NEW IMF XRP / XLM Document - Comparing Blockchain Consensus Mechanisms for Global Supervisors
hey citizens of the future citizen of the future here i hope everyone's doing fantastic uh today i got a super regulated document uh from our favorite the top of the world the top of the regulated world to imf the international monetary fund and uh this is a very interesting document it's called blockchain consensus mechanisms a primer for supervisors this was released last week last week today is february 2nd 2022 and a week ago this was launched and here we are reading this so we are at the head of the regulated revolution and here we go so there's some good there's some bad there's some good for carbon neutral utility networks and there's a bad for proof of work and proof of stake so before i get into this i just want to read a disclaimer here so none of this is financial advice i'm not paid to create any of this but the reason i create my content is because i see it a lack of good regulated information out there around these uh blockchain networks you know we see all this hype all this opium all this pump and dump [ __ ] no i'm i'm the regulated side i'm giving you the stuff that i find through my research and through my studies so we know uh mainstream media is doing an awesome job at covering all this up and well i'm uncovering it for you other citizens that are interested in the fourth industrial revolution so let's dive into this into this video okay guys before i get into this document i want to explain to you and show you how powerful the imf is okay so what is the international monetary fund so it's an organization of 190 countries working to foster global monetary cooperation secure financial stability and to connect all these countries so we can have a globalized system that's what they're doing so they work with countries all over the world this document is to supervisors all over the world they also work together with the world bank group hand in hand so this is how big this is the top document i'm telling you guys okay so now i'm going to show you guys what their backlinks look like so as a tool that you can use it's called ahrefs and this allows you to see how they're connected here now let's look they've got 27 million backlinks that is massive as a developer i that is huge now looking at this look at how many educational backlinks and governmental backlinks that they have governmental 679 that is the most i've ever seen developing these last for four years and educational content like that's a lot of so that's other people's websites talking about that that's huge okay so we're about to get into a document coming from the imf that's gonna break down the consensus mechanisms of different blockchains and that is what the supervisors around the world are gonna read and this is how they're gonna make their decisions or a part of it anyways okay so let's go let's dive so what does it go over it goes off of different consensus mechanisms uh proof of work proof of stake delegated proof of stake so proof of stake you know ethereum proof of work bitcoin uh delegated proof of stake which would be like xtc network and then uh but byzantine fault tolerant so xrp xlm okay let's dive so executive summary so i'm just going to zoom up here there we go the increasing use of distributed ledger technology and financial services has the potential to generate benefits for many stakeholders but can also pose unique risks dlt including blockchains is used in payments issuing debt and equity trade finance and post-trade processes large-scale use of dlt and financial services is currently limited but use cases are increasing in some jurisdictions dlt has the potential to just disintermediate markets reduce costs and increase speed and efficiency and create secure records of transparent immutable and auditable data and activity uh tlt can create democratization of data as the data are distributed and more control of the data is decentralized it can improve the provision of financial products and services including financial inclusion so that would be like mojo loop xrp uh connecting the unbanked to the bank supply chain management and record keeping for supervisors dlt can provide real-time control and supervision of financial markets so that is huge that that brings up a thing in my mind here of fna and how they can see the financial markets and i'm going to put some pictures here so you could see that they could see all the the payment flows around the world how much money is moving where is it moving to they can single it all out and they can have it all on a beautiful infographic to see the statistics so i'm just i went through this all i'm just reading the highlighted parts that i thought were important consensus mechanisms underpin the effective operation of blockchains and ensure a single consistent and honest ledger consensus mechanisms and dlt systems guarantee that a state value and a piece of information is correct and agreed on by most nodes some consensus mechanisms are designed to work invest in public networks and others perform better in private networks different consensus mechanisms can also deliver different outcomes which require different regulatory considerations for example some consensus mechanisms might prioritize speed and efficiency while others might prioritize security so within financial services proof of work proof of stake and delegated proof of stake are some of the most popular consensus mechanisms in public blockchains well byzantine fault tolerance and istanbul bft and federated bft are popular in private blockchains separately large technology entities known as big techs also created met consensus mechanisms that have the potential to be used in products and services that could be systematic quickly for example dmvft supporting the bitcoin blockchain proof of work is the most popular consensus mechanism but it suffers from significant drawbacks proof of work is secure silent method of forming consensus but it consumes significant energy and can be slow and expensive during times of high network traffic so they're the imf is pointing out the energy consumption needs to be solved and it's unscalable when things get uh getting get get hot in the market although innovations such as the lightning network side chains and other consensus mechanisms like proof of stake aim to solve some of proof-of-work problems others issues such as problemist probabilistic settlement can create friction within with existing regulatory frameworks these offer immediate settlement however they re raise new regulatory concerns about areas such as competition and they can run counter to the core ideals of decentralized networks to ensure they can embrace the promise of fintech while migrating against any risks authorities should consider the pros and cons of different consensus mechanisms so we should all send this to the sec because they have not done the pros and cons for different consensus mechanisms one they haven't even give us regulatory clarity and here's the imf the head of all the countries around the world and yeah like come on guys so let's uh let's go down here authorities should also consider whether a technology neutral approach can continue delivering mandates when diverse new technologies deliver different outcomes and may consider a more proactive approach to supporting or restricting certain technologies authorities could also consider upskilling supervisors to better supervise new technologies so they're talking about come on like let's get these supervisors to understand these technologies international organizations have a role in sharing regulatory best practices particularly in jurisdictions where there might be a skills gap and finally approaches such as text sprints and regulatory sandbox so we've all heard of cbdc sandbox with r3 with project ubin um there's so there's a lot of sandboxes out there where it's just these big boys they all play together they get their cbdc's they get they try this stuff and it's all trial and error as well as deeper public and private collaboration via formal reviews can enable authorities to understand the relative strengths and weaknesses of different consensus mechanisms allowing firms in financial services to leverages leverage the benefits of dlt while ensuring that risks are appropriately mitigated so public the private companies need to work together they keep doing uh reviews sharing uh thesis proof of concepts and then that's how we're going to improve so introduction regular authorities general approach to financial innovation is one of technology neutrality which is not the same as tech technology agnosticism as not all technologies are equal authorities are open to use new technologies even as they seek to understand and mitigate any unique risks that the technologies might bring although regulatory authorities may be technology neutral the concept of the same business same activity same risk they might shift to become technology agnostic as different technologies might generate different risks where new technology creates unacceptable risks that could interfere in achieving the mandates and objectives of the regulatory authorities okay so the rest of this is just filler there's nothing really special in there come down here so why consensus mechanisms matter so here they show uh how consensus fits into distributed systems there's an application layer a contract layer an incentive layer the consensus layer and then the network layer the design of blockchains matters and different consensus mechanisms come with their own advantages and disadvantages blockchains can be public or private permissioned or permission lists these designs bring with them the unique regulatory opportunities and risks and this note will focus on the most popular consensus mechanisms that underpin blockchain systems in financial services it is not an exhaustive list of all consensus mechanisms regulators must consider trade-offs when looking to understand the regulatory implications of certain blockchains some consensus mechanisms provide a greater focus on security and decentralization decentralization good for record keeping while others encourage greater speed and efficiency for example supporting a large number of payments transactions per second there are there is a fundamental difference in how decisions are made in a centralized and decentralized systems okay so consensus aims to solve problems of how to synchronize data across nodes so remember this consensus is how these nodes verify a block how they they you know when a transaction is made these nodes across the whole network go through these different mechanisms just to verify the block is legit this this block is certified it is real it is added to the network that's updated across all nodes so in decentralized systems distributed nodes need to come to agreements or consensus as there is no central authority to re assume responsibility okay so here we go we're getting into it consensus mechanisms aim to solve these problems and ensure that there is one constant and honest ledger that distribu distributed part participants can come to an agreement distributed ledgers are considered uh byzantine fault tolerant if they can solve such problems and ensure agreement okay so here we go consensus mechanisms should not harm or interfere with the global aim to transition to a low carbon economy do you hear this guys the narrative now is changing for a global aim to transition to a low carbon economy a transition to a greener economy supports the goals of the imf as well as the goals of many regulatory affairs authorities which seek to ensure sustainable growth in their respective markets while not harming the environment the imf a week ago this was launched this is the start of the narrative where they start attacking the high energy using proof of work and proof of stake networks so if you're a bitcoiner you better start debugging you better start being ready to fight this because there's going to be a fight between all the global regulators the imf and all partners of the imf they're all going to start attacking the high energy consumption this is a warning the use of energy-intensive methods to achieve consensus presents unacceptable risks to financial stability in society as such methods exacerbate the effects of climate change here we go climate change recently to manage the risks of climate change and mitigation and mitigate environmental impacts from crypto assets the swedish uh i'm canadian i can't pronounce that i'm sorry guys uh called by the european union to ban proof of work mining in 2021 so i actually read this document i took notes on it so give me two seconds here and i'm going to pull it up a key consideration of authority should be moving to less environmentally damaging methods of operating blockchains so they're saying blockchains can stay but everyone needs to get away from the wasteful energy consumption okay guys here it is this is from the sweden government this is what i've seen this was uh november 5th 2021 so two three months ago crypto assets are a threat to climate transition energy intensive mining should be banned okay so i hope you guys like that uh enthusiasm here we clearly see that the more expensive bitcoin becomes the more emissions it generates uh they say at the current market value lead to the release of up to 120 million tons of co2 in the atmosphere per year to get a better sense of this number using data from uh very smart people two largest crypto assets today is equal to a hundred million round trips between sweden and thailand then it says uh there is good access to renewable energy so once we see more bitcoin on renewable energy sure they'll back down but until then it's going to be a fight we're already seeing crypto producers establish themselves in northern sweden between april and august this year electricity consumption for bitcoin mining has increased by several hundred percent and now amounts to one uh terawatt hours annually that is equal to the electricity of 200 000 swedish households okay our conclusion is that policy policy measures are required to address the harms caused by proof-of-work mining method it is important that both sweden and europe can use our renewable energy where it provides the greatest benefit for society as a whole for instance sweden and other countries could introduce attacks on energy energy energy intensive production of bitcoin here we are they're going to start saying well we're going to carbon tax you guys for mining bitcoin we're going to tax the [ __ ] out to you until you stop mining bitcoin because it's a waste of energy and we have all control over the global system the emissions need to stop here and now and renewable energy needs to be used for climate transition of essential services therefore we call for the ue the eu to consider an eu level ban on the energy intensive mining method proof of work there are other methods for mining crypto assets that could be used for bitcoin and ethereum that are estimated to reduce energy consumption by 99.95 percent with maintained functionality huh wonder what networks run 99 less than bitcoin and ethereum but could run the transactions of bitcoin and ethereum on top of their ledger sweden to maintain meet sweden to meanwhile introduce measures that halt the continued establishment of crypto mining production using energy intensive methods the companies who trade and invest in crypto assets that are mined using proof of work method can not be allowed to describe or market themselves or their activities as sustainable so now they're attacking any company if you're a company that's buying bitcoin that uses proof of work you cannot label your company as sustainable anymore could you imagine what that would do to the market but it is important that sweden and the eur european union lead the way and set an example in order to maximize the our chances of meeting the paris agreement we should also strongly encourage other countries and regions to follow suit a ban on the proof-of-work mining method within the eu could be an important first step in a global move towards greater use of our energy-efficient crypto mining methods this is from the generals at the swedish financial supe supervisory authority and an environmental protection agency so you can see this was three months ago now we're talking about the imf the imf is now saying hey proof of work is a huge waste we need to do something about it so be ready to see what happens in these this next year these next two years some crazy things are going to go down some unexpected things because we're deep it's literally the retail against the highest power of regulatory advisors that are working together with companies all around the world carbon neutral networks are the future public blockchains are considered the pure form of blockchain envisaged by early developers and so data are distributed widely in control of that data can be decentralized public blockchains are permissionless and decentralized although there can be public permission blockchains in which certain nodes are given specific rights such blockchains can remove reliance on single counterparties and authorities and they aim to democratize the transfer of data between network participants on the blockchain from a regulatory perspective public blockchains are in principle less susceptible to cyber attacks operational failures and malicious behavior by individuals or entities although they bring unique risks the key advantages of public blockchain specifically larger public networks is the decentralization of information which among other things makes them less susceptible to cyber attacks okay okay sweet they're saying that public blockchain is decentralized it is less susceptible to cyber attacks and even public blockchains can have centralized points of risk for example applications built on those networks like wallets and exchanges right because everything has a security risk furthermore it can be difficult to supervise participants on a public blockchain because they can be global or unknown and this challenge can pose risks such as financial crime and there may be a lack of recourse to end users or no no way to fix market errors should any failure or fraud occur so like if tether went corrupt what the [ __ ] are they gonna do who knows well i shouldn't say if tether went corrupt they are corrupt because they're printed money on a thin air and they have no wallet to prove it so if there's ever a bank run where you know they could their assets they couldn't prove they owned all that money that they printed then there's going to be a bank run people are going to be selling tether for 30 cents to the dollar you know it's it's it'll be bad but they can't do anything you guys got to remember that the regulators can't do anything in these when we're investing in these blockchain markets you get hacked if you get uh something happens you're [ __ ] they can't do anything so private blockchains usually consist of a single or small number of entities and tend to give permissions to known and identifiable participants in this way private blockchains run counter to the intended ideals of the decentralized community in that they shift risk from one centralized entity or authority to another the network administrators within the payment space these blockchains are proposed for so called global stablecoin arrangement as well as proposed cbdcs so consensus mechanisms in public blockchains no proof of work we know proof of stake and then delegated proof of stake my main example is xdc network that's what they run off so proof of work as the fundamental underpinning of the bitcoin developed by satoshi Nakamoto uh proof of work is the most frequently used and well-known consensus mechanism don't need anything like that um so right here this is this is where it is you know let's let's see what the imf is saying here so this is just wash up here uh to solve the mathematical puzzles generated by the bitcoin protocol nodes need to use brute force which in turn consumes considerable energy because brute force requires specialized computing systems to run through all possible solutions until the winning solution is found an effort that uses significant power the imf has set out that the financial sector has an important role to play in the fight against climate change and seek to support reductions in climate change risk and mitigating the impact of adverse climate events so here they are mentioning it again financial industry needs to fight against climate events so what is going to happen from this this is the start however the total energy uses of bitcoin mining is compared to poland at 140 terawatt hours and so runs counter to this aim regulators using and supporting consensus mechanisms that rely on large scale energy should you use should pay attention to this energy consumption most of them will likely find such damaging impacts to the environment unacceptable so this is going out to supervisors around the world from the IMF director so they're going to be reading this and they're going to be like wow maybe we should start considering that proof of work is something we need to stop okay well let's go proof of work guarantees eventual consistency in the blockchain uh competing forks can impact the network by making it so expensive and inefficient forks can lead to slower settlement times making the usage of proof of work inefficient in certain areas of financial services currently the bitcoin blockchain can process approximately a large seven transactions per second huge and although the development of the lightning networks offers promise in this area uh with its own flaws like how they i like how they put that uh its transaction rate is currently much lower from the than that of the traditional payment mechanisms like visa which averages around 1700 transactions per second inconsistencies can also lead to risks to settle to settlement finality transactions between counterparties carry risks including credit liquidity operational and legal risks all of which can trigger systematic hazards rules around settlement finality aim to mitigate these risks further proof of work is seen to be potentially centralizing the imf is calling proof of work centralizing which could negate the security that proof of work offers as mathematical puzzles become increasingly complex more powerful computing is needed to solve them given this large cost involved such technology is available only to certain individuals or entities where mining pools are formed this scenario can rise to questions around the powers tool and options available for the regulator to fix an eventual market failure for example an individual who or an entity that becomes too big to fail so it says dlt based on proof of work cons consensus mechanisms might not be able to fit in the existing regulatory frameworks focused on settlement finality supervisors should be aware that many blockchains that use proof of work tend to be decentralized which not all identities and nodes are known and that can give rise to supervisory difficulties okay so we just reviewed that and they're attacking proof of work uh for the energy usage it can't be used in the payment systems because it's expensive slow um what else um yeah so that's pretty crazy when you start hearing this from the imf now so the narrative is changing because now this is going to trickle down society right like you know supervisors are going to read this they're going to start putting out regulations rules they're going to start talking about this and you know the house of commons uh parliament governments worldwide banks will then hop on the train to say oh bitcoin is not going to three hundred thousand dollars it's going to uh ten thousand dollars because of uh energy wastage so now let's move on to proof of stake ethereum my favorite said nobody ever but fanboys and people that love high fees okay so proof of stake consensus mechanism an algorithm randomly selects validators for block creation based on the amount of token holders stake from their crypto asset ownership okay so we're talking about the more tokens you own the higher chance you can get for getting uh rewards the first step in selecting a proposer then a proposed block and then validation of the proposed block holders with larger ownership of the native token have a greater chance of being selected like playing the lottery even though everyone who buys a ticket has a chance of winning and the selection is random those with the most tickets have the greatest odds of winning huh let's think about that for a minute the current banking system the ones with all the money are making all the money the ones without the money aren't making the money so now we see the sec government they favored the ethereum network and they gave it the free pass the eth free pass why is it because they all are heavy bag holders of ethereum network and it's moving to proof of stake and since it's moving to proof of stake the the big bag holders are good or become super low even more wealthy because now they have the greatest odds of winning huh food for thought but that's that's my perspective uh by not requiring energy intensive mining operations proof of stake improves on some of the weaknesses not all of them and some of the weaknesses of proof of work such as large energy consumption while preserving network security this lessened energy consumption also means a lower need to issue many new coins to incentivize nodes to participate in the network it also limits the risks of 51 attacks which which it would be difficult and expensive for anyone to carry out a 51 attack well you did a 51 attack on ethereum you're going broke because you're at least paying 30 to 100 per transaction because ownership directly correlates with the chances of being selected proof of stake consensus mechanisms can theoretically create a community where richer individuals or entities are more likely to be selected holy [ __ ] this means those participants are more likely to be rewarded fueling an environment where the rich get richer the imf is saying ethereum's proof of stake is going to enrich the rich is there a problem with that i think there is that's why i don't touch ethereum except for quant i love quant but i don't love ethereum okay so weaknesses within proof-of-stake consensus mechanisms might impact st stability and integrity such as centralization in smaller networks and the inefficiency of staking in the long term these flaws can lead to centralization related issues which can particularly problematic in smaller networks or networks in their infancy and this can impact market integrity authorities could also consider elements like sandboxing to help protect nascent networks the potential for centralization is similar of proof of work the where participants can afford the most powerful machines that are able to generate rewards however proof of work based advantages in terms of centralization are based on the different nature of the capital used for validation the friction to which between the currency and the hardware and electricity even in larger proof of state networks the potential for validator cartels to form can lead to concerns around centralization validator cartels write that down validator cartels the rich getting richer proof of stake is also inefficient in its use of network native resources uh we're talking about uh safeguarding the integrity of financial systems an important aspect of the bfa so regulators could think about the appropriate network security and fairness authorities should consider these frameworks that incorporate appropriate systems and controls to migrate mitigate against cyber and operational risks such as the bazel committee on banking supervision and principles of operational resilience 2021 says uh in line the bfa elements on improving financial inclusion and ensuring open free and contestable markets authorities should be able to consider how to work with market participants developing these networks to ensure that they are as inclusive and collaborative as possible and that these networks do not work to benefit a small privileged group and lead to areas of financial markets that lack contestability so i think we should take screenshots of some of these pieces i'll write a thread on it and let's tag the sec govern this let's tag jay clayton let's tag those guys and let's show them what they're doing because they're picking favorites to the proof of stake so these bankers that hold all these fat pockets that got into ethereum early are going to get even richer than they already are okay delegated proof of stake the dpos model operates a voting system where the stakeholders chosen to validate a block can outsource their work to a third party these third parties are known as witnesses and are responsible for achieving consensus during the generation and validation of new blocks benefits of dpos include energy savings greater decentralization and positive participant behaviors dpos promotes greater uh democratization all token holders can play some role in the operationalization of a network uh it should be noted that in many models of blockchains that use delegated proof of stake voting is proportional to the amount of stake that participants place dpos also aims to promote positive behaviors from participants so you know in the delegated proof of stake they can uh they can shut down your account they can do different things to penalize you where you're not getting rewards etc etc dpos is relatively new and uh provides opportunities for firms to generate efficiencies through a relatively fast transaction throughput and can deliver in both permissioned and permissionless networks developed and implemented in a compliant manner dpos can create a positive outcome for the markets and consumers by providing in interesting use cases in regulate regulated activities like payments like trade finance like digital documents there's so many use cases out there you just gotta dive this is because it can create a truly decentralized environment with the potential for quicker transaction rates that said because the mechanism has not been tested as long as proof of worker proof of stake has been regulators should consider associated network security risks cartel like behavior and boat parked and limited voter participation okay consensus mechanisms in private blockchains federated byzatine fault tolerance fbt fbft so that is the consensus that xrp and xlm run off of i don't know anything about these other ones uh d dm dft or proof of elapsed time so i'm not even going to go over them because it's no sense to me it's not relative but these this is the the exciting stuff here so one sec here um so this one uh instable practical uh bft this is like hyper ledger and consensus quorum i like xrp and xlm so that's what i'm going over hyperledger is uh an awesome regulated network so but that's just out of my i'm more public i'm a public guy here so right here fbt is a byzantine fault tolerant consensus mechanism that aims to solve issues of centralization with greater skill scalability bft mechanic mechanisms described above identities of all participants are known however in fbft the identities of all nodes do not have to be known so this is where you know x our xlm and xrp nodes they're anonymous right there is uh yeah so membership is open and control can be decentralized so anyone that says xrp and xlm is not decentralized they are straight up potatoes because it's a decentralized token ecosystem like xrp but it has centralized holdings in the ripples escrow but ripple can't sell all those right it's locked in a smart contract of escrow that gets released and slowly released so only a little bit gets sold to the open market whatever doesn't sell gets locked back into the thing so but i go over this in the xrp video there that you guys can watch so it goes it uses a unique load unique node list um which a subset of nodes is needed for agreement within financial services fFBT consensus mechanisms can generate large efficiencies for retail payments wholesale settlements so retail payments xrp xlm wholesale settlements uh xrp for their wholesale cbdc solutions on their federated side chains and other back office functions well what like foreign exchange like debt equity you know there's different things man it's it's a big there's a lot of money out there that needs to be moved efficiently because the current system is [ __ ] broken part of my language but that's how i hate this current system uh the bft works best where network participants are known the algorithms are built for speed and have immediate block finality the latter is particularly operationally flexible and it allows groups of validators to be modified over time with increasing scale speed blah blah blah but here it is right here as well known use cases as ripple and stellar the IMF is calling ripple and stellar decentralized use cases and uh authorities might consider how fbft consensus mechanisms can balance a decentralized and distributed network with efficiencies such as high transaction rate and settlement finality so we just read this imf document they're they're crapping on ethereum they're cropping on proof of work or they're crapping on proof of stakes or it's just me tonight about my negative ethereum attitude because you know when i do eight transactions on ethereum and it cost me eight hundred dollars american i think to scale of the whole globe how much of that money is actually going to minors and enriching a select few well here we are just trying to get a transaction to go through and that really upsets me because i care for all you citizens i care for everyone out there that's losing money you know it's not efficient when we got to pay a hundred dollars to make one transaction oh your transaction failed and oh i got to pay a cancellation fee are you kidding me like the what is this the banking system like this is messed up so okay so conclusion here let's finish this off strong uh let's see we're into here uh oh my god 48 minutes sorry guys this is long reading this stuff proof of work is too energy intensive to be considered a viable consensus mechanism involving many regulated financial service activities it runs counter to several of the imf aims particularly those involved transitioning to a greener economy do you hear this although the mechanism is secure or silent and offers true democratization of data within distributed systems significant energy consumption the nature of forking and the attendant issues around probabilistic settlement are likely to create friction with many regulatory frameworks regulatory mandates and the bfa this is in their conclusion for supervisors we gotta realize how big this is and i'm telling you guys let's pick i'm gonna mark this day from a year from now and two years from now we're going to see a domino effect of regulatory whips being lost and it's going to be a fight so if you support bitcoin and you support these markets be ready for a fight or go carbon neutral carbon neutral you'll be adopted proof of work you've got a battle on your hands uh so here you go this is just a comparison chart you guys can look at uh these are similar mechanisms are likely to be deployed in financial services where participants are known and likely to be used in global stable coins and potential cbdc's which can create risks to financial stability uh the mechanisms can raise risk blah blah blah deploy widely used project products like global stable coins now i'm gonna at the end of this i'm gonna reflect back to the stable coin thing and networks that are too big to fail so public and private collaboration might be better to allow authorities to monitor that developments in the market and ensure the development of compliant business models and new financial services [ __ ] coins are gonna die telling you that right now if they don't have federated on bridges off bridges uh your [ __ ] is coin's to die out where development of dlt is small and non-systematic authorities might decide to take a wait-and-see approach where development of dlt operates at a larger scale authorities might take a test and learn approach through outreach and engagement to better understand the risks and benefits as well as the additional variables such variables include interoperability with other financial systems emerging standards across financial institutions so let's talk about this interoperability with other financial institutions so interoperability uh is quant and other bridges that can get in with traditional finance so quant will connect these regulated blockchain networks to financial systems and then we talk about emerging standards across financial institutions well what do you think about i think about iso 20022 we know that's the messaging standard that's being upgraded between banks worldwide that is a requirement by 2025. i think about iso tc 307 which is a blockchain standard um that companies are working towards that gilbert verdian of quant network has put in place years ago and i will attach some screenshots so you can take a look at that and it says engagement between authority and industries can happen through short-term engagements using business as usual supervision or through longer term engagements via innovation hubs short term public provi and private collaboration can happen through joint events or commission surveys focused on consensus mechanisms longer term collaboration can be through joint research experiments and testings so they're saying regulatory authorities should consider implications of different mech consensus mechanisms and consider a technology agnostic approach so they're not picking favorites like the sec government is it's [ __ ] [ __ ] apartment language by taking a technology agnostic approach authorities can work with market participants to better understand the strengths and weaknesses of different consensus mechanisms and where comp comparative advantages in the provision of different financial products and services for example payments and issuing debt and equity supply chain management and record activity might exist shifting through a technology agnostic approach authorities remain unbiased to the use of different technologies but recognize the different technologies for and bring different risks and authorities are not neutral to these risks so they're not neutral it's good or it's good it's unfair to the technology and it's unfair to the citizens because if they pick favorites then that's not letting technologies that could actually flourish they're denying the right to that flourishment because they're busy picking favorites like the sec governor ethereum supervisors can ask firms certain questions and make accurate judgments on the risk and efficiency of different consensus mechanisms although regulatory authorities are beginning to make a shift towards becoming more data driven digital regulators resources budgets and availability of the skilled supervisors remain a challenge for many of them here are the international organizations like the imf have a role to play providing technical assistance and sharing best practices standard setting bodies can help by providing global recommendations that can provide minimum requirements for consec consensus mechanisms when requi when utilizing regulated financial entities so you're gonna create standards then they're talking about regulatory sandboxes can help authorities understand and help them foster the technology that is coming well that was a big mouthful i hope i hope that shows you that what is to come because this is in spot this has put some thoughts in my mind that you know back up some arguments that we've been thinking about in the communities here so okay so this is the stable coin i want to quickly refer back to so i wrote about this three weeks ago uh it was in a cbdc cross-border payments world bank document okay but this is the things that i noticed so first things first they talk about xrp and xlm is stable coins they call them digital currencies right here in here they call them digital currencies cough sec gov they're not securities why is the world bank calling xrp and xlm digital currencies but you guys are calling them securities sounds like you're really only talking about the united states thinks their securities in the united states is going to be wrong japan just throwing this out there japan it's not a security it's a digital asset they're completely separate uh entities they're two different classifications it's not xrp not a security in japan it's a digital asset it's a new class of currency u.s is falling behind in this race and this is why i'm calling it out so basically my question is they call xrp and xlm a stable coin but they're not the price isn't stable but what is stable is that it settles in four seconds and it's always a fraction of a cent and it's scalable so maybe they're recalling it a stable coin because of its ability to that in that fraction of us in the four second settlement the price is stable the price doesn't fluctuate in that time so if you're an institution and you're settling funds whether it's million dollars 10 million dollars in that four seconds and you cash out on the other side well there hasn't been much movement maybe that's what they refer to as stable coin comparing it to the current legacy financial system which is you know correspondent banking system which takes five to seven business days for the payment to settle there's no end-to-end tracking you got all your foreign exchange fees you've got your your uh uh your settlement fees and then you've got your nostro and vostro accounts which are gaining zero percent interest and uh so maybe they're talking about stability and that when you send that payment it's there in four seconds that's a stable coin that you can settle in four seconds that is just my theory and if you guys want to chip in why they would call you know xrp and xlm stable coins feel free share your thoughts but that's what i want to leave you guys with is you know we see the uh the imf here uh we read this document and they mentioned stable a global stable coin system they mentioned ripple they mentioned xlm and then we see a world bank document here which talks about stable coins ripple and xlm which is very convenient that those two are mentioned in the IMF and in the world bank document under the same stable coin stuff um but yeah anyways i'm going to leave you guys the article you guys can read it share it if you've got something on this like comment subscribe leave some feedback share it with your favorite influencers be like check this out let's get this information out there i'm a small account i got 6 000 followers it's just a drop in the bucket but what i want to do is create regulated content that helps show you guys what we are in because we are in markets of the future i classify all of us as citizens of the future you're participating in these markets you're a citizen of the future so everyone out there i hope you got something from this thank you for supporting and liking commenting and uh cheers i hope this was great and i'll see you next one citizen of the future
2022-02-07 09:31
