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LIBOR doesn't demonstrate that banks rely on trust. None of the involved banks or brokers trusted that anyone else was actually being honest about LIBOR submissions or predictions. Even if there were any system safeguarding LIBOR whatsoever, a blockchain wouldn't have helped. The reason it was so easy to falsify your bank's LIBOR submission was because they were essentially made up. Submitters produced the number by talking to brokers and then making a decision. A blockchain wouldn't have made any difference. You'd put your submission on the blockchain, and you wouldn't be able to change it later if things didn't turn out how you liked, but you had made up the submission anyway. Nobody would ever be able to point to some number on the blockchain and say definitively that your reported LIBOR figure for today should have been X but in fact it was Y and therefore you're a crook, because the figures were never verified. They'd only be able to say "There's no record, so you could easily have just made up the number," and you'd say "I did make it up, that's how you do it, everyone else made theirs up too," and that would pretty much be it. The only way to catch someone being dishonest was to find records of employees talking about it; the Hayes case and others like it are based on the fact that bankers incriminated themselves by discussing the manipulation with each other. By contrast, when banks transfer specific quantities of money, they absolutely are not relying on a trust-based system. I owed you X, I sent you X, and I swear to God if you come to me later and say I only sent Y and I owe you more dosh there will be a fight. If you produce internal records kept by your accountants that say I totally only sent Y, no bank would take your word for it under any circumstances. Similarly, if there was a mixup and some of my assets ended up with you by accident, my chances of convincing you that I should get them back are nonexistent if I don't have some outside system demonstrating that I'm not lying. In real life, financial institutions rely on third-party businesses to be that "outside system." A blockchain would help solve our problem without those businesses. I wouldn't need to trust you, the transaction would be recorded on our blockchain, and if either of us thought the other could falsify the blockchain we wouldn't have agreed to use it. If the blockchain says I really didn't send enough money, I'll probably say something about a technical glitch and give you the cash while I grumble about how much I hate technology. Neither of us have to trust each other any more than we already don't, and we don't have to involve some kind of trust or clearing business. |