While the Bitcoin community thrashes a their Hong Kong summit and buzzes over an alleged ‘unmasking” of Craig Steven Wright as “Satoshi Nakamoto”, Bitcoin Magazine reported this week that Goldman Sachs filed a patent for blockchain technology. I don’t know if the patent is especially important or not, but it is an interesting indication of how Wall Street is thinking about cryptocurrencies.
“Cryptographic Currency For Securities Settlement”
Specifically, the patent describes using the concepts underlying Bitcoin (the blockchain ledger), but not Bitcoin. They imagine their own alt coin, SETLcoin.
The goal is to replace the complex and mostly opaque bookkeeping that brokers do with cryptography and blockchains. Bitcoin enthusiasts aren’t wrong that this technology could replace a lot of the back office jobs (and costs) on Wall Street. But Wall Street has figured out that they can get the benefits without relinquishing their own control over the systems. Simple and cheap, si! decentralized, no! A billion times, no!
Basically, the blockchain is designed to execute security trades (a highly regulated enterprise). There is too little information for me to completely grok what they intend to do, but basically SETLcoins represent blocks of securities and other assets.
Given the nature of the business, Goldman’s patent discusses the use of authoritative sources to validate assets (and probably actors). Naturally, Goldman will be one of the keepers of the keys, and they expect to play nicely with government regulators. This, of course, flies in the face of the “trustless” philosophy of Bitcoin.
I’m pretty sure that most users would never need to know that SETLcoin exists, though I guess the blockchain could be public (read only). I’m not sure if that’s envisioned or not. If it is published, that would be a new level of transparency. But I doubt the customers really want everyone reading all their transactions.
From what I can see, this is a very plausible approach. Given the people involved and the money invested, it would be surprising if it were totally stupid! And it basically eliminates one of Bitcoin’s major use cases. If Wall Street implements something like this—and I think they will—then who needs Bitcoin? (Besides drug lords and hackers?)