匿名的效果。然而和Mixer不一樣, 大多數交易所都會記用戶的登入IP和電郵等資料, 即使同時使用多個不同的交易所進行轉帳, 就匿名性而言遠比不上其他3種方法。

本文的目的不是為了鼓勵大家使用區塊鏈或加密貨幣進行違法行為, 而是為了讓大眾對這項技術有正確的認識, 避免因為錯誤使用而造成任何損失。事實上, 我個人完全不讚同各種針對警務人員的攻擊行為, 試想像當有一天全香港所有有理智良知的人都不願加入警隊, 香港真的會變得更好嗎? 但看到黑社會出現在撐警集會上, 這日可能已經來到了。

This is 2/2 for the series of Central Bank Digital Currencies by Standard Kepler Research

In the previous article we have discussed Central Bank Digital Currencies as one of the potential use case of DLT based systems.

In this article, we are going into the detail of how CBDC can be implemented and why banks may want to do it. By comparing the threemost possible options of DLT based systems(Corda, Hyperledger Fabric, and Quorum) in four different aspects: 1.) Privacy, 2.) Scalability & Performance, 3.) Resiliency and 4.) Finality.

R3’S CORDA

Corda argues that the essence of blockchain is “ensuring that data held by different actors is, and remains, consistent as operations are applied to update that data, and that this forms the foundation on which reliable transactions are built.” This view allows Corda to pursue the advantages of DLT without utilizing a blockchain.

“[Corda] is heavily inspired by blockchain systems, but without the design choices that make traditional blockchains inappropriate for many financial transactions.” Corda defines its ledger as a set of immutable state objects. This ledger acts as a reliable single source for the Corda platform, yet it does not make transactions nor entries on this ledger globally visible. Cryptographic hashes are instead utilized to identify parties and data and ensure that only parties that are part of a agreement can see relevant ledger details.

Corda seeks to achieve consensus among parties of an agreement on the state of that specific agreement as it evolves. This “per agreement” approach is in contrast to systems (e.g. Bitcoin) that seek to achieve consensus on the state of an entire ledger. Updates to the Corda ledger are applied using txs that consume existing state objects and create new state objects (there is no native cryptocurrency involved). The validity of a transaction can be checked independently by parties by running the contract code. However, a predetermined observer node is required to reach consensus over uniqueness. Importantly, this observer node only checks consumed input states, and does not need to see the full content of a transaction. There is no concept of mining in Corda.

On Corda, state objects represent an agreement between parties. This agreement is governed by contract code that is linked to legal prose. Transactions in turn transition state objects through a lifecycle, and transaction protocols enable parties to coordinate actions without a central controller. Combined, these components are referred to as CorDapps, and need to be built by developers on the platform.

Corda is a timely reminder that a blockchain is only a way to implement a distributed ledger, but not all distributed ledgers necessarily employ blockchains. Hyperledger Fabric and Quorum are two other ways of building distributed ledgers. CBDC Project Ubin 2 interestingly compares all three, a comparison we will return to.

HYPERLEDGER FABRIC

Hyperledger Fabric is part of the Hyperledger family of projects hosted by the Linux Foundation. These projects have all been designed to be modular, with the intention of offering greater flexibility to customers and developers alike. In theory, this allows developers to experiment with different components without affecting the rest of the system, allowing for a Lego-like approach to building solutions for diverse problems from a fixed set of components. Fabric further runs distributed applications written in general-purpose programming languages, without depending on a native cryptocurrency.

The concept of channels is also at the core of Fabric. The system is built on a network of bilateral channels between participants, with each bilateral channel forming one ledger. By establishing such channels, data privacy can be maintained within the channel and away from other system participants. A third party, such as a monetary authority, can be included in the channel for purposes of transaction recording and monitoring. Multilateral channels can also be created, such as in the case of Singaporean project Ubin, where participating banks are linked by multilateral funding and netting channels. Such a funding channel allows participants to move funds between their individual channel-level accounts. Note that the number of bilateral channels, and thus system complexity, grows with each new system participant.

Any blockchain that sees usage within financial market infrastructure must provide immediate finality, rendering consensus algorithms such as proof of work and proof of stake unviable. Fabric prevents double spending attacks via a system endorsements and an orderer. Participating nodes validate a transaction against the system endorsement policy (defined by the chaincode) to ensure the validity of the transaction and its signatures (see Figure 2). An orderer packages endorsed transactions into blocks, and broadcasts these blocks to the channel participants. These subsequently validate the transactions before they are committed to the ledger. It is also possible to include a consensus mechanism that allows for a multiple node ordering service.

Several proof of concept Central Bank Digital Currency (CBDC) systems have been built on Hyperledger Fabric, most notably so Singaporean Ubin 2 and Japanese-European Stella 1 & 2.

JP MORGAN’S QUORUM

Achieving appropriate levels of privacy is a core requirement in enterprise blockchain. How a blockchain achieves this is a question with many possible answers, ranging from the relative simplicity of bilateral channels to the use of data heavy zero knowledge proof transactions. JP Morgan’s Quorum sets out to build on the work already done by Ethereum, and to turn Ethereum into an “enterprise-ready distributed ledger and smart contract platform”.

All nodes in a Quorum network run the same set of components. However, these components differ somewhat from Ethereum. Foremost is the introduction of private state trees. The Quorum blockchain (just like Ethereum) saves information in the form of states, and transactions modify states on the blockchain. Quorum nodes have a public and individual private state trees, with the public state tree storing vanilla Ethereum transactions and hashes of encrypted private smart contract changes.

A Zero Knowledge Security Layer (ZSL) developed by the team behind Zcash is another core component of Quorum. ZSL enables the transfer of assets on the network without revealing the sender, receiver, nor the quantity of the asset. Hashed values of the initial balance, transaction amount, and final balance are submitted by the sender and receiver to a proof generator off-chain. They are subsequently submitted to the Quorum chain for verification by other nodes on the network, following which the transaction is confirmed and balances are updated.

Quorum thus requires both private and public smart contract transactions. The private contracts enable private transactions between two parties, while public transactions are used to distribute ZSL proofs for verification on the Quorum network. The transaction flow under Quorum is visualized in Figure 3, and narrated most succinctly by the Ubin Phase 2 whitepaper itself: “A payment instruction for fund transfer is initiated from the sender’s dApp. The dApp invokes the private contract to generate a private transaction. The sender’s dApp then invokes a public transaction which will be executed by all nodes on the Quorum network. The public transaction is created with the hash of payment instruction amounts which will be used as inputs to generate and verify proofs. Hashing is done to maintain data privacy since public transactions are propagated to all nodes in the network.”

Transaction finality is another characteristic that is of crucial importance in enterprise settings. Financial institutions are typically unable to handle probabilistic finality, and the probabilistic nature of finality under Ethereum’s Proof-of-Work is thus unsuitable for enterprise applications. Quorum introduces alternative ways of achieving consensus, the one having been evaluated by Singapore’s Monetary Authority for wholesale settlement purposes being “Raft”. Raft has been used for many years in software such as Kubernetes. It relies on the concept of a single leader, who proposes blocks that others validate. This means there is no forking, and as such there is transaction finality. Raft also enables the setting of block times that are significantly faster than is possible under Ethereum.

Having thus far introduced R3’s Corda, Hyperledger Fabric, and JP Morgan’s Quorum, we will next briefly compare all three according to their suitability in supporting wholesale payment systems.

COMPARING CORDA, FABRIC, AND QUORUM

Several CBDC proof-of-concept and prototype projects have been conducted to date (see part 1). These projects have generally been spearheaded by a central bank, yet in collaboration with financial institutions (who use existing financial market infrastructure) and developers of enterprise level Distributed Ledger Technology. The following is a brief comparison between the three most prominent contenders (Corda, Fabric, Quorum), largely based on the findings of previous CBDC projects.

Privacy: Corda only seeks to achieve consensus among parties of an agreement on the state of that specific agreement as it evolves, as opposed to seeking agreement on the state of a globally distributed ledger. Hyperledger Fabric offers the ability to set up shared channels (each one a ledger) between parties, with transaction within the channel being private to outside parties. It is worth noting that channel-level account balances can be viewed by channel participants. Regulators (e.g. a central bank) can be included in channels for compliance purposes. Quorum achieves privacy via public and individual private state trees, with the public state tree storing vanilla Ethereum transactions and hashes of encrypted private smart contract changes. Quorum thus offers and requires both private and public smart contract transactions. The private contracts enable private transactions between two parties, while public transactions are used to distribute zero knowledge proofs for verification on the Quorum network.

Scalability & Performance: Due to its design, Corda is not a proper blockchain. This not only alleviates privacy concerns, but also makes scaling significantly easier compared to traditional DLTs. The addition of a new participant only requires the installation of a new node to the existing network. In Fabric, [N x (N-1) / 2] + M channels are required to operate, with N = number of participating nodes, and M = number of multilateral channels. The network complexity rises with each new participant, and participants need to maintain and move funds between individual channel-level accounts for each channel. Quorum’s vastly improves upon the performance of Ethereum by virtue of being a permissioned network, yet there is further room for improvement with regards to the speed of running zero knowledge proofs.

Resiliency: While Corda can continue to operate should individual bank nodes go offline, the use of a single notary node (e.g. central bank) to achieve consensus over uniqueness is a potential point of weakness. This can be rectified with a notary node operated by multiple parties, although at the expense of added complexity. Fabric involves a blockchain, but an orderer is required to order transactions into blocks. The Ubin 2 prototype is built on a single orderer, which introduces a single point of failure. A multi-node ordering service could solve this issue. Propagating hashes of private transactions to the global ledger improves resilience in Quorum. This use of a central ledger ensures significant resilience, and under the tested Raft consensus method the consensus leader could be rotated with each transaction for added resilience. This may or may not be possible in the usage scenario of CBDC, and the consensus leader could thus constitute a point of weakness.

Finality: Of crucial importance to financial service providers. The use of a notary node ensures certain transaction finality in Corda, with a notary signature indicating that input states are thus far unspent. Fabric’s ordered node orders a transaction into a block, and sends it out to channel participants for commitment to the shared channel ledger. The transaction is finalized upon commitment. The Raft consensus method tried alongside Quorum relies on a consensus leader to commit blocks to the chain after verification. Once a block has been committed, the chain cannot be reversed since there is no concept of mining involved, and finality is thus achieved.

Originally published at https://www.standardkepler.com

Standard Kepler is Asia’s leading blockchain financial services provider, offering market changing research insights, in addition to holistic advisory, crypto trading, and custodian services. We take great pride in being able to offer professional services that are trusted for our honesty and driven by technology. Headquartered in Hong Kong, Standard Kepler’s management team previously served in JP Morgan, Macquarie Capital, State Street, and KPMG.

REFERENCES

Bank of Canada; Payments Canada; R3. 2017. Project Jasper: Outline.

Bank of Canada; Payments Canada; R3. 2017. Project Jasper: A Canadian Experiment with DLT for Domestic Interbank Payments Settlement.

Bank of Canada. 2018. Project Jasper: Are distributed wholesale payment systems feasible yet?

Bank of Canada; TMX Group; Payments Canada; Accenture; R3. 2018. Jasper Phase 3: Securities settlement using DLT.

Corda. 2018. The Corda Platform: An Introduction.

Deutsche Bank Research. 2018. Why would we use crypto euros?

European Central Bank. 2018. Stella: BOJ/ECB joint research project on DLT.

Hyperledger. 2018. An Introduction to Hyperledger.

JP Morgan. Quorum Whitepaper.

Monetary Authority of Singapore; Deloitte; Bank of America Merrill Lynch; BCS Information Systems; Credit Suisse; DBS Bank; HSBC; J.P Morgan; Mitsubishi UFJ Financial Group; OCBC Bank; R3; Singapore Exchange; UOB Bank. 2017. Project Ubin; SGD on Distributed Ledger.

Monetary Authority of Singapore; The Association of Banks in Singapore; Monetary Authority of Singapore. 2017. Project Ubin Phase 2.

Monetary Authority of Singapore; SGX; Anquan Capital; Deloitte; Nasdaq. 2018. Project Ubin: Delivery versus Payment on DLT. South African Reserve Bank. 2018. Project Khokha: Exploring the use of DLT for interbank payments settlement in South Africa.

Sveriges Riksbank (Swedish Central Bank). 2017. The Riksbank’s ekrona project report 1.

Sveriges Riksbank (Swedish Central Bank). 2018. The Riksbank’s ekrona project report 2.

Sveriges Riksbank (Swedish Central Bank). 2018. Economic commentaries: Are Bitcoin and other crypto-assets money?

Introduction to Central Bank Digital Currencies (2/2) was originally published in HackerNoon.com on Medium, where people are continuing the conversation by highlighting and responding to this story.

Blockchain technology often confuses people, and this confusion mainly stems from the several misconceptions that I have already mentioned in the two previous articles (8 most common misunderstanding of blockchain part 1 and part 2).

The misconceptions are hindering laymen and sometimes experts to understand the technology and build real solution on it.

Knowing the kind of mistakes we are committing is just as important as knowing how to fix them. Today, I attempt to explore how to build a real application on blockchain by taking the Accenture report (issued on 11th Oct, 2018), which contains numerous mistakes, as an example.

This article is written in two parts; the first is about the mistakes in the paper, and the second provides suggestions on how different industries can tap into the value of blockchain.

1. Blockchain Does not help Data Sharing

“Now imagine a world where, through a blockchain-based system, every party involved in the move could see the data and information pertaining to the end-to-end relocation process with appropriate permissions granted by the stakeholders- in this instance, the family.

Organizations could access just the data they need, and because the information reflects blockchain’s enhanced trust levels, parties no longer need to engage in messaging and reconciliation. As organizations widely implement these kinds of models, the possibilities for AI systems will grow significantly” — page 4

In layman’s terms, the above sentence suggests that companies surrender the data they own (or steal), encrypt it by users’ private key and upload it on blockchain. After that, these companies can access this data only with users’ permission. In the event that a user loses his/her private key, his/her data will be lost permanently because nobody controls the system. How this system even makes sense is unknown, but it sounds legitimate with the word blockchain.

People often think blockchain helps data sharing because of two keywords: security and trust, which are also misconceptions that I am going to explain in points 4 and 5.

2. A smart contract is not a contract for businesses in digital form

“In the future, wider access to data across an ecosystem and the advances in automated business logic via smart contracts could enable new and greater access for AI machines to traverse business ecosystems and deliver more comprehensive solutions to customers.” — page 5

A smart contract is merely a program on blockchain. A smart contract that is running on a public blockchain is an immutable, censorship-resistant program. By contrast, a smart contract running on a permissioned chain is merely another regular program.

Smart contracts running on a public blockchain are sometimes called decentralised applications (DApp). Decentralising applications can be helpful. For example, we can look at decentralised gambling applications (which account for 40% of total blockchain transactions [Standard Kepler Research]).

These applications do not have licenses; users do not know the operators, and no protection is in place for gamblers. Yet, users can trust them because decentralisation guarantees the immutability of the code. That is, the agreed program code cannot be altered.

Decentralised applications place the core logic on blockchain and establish fully automated execution. Consequently, these applications behave like ‘contracts’, and users can trust the program to deliver what is claimed. However, the mere placement of a program code on blockchain does not decentralise the application.

Moreover, we need to understand that decentralisation is not necessary to achieve automation unless the goal is creating an application or service that cannot be controlled or wiped out by anyone (e.g. a gambling software without a license or an application for use by North Korean generals in buying and selling properties in New York).

I do not see much business use cases here. Thus, I will not spend considerable time on it, given that this article is written for business owners.

3. Decentralised artificial intelligence (AI) versus full automation

“The processes of a decentralized management, evolution, adaptation and cooperation in MAS, consisting of a large number of reactive agents, are investigated and stimulated. “ — page 7

The beauty of decentralisation is censorship resistance. If a decentralised AI is to be deployed on public blockchain (given sufficient public blockchain throughput), then an immutable AI that is controlled by nobody must be expected. However, an uncontrollable AI does not mean anything to a business organisation.

Meanwhile, an AI program deployed on a permissioned blockchain will not differ from any other privately owned AI program.

4. Does blockchain redefine trust?

“Blockchain is a new type of database system that maintains and records data so that multiple stakeholders can confidently and securely share access to the same data and information. As such, it is changing the nature of boundaries between organizations. Since the invention of modern databases in the 1950s, the governing business model concerning them has centered on trust. For example, Party A needs to have confidence that Party B (or anyone else) hasn’t unilaterally changed any data. Consequently, companies traditionally build data systems they can fully control and operate using a “messaging” based business model. In this case, Party A sends its view of the world in a “message” to Party B, and vice versa. Only when both parties can reconcile those views will they complete the business transaction. Blockchain is changing that concept of trust in data. Through blockchain and other types of Distributed Ledger Technologies (DLT), companies can now access a common shared data set that they and other stakeholders know they can trust.” — page 12

This is one of the most common misconceptions that I have mentioned in my previous article — ‘By its nature, every piece of transaction data stored on blockchain should be self-evident. But not every piece of data stored on blockchain is transaction data. Moreover, blockchain technology itself cannot make general data self-evident (e.g. the coffee is from Ethiopia).’

The above misconception leads us to think about which data should be and not be recorded on blockchain.

Only data that can be verified by previously stored data should be stored on blockchain. I call this kind of data recursive data, which means that if the previous data is correct, then the current data must be correct.

Only data that can be verified by previously stored data should be stored on blockchain. E.g. Transactions, ownerships and account balances.

The chain characteristic allows us to easily trace the history of the data down to its origin. Hence, data that can be verified by previously stored data can be proven right or wrong without others’ help. Transactions, ownerships and account balances are data that can be verified by previous data. If all previous transaction records are correct, then the account balance must be correct.

However, this self-evident ability does not apply to other type of data, such as medical data, electricity consumption and farm records. One cannot determine whether maize is organic merely by checking the previous record, even with the immutability of the data.

5. Blockchain improves data security. However, you may not want to pay the price

“Security: Protection and control can be implemented at the data element level instead of the database or data table levels making it much more difficult to penetrate.” — page 12

This statement is true. It means that every data is encrypted, and they can be decrypted by users only. Blockchain is secure, but a company must ensure that it indeed needs this level of security and is willing to make the relevant sacrifices in terms of data usability.

The logic of the paper lies in AI’s need for training data and blockchain’s ability to facilitate the data sharing across different parties.

Most companies can already share data with third parties as long as they are willing to do so. We do not need to move data to blockchain simply because we want to share it across different parties.

Therefore, the question is as follows: Can storing data on blockchain create additional benefits regarding security, data authenticity, data availability and privacy protection? We often ask the wrong question of what blockchain can do, when the question should be ‘What can blockchain do better?’

Instead of “What blockchain can do”, we should ask “What can blockchain do better?”

The Accenture report lists six use cases of blockchain in different industries, namely, smart energy and smart buildings, public science, supply chain, smart devices, identity and healthcare. In the next article, I will explain how these industries can tap into the power of blockchain technology and transform their core businesses.

Originally published at https://keplerlab.io on May 15, 2019.

AI plus Blockchain? Accenture is doing it wrong! — Kepler Blockchain Lab was originally published in HackerNoon.com on Medium, where people are continuing the conversation by highlighting and responding to this story.

Weekly Summary, Standard Kepler Research

THOUGHTS OF THE WEEK

Bitcoin is rushing, so let’s take a quick look at what the industry might be thinking at the moment.

Bitcoin is up 30% in the last week, reaching US$8000, the highest price point since July last year, and a doubling in price since mid-December 2018. Bitcoin has strengthened relative to altcoins, and BTC market dominance is now up to 60%.

This comes as equity markets suffer in the fallout from the US-Chinese trade war. It is is worth noting that the Google search interest in Bitcoin is still relatively low, indicating that it likely is not the general public piling money into Bitcoin.

“What drove $BTC up this week? A handful of large players, that started buying in waves. Systematic buying. Clues to reach that conclusion can be found in volume, price action, funding, and futures basis and term structure. May expand on this later. Not retail driven.” — Economist Alex Kruger

Summarizing possible motivations, again per Alex Kruger, they include:

• Front-running Fidelity/Bakkt/Ameritrade/Etrade flows
• Front-running news
• Coordinated buying

The market is ripe with positive news: Bloomberg reports that Fidelity will roll out its institutional crypto trading desk “within a few week”, and Bakkt have announced rolling out testing for bitcoin futures trading in early July 2019.

The real reason for the rushing BTC price is likely a combination of the reasons listed above by Alex, or even more likely something completely else. Needless to say, these are interesting times — but beware of the “Global FOMO”.

Remember the Standard Kepler can meet all your BTC and crypto brokerage needs, just head over to www.standardkepler.com to learn more. Next week will be a bit special, as it will be the last week reaching out to you all via this weekly newsletter.

CHART OF THE WEEK

© 2018 Standard Kepler

Originally published at https://www.standardkepler.com on May 14, 2019.

Summary of Bitcoin’s New Rush — Trade war? Fidelity? Or something else? was originally published in Standard Kepler on Medium, where people are continuing the conversation by highlighting and responding to this story.

Weekly Summary, Standard Kepler Research

WEEKLY RECAP

Total market cap. increased 7.3% to $184bn, and 7 day trading volume increased 4.8% for top 100 crypto.

THOUGHTS OF THE WEEK

Having noticed a significant dissonance between the general media hype for Facebook Coin (FBC), and our own take on the project, we thought it might be worthwhile to round up everything we know about Facebook Coin thus far.

Use case: Rumors indicate that Facebook Coin would be launched by Facebook to allow people on the Facebook platforms (starting with WhatsApp) to easily send funds between each other. Founder Mark Zuckerberg has previously stated that he would like it to be as easy to send funds between Facebook users, as it is to upload a photo. Leaks have indicated that the Indian remittance market might be an initial target via WhatsApp, and what Facebook likely sees is an opportunity to recreate the vast success of 3rd party mobile payments in China (see chart of the week).

Form: Facebook is reportedly planning to raise funds that will act as collateral for FBC. FBC would be tied to these funds in order to avoid price instability. New York Times journalist Nathanial Popper has revealed that Facebook is seeking $1 billion in venture capital to back the FBC and achieve this tethering.

Technology: The coverage of FBC by crypto media is likely in large part down to the inclusion of the word “Coin” in the name. So far, we do not know if FBC will be launched on a blockchain. Bloomberg previously reported the following statement from Facebook: “Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.” However, Mark Zuckerberg’s more recent statements on the topic have been completely devoid of any mention of blockchain technology. Barclay’s analyst Ross Sandler reportedly stated in a note that “Based on our checks, the first version of Facebook Coin may be a single purpose coin for micro-payments and domestic p2p money transfer (in-country), very similar to the original credits from 2010 and Venmo today.”

Conclusion: In other words, we do not yet know if FBC will run on a blockchain. FBC would be akin to an intranet, completely separate from the internet-like world of public blockchains. Even if FBC runs on a blockchain, in the words of Standard Kepler CEO David Tang, “JP Morgan coin and FBC are not even close to the Bitcoin and Ethereum types of cryptocurrency. Rather, these coins are existing settlement systems employing some blockchain features. From a user’s point of view, there is no difference in using these systems from using Swift or WeChat Pay.”

CHART OF THE WEEK

© 2018 Standard Kepler

Originally published at https://www.standardkepler.com on May 7, 2019.

Facebook Coin — What We Know so Far was originally published in Standard Kepler on Medium, where people are continuing the conversation by highlighting and responding to this story.