This Is Not The Time To Let Bank Management Off The Hook

The CEO of UBS yesterday joined other wolves in sheeps clothing big bank leaders in calling for freedom to make 'honest mistakes' (last year it was the crew at HSBC!). 

This is just a confidence trick. After all, the word "mistake" covers many different types of sin and bank culture doesn't seem to distinguish between honest and dishonest ones, as Andrew Hill of the FT has pointed out. He also cites a memo from JP Morgan's CEO as warning against descending into "a culture of back-stabbing and blame" - but from what I understand that's exactly the culture that already prevails, at least amongst rival managing directors. Emails disclosed in numerous scandals reveal that these are dog-eat-dog environments, full of perverse incentives, where everything from taking the credit for other people's efforts to fiddling records to incurring the odd regulatory fine are just speed bumps along the road to fees, profits and this year's bonus.

Ignorance of exactly what is going on at operational level is another aspect of this confidence trick. Recently, the CEO of government-owned RBS told John Snow of Channel 4 News that he "didn't know" whether there were other major scandals waiting to break. I guess it's a tricky question to answer, but it does highlight the conclusion from the Parliamentary Commission on Banking Standards that these banking groups appear to be beyond management control, enabling those at the top tend to avoid culpability. Remember, too, that many of the recent scandals, like currency market rigging, arose well after the start of the financial crisis. So nothing has really changed since the aptly nick-named 'noughties' (lest we forget Bobby "Dazzler" Diamond's immortal words in 2011!).

And to suggest that regulation might mean big banking groups will tend to take less risk in doing things that customers care about, like lending to small businesses or paying higher returns on savings, is poppycock. They aren't bothering to do this anyway. They just want the freedom to make more money for management, and possibly shareholders. They are simply not customer-led businesses.

For all these reasons, the bank CEOs should continue to be roundly ignored.

Guest Post at Open Identity Exchange - A Pragmatic Approach To Distributed Ledgers

The post appears here.

Thanks to OIX for the opportunity to support the initiative.

How To Pay A Spanish Speeding Fine From The UK

There seem to be a lot of grumpy tourists surfing the web after their holidays in search of a method to pay their fines. Strangely, the Spanish don't make it easy! I finally cracked it and share the steps below, some of which were the result of a call to the Spanish authorities on the number given on the fine notice, but the links came from surfing the net. Please take care when using the links/urls to ensure you are on the official pages! 

Click here: https://sedeapl.dgt.gob.es:7443/WEB_Sanciones/jsp/sincertificado/identificacionPagador.jsf [note this is reached via https://sede.dgt.gob.es/es/tramites-y-multas/alguna-multa-en/pago-de-multas/ , which in turn is reached by clicking the union jack “Is there a fine?” link at http://www.dgt.es/es/].

When the online form comes up, complete as follows:

Under "Document type", click the drop-down menu and click “passport”

Under "Document number", type 000000 - six zeros

“Date of the Report” means the date at the top of the fine notice in the box marked “Fecha Denuncia”

“Record Number” means the number in the top right of the fine notice in the box marked “N. Expediente” – with all dashes and dots removed

For the amount, you must put the total amount of the fine, not the discount for early repayment - the site will then calculate any discount and display it in the next screen, which will also give you the opportunity to pay by debit/credit card.

Drive safely ;-)

What (The Hell) Is A Smart Contract?

Another good meeting of the BitcoinBlockchain Leadership Forum today, with the focus on practical use-cases for distributed ledgers and grasping at the nebulous concept of 'smart contracts' (links are to my own recent posts on these topics). 

In particular, we saw good, productive tension between Bitcoin blockchain purists who are intent on coding pretty much every element of a transaction into the blockchain; and those who see distributed ledgers as (also) playing a more limited role as just one layer or component in a broader array of gadgetry involved in any contractual scenario.

In my view, both approaches are valid but which 'wins' will depend on the use-case. And the development of the Internet demonstrates the technology will be used in ways no one intended anyway.

So, for my money, the definition of a 'smart contract' needs to be very broad, and I've suggested:

"an agreement performed via any number of applications, devices, networks and messages, which may involve entries in a distributed ledger."

This definition flows partly from a great discussion I had with Alex Amsel of Bitshake recently. I made the point that distributed ledgers seem most useful where a specific item is somehow dealt with or used very frequently and by many people or entities. Alex added a third condition: the participants are running different proprietary software, operating systems and/or devices - in other words they have an expensive interoperability challenge.

So a 'smart contract' might just be written in Word format, or html, and not embedded in a distributed ledger at all. But the subject matter of the contract - the rights to play a song, or rent a shipping container or space on a truck - might be 'hashed' into the ledger, and users' machines could interact using that hash, triggering instructions to pay the contractual amount to a certain account. Multi-factor authentication as one step in the contractual process (e.g. identify checks for anti-money laundering) is another example.

At the forum, there was mention of locating, booking and paying for a car space as another example. This was dismissed by lots of people who said you can already do this without a distributed ledger - the parking space is already entered in the systems of the council's chosen payment service provider. But that means I need to know which municipality I'm in to find the right payment app, download it and register a payment method before paying (I changed cars recently, so I have to re-do all that). And that inaccessibility is partly a function of having to cover the cost of expensive proprietary systems. But if parking spaces were 'hashed' in an openly accessible public ledger, couldn't our smartphones find and pay for them using that code and our own chosen payment method?

Anyhow, the point is not that we necessarily need distributed ledgers to pay for parking or any other specific use-case, but that once people begin using distributed ledgers more widely, tons of other apparently trivial uses become feasible and worthwhile. Conversely, a comparatively trivial but widely shared use-case might unleash more widespread adoption, as happened with text messaging (I'm not suggesting that parking will do it, by the way).

Of course, Bitcoin users will be screaming at their screens by now, if they've got this far. They'll be shouting that Bitcoin has already unleashed distributed ledgers. 

They're probably right.

1001 Use Cases For Distributed Ledger Technology...

Virtual currencies are so last year. This year is about all the other uses for the underlying technology - the blockchain and other distributed ledgers.  

The number of use-cases is starting to snowball with every discussion about scenarios in which a certain item is dealt with many times by many parties. That's because it will be more efficient and cost-effective for the item to be represented by a 'hash' in the ledger, and each transaction related to that item to be 'hashed' so they are available to any computer running the same language/protocol, rather than dealing with that using 'old' technology. Even though the ledger is openly accessible to everyone's machine, confidentiality can be guaranteed using encryption, so that only those computers with the right private key could unlock the hash and see the details.

Here are a few of the ideas, some of which are definitely being kicked around and most of which involve smart contracts, e.g.:

• car rental;

• identification tools - multi-factor authentication - e.g. checking validity of a drivers licence (hat tip to Alex Batlin)

• issuing/trading shares, bonds and other financial instruments;

• freight, transport, logistics - e.g. booking space in shipping containers, long-haul trucks and aircraft, and keeping track of the delivery items themselves;

• tracking, controlling autonomous vehicles/devices;

• switching to the best tariff minute to minute for services related to cars, homes, devices like insurance, gas, electricity, phone contracts;

• renting hotel rooms, accommodation;

• tracking and paying royalties for music, films etc;

• something I'm working on that it's not my place to disclose;

and on, and on.

In other words, distributed ledgers as a platform will have the same horizontal impact as the Internet,  mobile networks and the smartphone. The ledgers won't necessarily replace any of that, but will be an important layer, enabling all sorts of applications and devices to 'run' off the recorded transactions and related events.

Worth giving is some thought - just keep a good old fashioned pen and paper handy to jot down the flow of ideas ;-)