Crypto's next act will be less ostentatious
If it's centralized like this, then why is any blockchain required? Why other than PR is a coin necessary? Couldn't they just offer intraday repo as a service, with the treasuries in custody and bank deposits instead of JPM coin on the other end? If this is the future of crypto, then I'm wracking my head trying to figure out why it should exist...
Not sure how this blockchain based repo is different from a repo using a centralised database. The blockchain is built by the JP Morgan owned Onyx team and I assume JP Morgan is the only one running nodes. I don't understand why anyone would use a blockchain when it adds no value of decentralisation. This seems like a nice PoC but nothing more
I'm a retired software engineer, and have yet to study blockchain in sufficient detail. But I tentatively agree www.stephendiehl.com/blog.html, a software engineer who argues that centralized software operated by a trusted agent is unambigously better than decentralized solutions for every use case except crime. Specifically wrt instant clearing and smart contracts: smart contracts are essentially like what traditional databases call stored procedures. You can certainly make an Oracle database run such a procedure at a specified time to close a repo, and the database doesn't need to wait for 5 o'clock to update.
So I'm interested in any arguments that derive business benefits concretely and specifically from the use of blockchain. Diehl's point is that the flood of "decentralized woo woo" around blockchain never really gets down to explaining that. A good driver-question is: what trust relationships are supposed to be obviated by the use of blockchain? It seems clear to me that you'd better trust JPM anyway if you use their repo exchange, so why would it be better or more worthy of your trust if they use blockchain as against more conventional (and reliable) I.T.? Nor is blockchain needed to indemnify you against your counterparty; exchanges do that now.
My own naive theory is that there is indeed no technical benefit, but all that decentralized woo woo attracts users to your shiny new instant-clearing smart-contract repo exchange. And JPM is doing this because they get to handle your assets in flight and hold them at rest, and if, as first-movers, they end up with the biggest repo exchange, that's a *lot* of assets.
If you've discussed this already, please point me at it; I haven't read all your old posts yet. Good blog though!
Is it just me, or are they doing this so their rates are invisible to regulators?