Vanguard will use blockchain to share index data

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Vanguard will use blockchain to share index data

Post by Barry Barnitz » Wed Dec 13, 2017 4:44 am

Hi:

News release: Vanguard will use blockchain to share index data, Ryan W. Neal, Investment News , December 12, 2017.
Vanguard Group announced Tuesday that it is looking to capitalize on this idea by using blockchain to simplify and automate the process of sharing index data. The $4.8 trillion asset manager said its blockchain—developed in partnership with the Center for Research in Security Prices (CRSP) and Symbiont, a technology company focused on institutional applications of blockchain—will enable index data to move instantly between index providers and market participants.
Warren Pennington, a principle at Vanguard's investment management group, said this reduces tracking error of Vanguard's index funds, eventually resulting in lower costs and improved performance for advisers and their clients.
After a successful pilot, Vanguard said it will begin automatic delivery of CRSP index data and intraday updates over its private blockchain sometime in 2018.
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Re: Vanguard will use blockchain to share index data

Post by nisiprius » Wed Dec 13, 2017 7:05 am

1) That's very interesting. I think.

2) I have no idea what it means. Can anyone explain to me why it is difficult to "move index data" in some other way... for example, simply posting a number on a website in an easily-machine-readable form? What's being shared here? What information is moving from where to where? Is the idea that this somehow speeds up the calculation and dissemination of index values into something closer to real time... or does it let an index consumer instantly calculate any chosen one of the many hundreds of thousands of indexes that the providers now provide... or is it just a form of security or DRM for sensitive data, or... ?????
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Re: Vanguard will use blockchain to share index data

Post by aristotelian » Wed Dec 13, 2017 7:14 am

Does this mean Vanguard is going to invest in Bitcoin? :mrgreen: :greedy :shock:

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Re: Vanguard will use blockchain to share index data

Post by lyrictulip » Wed Dec 13, 2017 7:26 am

nisiprius wrote:
Wed Dec 13, 2017 7:05 am
1) That's very interesting. I think.

2) I have no idea what it means. Can anyone explain to me why it is difficult to "move index data" in some other way... for example, simply posting a number on a website in an easily-machine-readable form? What's being shared here? What information is moving from where to where? Is the idea that this somehow speeds up the calculation and dissemination of index values into something closer to real time... or does it let an index consumer instantly calculate any chosen one of the many hundreds of thousands of indexes that the providers now provide... or is it just a form of security or DRM for sensitive data, or... ?????
You're absolutely right that for one way information sharing, blockchain offers no real value. I have to presume that this is to maintain some sort of "shared ledger" - i.e., multiple parties transacting among themselves. As a complete guess: I can imagine how that might facilitate communicating the current state of holdings among Vanguard and Authorized Participants in realtime? Otherwise, yes, this would be pointless.

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Re: Vanguard will use blockchain to share index data

Post by rkhusky » Wed Dec 13, 2017 7:36 am

This is probably the reason (bold mine):
"There are so many things that happen in the market that rely on this index data," Mr. Pennington said. Currently, this data must travel through multiple parties and distribution channels before it reaches investment professionals.

With the blockchain, any update to the index data is made instantly and is available to all parties involved, reducing time, the need for manual work, and changes for errors. Mr. Pennington said it will allow Vanguard to cut its own costs while improving how accurately its funds track an index.
Reduce mistakes and block potential hackers from manipulating data.

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Re: Vanguard will use blockchain to share index data

Post by UpperNwGuy » Wed Dec 13, 2017 8:28 am

How does this affect the normal investor?

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Re: Vanguard will use blockchain to share index data

Post by Jags4186 » Wed Dec 13, 2017 8:42 am

My question is if Vanguard can create a new ledger to take care of its needs what is driving the value of Bitcoin. It would seem to me if you need the use of a block chain ledger you would create your own. I don’t understand the demand of Bitcoin other than to say you have it.

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Re: Vanguard will use blockchain to share index data

Post by triceratop » Wed Dec 13, 2017 8:48 am

Jags4186 wrote:
Wed Dec 13, 2017 8:42 am
My question is if Vanguard can create a new ledger to take care of its needs what is driving the value of Bitcoin. It would seem to me if you need the use of a block chain ledger you would create your own. I don’t understand the demand of Bitcoin other than to say you have it.
None of the Vanguard statements mention Bitcoin. Blockchain's viability as an idea is much different from Bitcoin's.
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Re: Vanguard will use blockchain to share index data

Post by Jags4186 » Wed Dec 13, 2017 9:54 am

triceratop wrote:
Wed Dec 13, 2017 8:48 am
Jags4186 wrote:
Wed Dec 13, 2017 8:42 am
My question is if Vanguard can create a new ledger to take care of its needs what is driving the value of Bitcoin. It would seem to me if you need the use of a block chain ledger you would create your own. I don’t understand the demand of Bitcoin other than to say you have it.
None of the Vanguard statements mention Bitcoin. Blockchain's viability as an idea is much different from Bitcoin's.
I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.

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Re: Vanguard will use blockchain to share index data

Post by onourway » Wed Dec 13, 2017 10:01 am

Jags4186 wrote:
Wed Dec 13, 2017 9:54 am
I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.
I don't necessarily believe this myself, but the general thought is first mover status. The network effect of a large user base may be insurmountable even if better implementations come along later.

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Re: Vanguard will use blockchain to share index data

Post by techrover » Wed Dec 13, 2017 10:39 am

There are many in-efficient and insecure processes employed by all financial companies esp. on backend. Looks like in this case, vanguard is leveraging blockchain to address this part. In the end should be good for all customers due to lowered costs.

blockchain != bitcoin so rest assured this doesn't mean vanguard is investing in bitcoin.
Blockchain is the technology behind bitcoin that enables transactions(containing any piece of data) amongst untrusted parties due to its very secure distributed ledger mechanism. It does have many applications especially in use cases where intermediaries are involved for creating this trust.

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Re: Vanguard will use blockchain to share index data

Post by AnonJohn » Wed Dec 13, 2017 10:45 am

techrover wrote:
Wed Dec 13, 2017 10:39 am
Blockchain is the technology behind bitcoin that enables transactions(containing any piece of data) amongst untrusted parties due to its very secure distributed ledger mechanism. It does have many applications especially in use cases where intermediaries are involved for creating this trust.
That's a very nice, consise encapsulation. Thanks for sharing.

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Re: Vanguard will use blockchain to share index data

Post by Taylor Larimore » Wed Dec 13, 2017 10:48 am

Bogleheads:

There is lots I don't know (and don't need to know) about investing. This is one of them.

Best wishes.
Taylor
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Re: Vanguard will use blockchain to share index data

Post by triceratop » Wed Dec 13, 2017 10:58 am

Taylor Larimore wrote:
Wed Dec 13, 2017 10:48 am
Bogleheads:

There is lots I don't know (and don't need to know) about investing. This is one of them.

Best wishes.
Taylor
Taylor,
I wouldn't consider this an investing topic. It's a technology problem, and the technology that some financial companies are using for their backend services.
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Re: Vanguard will use blockchain to share index data

Post by nisiprius » Wed Dec 13, 2017 11:18 am

Jags4186 wrote:
Wed Dec 13, 2017 9:54 am
...I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value...
That's in fact a problem, and it's why you have Bitcoin, Litecoin, Swiftcoin, Namecoin, Peercoin, Dogecoin, Emercoin, Gridcoin... I'm tempted to say Thiscoin and Thatcoin but they might be real cryptocurrencies.

Cryptocurrencies are valuable a) as a medium of exchange that b) does not depend on trust in a central authority.

In order to make a transaction, both parties need to be equipped to participate in that cryptocurrency's network, because if you were willing to accept a trusted intermediary you could just use an ordinary "fiat" currency.

There exist companies--the only name I know is GoCoin but I am sure there are others--that provide a front-end conversion service for online retailers who want to advertise that they "accept Bitcoin, Litecoin, and Dogecoin.*" GoCoin processes the transaction, converts the cryptocurrency to dollars, and the retailer doesn't need to deal with anything but dollars. However, the customer has to trust GoCoin.

Currencies are, in effect, "natural monopolies" whose value is enhanced by universality and ubiquity; that's probably why we no longer have the situation we had in the 1800s when every big bank issued its own banknotes and merchants subscribed to Thompson's Bank-Note Reporter to find out what each banknote was actually worth.

I assume that there is a huge advantage to being among the biggest and most widely-accepted cryptocurrencies... that, other things being equal, one that is widely accepted will be worth more than one that is not... and one that is perceived to be growing in acceptance will also grow in value. After all, if you eventually want to convert your cryptocurrency to fiat money, you need to find someone with fiat money who wants to buy whatever kind of cryptocurrency you have.

So, at this point, Bitcoin has value by virtue of wide acceptance, and, therefore, a higher degree of liquidity in terms of conversion to fiat money.

*Does GoCoin still support Dogecoin? I see announcements from 2014 but they no longer mention it by name on their web pages about currencies supported. Odd, that.
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Re: Vanguard will use blockchain to share index data

Post by David Jay » Wed Dec 13, 2017 11:28 am

Yea, this makes sense. One could post anything on an open FTP server. Right out there in the open, with no passwords, no communication encryption or anything.

If you have the key, you can read it. Otherwise, not.
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Re: Vanguard will use blockchain to share index data

Post by vitaflo » Wed Dec 13, 2017 11:45 am

Jags4186 wrote:
Wed Dec 13, 2017 9:54 am
I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.
As an analogy it's like saying Vanguard is going to use the internet. That doesn't affect Facebook's price. Facebook is its own product. The value of Facebook, while partially due to the internet, is mostly due to the value Facebook provides to its users. The internet is just the tool that allows it to happen.

Whether bitcoin (or any other cryptocurrency or product based on blockchain) has value will be determined the same way.

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Re: Vanguard will use blockchain to share index data

Post by Jacotus » Wed Dec 13, 2017 12:08 pm

This sounds like a trial run for Vanguard to get real-world experience at using blockchain technology in an application that is not one of their most sensitive. Large organizations need to build up experience and knowledge with technologies before they will feel ready to deploy them at massive scale.

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Re: Vanguard will use blockchain to share index data

Post by Kenkat » Wed Dec 13, 2017 12:50 pm

Jacotus wrote:
Wed Dec 13, 2017 12:08 pm
This sounds like a trial run for Vanguard to get real-world experience at using blockchain technology in an application that is not one of their most sensitive. Large organizations need to build up experience and knowledge with technologies before they will feel ready to deploy them at massive scale.
Yes, I agree with this. Based on my understanding of what Vanguard is doing here, there are other more established technologies that could have accomplished the same thing. So it is probably a pilot - let’s use blockchain for this so that when we have a real need for that specific approach, we will understand it better and have already built out some of the supporting processes and technologies.

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Re: Vanguard will use blockchain to share index data

Post by Barry Barnitz » Wed Dec 13, 2017 1:01 pm

Hi:

Another article: Vanguard Group makes $1.15-trillion AUM bet on blockchain technology that eliminates giant daily manual process, Brooke Southall, RAIbiz.
The dirty little secret about index-based investing is just how people-dependent and clunky the process is for updating index funds to match the actual index, which subverts passive investing's whole purpose of matching market returns...

...Vanguard Group announced today that it will soon take a giant step forward in replacing that existing manual reconciliation process -- and all its delays, errors and opacity -- with an automated one that makes it happen in real time.
Vanguard's new blockchain system won't roll out until 2018 and should ultimately enhance people's faith in Vanguard's indexing process, according to Carolyn Wegemann, spokeswoman for Vanguard.

"It's a pretty manual process at the moment," she says. "We get a feed at the end of the day from the index providers saying: This is what it should look like. It's private websites with log-ins."

The beauty of blockchain is that organizations' systems virtually merge by sharing a single decentralized database. What sounds chaotic and insecure for lack of walls and borders is actually just the opposite. All transactional parties are advised of all changes to the ledger automatically like an endless chain of reply-all emails.
The blockchain-based system is facilitated by Symbiont.io Inc., a startup founded in 2015 with a staff of four and backed by $7 million in venture capital. It makes indexes kept by the Center for Research in Security Prices and the technology flow straight to Vanguard without the participation of a team at Vanguard whose job it is currently to make those ends meet. CRSP is located at the University of Chicago’s Booth School of Business.

“We’re pleased both Vanguard and CRSP were open to exploring new ways to use our platform to make capital markets cheaper, faster, and more accurate for investors,” Mark Smith, CEO and co-founder of Symbiont, says in a release.
Though the giant of the industry is winning assets at a clip of about $350 billion annually, the company may need to tweak its strategy. Previously, it could rely on being the cheapest.

But now competitors from Schwab to State Street to BlackRock are selling products, particularly ETFs, that go lower. Vanguard will now need to rely more on quality, liquidity, branding, variety, security, service and other factors to maintain growth and its staggering lead.
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Re: Vanguard will use blockchain to share index data

Post by an_asker » Wed Dec 13, 2017 1:10 pm

nisiprius wrote:
Wed Dec 13, 2017 11:18 am
[...]That's in fact a problem, and it's why you have Bitcoin, Litecoin, Swiftcoin, Namecoin, Peercoin, Dogecoin, Emercoin, Gridcoin... I'm tempted to say Thiscoin and Thatcoin but they might be real cryptocurrencies.
[...]
Don't forget Hiscoin and Hercoin! ;-)

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Re: Vanguard will use blockchain to share index data

Post by randomizer » Wed Dec 13, 2017 1:18 pm

I find this puzzling. The blockchain hype train is leaving the station. Seems like a case of the old saying: when you have a hammer, everything looks like a nail.

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Re: Vanguard will use blockchain to share index data

Post by BogleMelon » Wed Dec 13, 2017 1:25 pm

nisiprius wrote:
Wed Dec 13, 2017 11:18 am

Cryptocurrencies are valuable a) as a medium of exchange that b) does not depend on trust in a central authority.
However, the only 2 ways to acquire these currencies are:
1- Buying it from a seller using a fiat currency "which depends on a central authority"
2- Mining it yourself, but then you would need to buy a fancy machine "with a fiat currency that depends on a central authority" in addition to pay a lot of fiat currency (right! that depends on a central authority again!!) to an energy company to use their electric energy to mine.
:oops:
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Re: Vanguard will use blockchain to share index data

Post by srt7 » Wed Dec 13, 2017 1:31 pm

vitaflo wrote:
Wed Dec 13, 2017 11:45 am
Jags4186 wrote:
Wed Dec 13, 2017 9:54 am
I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.
As an analogy it's like saying Vanguard is going to use the internet. That doesn't affect Facebook's price. Facebook is its own product. The value of Facebook, while partially due to the internet, is mostly due to the value Facebook provides to its users. The internet is just the tool that allows it to happen.
Excellent analogy! At least in the first world. I say that because Facebook did have an idea of building a walled garden where Facebook was the internet. They tried (and thankfully failed) selling free cell phones with FB only access w.r.t. internet in a third world country.

Anyway, Bitcoin is just one of the many products that use the concept (and implementations) of block chain technology. Nothing more.

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Re: Vanguard will use blockchain to share index data

Post by Chuck » Wed Dec 13, 2017 1:40 pm

Cryptocurrency is not a topic of this thread.

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Re: Vanguard will use blockchain to share index data

Post by Epsilon Delta » Wed Dec 13, 2017 3:43 pm

rkhusky wrote:
Wed Dec 13, 2017 7:36 am
This is probably the reason (bold mine):
"There are so many things that happen in the market that rely on this index data," Mr. Pennington said. Currently, this data must travel through multiple parties and distribution channels before it reaches investment professionals.

With the blockchain, any update to the index data is made instantly and is available to all parties involved, reducing time, the need for manual work, and changes for errors. Mr. Pennington said it will allow Vanguard to cut its own costs while improving how accurately its funds track an index.
Reduce mistakes and block potential hackers from manipulating data.
This makes no sense. Anybody can have a website and anybody can have a browser so there is no need for data to travel through multiple parties (Unless the multiple parties are ISPs, but any blockchain must travel through them to.)

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Re: Vanguard will use blockchain to share index data

Post by Epsilon Delta » Wed Dec 13, 2017 3:46 pm

Jags4186 wrote:
Wed Dec 13, 2017 9:54 am

I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.
Bitcoin uses blockchain. It uses other stuff as well. To say that Bitcoin is an implementation of blockchain is the same as saying a car is an implementation of a wheel.

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Re: Vanguard will use blockchain to share index data

Post by Theseus » Wed Dec 13, 2017 4:42 pm

I am going to take a crack at simplifying this for non-IT folks.

Let's start with an engine. There is an engine in a lawnmower, snow thrower, car, airplane, helicopter, rockets. Engine at its core performs the basic function of converting fuel into energy that can be then converted into a force. In this example blockchain is the Engine and Bitcoin is a Car (or a mower or take your pick). So just because the Car has the Engine doesn't mean that any engine's purpose is only to provide power for the car. One engine will drive your lawnmower and the other will defy gravity and take you to the space. Both of those engines are going to look incredibly different - even though we call them engines.

Blockchain is essentially a technology (in the layman's term) to establish a ledger (or any piece of information) on many different computers at the same time. It makes sure it is consistent, secure, and is incredibly difficult to hack.

What vanguard is doing is a great thing. I am sure this is just pilot project to test the technology so they can roll it out for actually record keeping and transactions.

Some people worry that someone will hack your broker's computers and electronically modify what you own. If your broker was using a blockchain technology to keep track of your records then it will be distributed on many different computers and that makes it super difficult to hack. (I am simplifying this a lot - but that's the basic idea).

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Re: Vanguard will use blockchain to share index data

Post by Thesaints » Wed Dec 13, 2017 4:44 pm

Jags4186 wrote:
Wed Dec 13, 2017 9:54 am
I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.
Because in order to have a particular implementation of BC to work one needs a users base and the larger the base the better.

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Re: Vanguard will use blockchain to share index data

Post by Oicuryy » Wed Dec 13, 2017 5:45 pm

Here is symbiont.io's description of how CRSP and Vanguard are using their software.
https://symbiont.io/solutions/index-data-distribution

Source code for a demo version of their software is here.
https://github.com/symbiont-io/assembly-sdk

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Re: Vanguard will use blockchain to share index data

Post by woof755 » Sun Jan 21, 2018 3:10 am

Theseus wrote:
Wed Dec 13, 2017 4:42 pm
I am going to take a crack at simplifying this for non-IT folks.

Let's start with an engine. There is an engine in a lawnmower, snow thrower, car, airplane, helicopter, rockets. Engine at its core performs the basic function of converting fuel into energy that can be then converted into a force. In this example blockchain is the Engine and Bitcoin is a Car (or a mower or take your pick). So just because the Car has the Engine doesn't mean that any engine's purpose is only to provide power for the car. One engine will drive your lawnmower and the other will defy gravity and take you to the space. Both of those engines are going to look incredibly different - even though we call them engines.

Blockchain is essentially a technology (in the layman's term) to establish a ledger (or any piece of information) on many different computers at the same time. It makes sure it is consistent, secure, and is incredibly difficult to hack.

What vanguard is doing is a great thing. I am sure this is just pilot project to test the technology so they can roll it out for actually record keeping and transactions.

Some people worry that someone will hack your broker's computers and electronically modify what you own. If your broker was using a blockchain technology to keep track of your records then it will be distributed on many different computers and that makes it super difficult to hack. (I am simplifying this a lot - but that's the basic idea).
Thank you for this very valuable description. It rings true to an informative short video I watched about Blockchain.
I am disinterested in cryptocurrency. I am very interested in blockchain technology.

Here is an informative article from the NYT magazine:

https://www.nytimes.com/2018/01/16/maga ... ubble.html
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Re: Vanguard will use blockchain to share index data

Post by mws13 » Sun Jan 21, 2018 9:46 am

Vanguard is building a "private blockchain". Many many organizations are now doing similar test because of the power of the technology's ledger system.

Then there are "public blockchains", Ethereum and Bitcoin are two known today.

How public vs private blockchain work together or not is a HUGE question to be answered. My only prediction is that there will NOT be one answer that dominates a market.

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Re: Vanguard will use blockchain to share index data

Post by MindBogler » Sun Jan 21, 2018 10:28 am

Theseus wrote:
Wed Dec 13, 2017 4:42 pm
Blockchain is essentially a technology (in the layman's term) to establish a ledger (or any piece of information) on many different computers at the same time. It makes sure it is consistent, secure, and is incredibly difficult to hack.
One of the problems I see with blockchain is its proponents' insistence that it is unhackable. I truly believe that it is unhackable today. I don't have faith that it will remain that way in the future. There are numerous examples of private key infrastructure which started out perfectly secure and reliable before ultimately breaking down. Cryptographic systems are only invulnerable under the assumptions of the day. Whether it takes 10, 25 or 50 years, the same will happen to blockchain. It is a virtual inevitability.

My second issue is with Vanguard specifically. Blockchain isn't solving a novel problem in this instance. The use case that Vanguard has described could just as easily be solved by creating a simple REST API using a handful of servers or even something like Amazon API Gateway and go fully serverless. Incidentally, to manage and read the blockchain they're going to need some systems as well. This is a case of solving a simple, common problem with something new and shiny without explaining what benefit is actually derived or what new problem is being solved. I've been in the field for many years and this theme recurs like a bad dream.

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Re: Vanguard will use blockchain to share index data

Post by mws13 » Sun Jan 21, 2018 10:47 am

MindBogler wrote:
Sun Jan 21, 2018 10:28 am
Theseus wrote:
Wed Dec 13, 2017 4:42 pm
Blockchain is essentially a technology (in the layman's term) to establish a ledger (or any piece of information) on many different computers at the same time. It makes sure it is consistent, secure, and is incredibly difficult to hack.
1) Cryptographic systems are only invulnerable under the assumptions of the day. Whether it takes 10, 25 or 50 years, the same will happen to blockchain. It is a virtual inevitability.

2) This is a case of solving a simple, common problem with something new and shiny without explaining what benefit is actually derived or what new problem is being solved. I've been in the field for many years and this theme recurs like a bad dream.
1) But that is what makes the world go round. You are using the assumption that we (human beings) will be here in 50 years. Private keys being hacked vs 'eccentric' central government leader pushing the nuclear button, who knows which happens first???

2) Obviously this is simple test for Vanguard. What Vanguard needs to defend against is a group of investors (bogel heads) creating a Smart Contract Fund that simulates the S&P 500 Index and buying and selling those stocks/tokens directly from those companies. Now we have cut out Vanguard and Goldman Sachs, and we have very very low fees. Before you say it can't happen, let's look at some of the things said about John Bogel 30 years ago by traditional Wall Street....

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Re: Vanguard will use blockchain to share index data

Post by siamond » Sun Jan 21, 2018 10:54 am

MindBogler wrote:
Sun Jan 21, 2018 10:28 am
This is a case of solving a simple, common problem with something new and shiny without explaining what benefit is actually derived or what new problem is being solved. I've been in the field for many years and this theme recurs like a bad dream.
Very true... Been 'living the dream' too...

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Re: Vanguard will use blockchain to share index data

Post by linenfort » Sun Jan 21, 2018 10:56 am

In a single sentence:
All transactional parties are advised of all changes to the ledger automatically like an endless chain of reply-all emails.
- from the second article Barry Barnitz posted.
Is it too early for an all-bond-portfolio thread?

columbia
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Re: Vanguard will use blockchain to share index data

Post by columbia » Sun Jan 21, 2018 10:58 am

Taylor Larimore wrote:
Wed Dec 13, 2017 10:48 am
Bogleheads:

There is lots I don't know (and don't need to know) about investing. This is one of them.

Best wishes.
Taylor
This is on point. :)

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topper1296
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Re: Vanguard will use blockchain to share index data

Post by topper1296 » Sun Jan 21, 2018 11:08 am

techrover wrote:
Wed Dec 13, 2017 10:39 am
There are many in-efficient and insecure processes employed by all financial companies esp. on backend. Looks like in this case, vanguard is leveraging blockchain to address this part. In the end should be good for all customers due to lowered costs.

blockchain != bitcoin so rest assured this doesn't mean vanguard is investing in bitcoin.
Blockchain is the technology behind bitcoin that enables transactions(containing any piece of data) amongst untrusted parties due to its very secure distributed ledger mechanism. It does have many applications especially in use cases where intermediaries are involved for creating this trust.
How will this disrupt banking and/or companies like Visa or Mastercard? Lower transaction costs? Job loses?

mws13
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Re: Vanguard will use blockchain to share index data

Post by mws13 » Sun Jan 21, 2018 11:24 am

topper1296 wrote:
Sun Jan 21, 2018 11:08 am
How will this disrupt banking and/or companies like Visa or Mastercard? Lower transaction costs? Job loses?
[/quote]

The closest comparison is if you walk to your cable/wireless provider (verizon for me) and pay in cash. However, those USD are issued by the Federal Reserve (centralized government) rather than a decentralized system like bitcoin. If I pay Verizon via MasterCard, there are third party fees.

Bitcoin (and other potential currencies) has lots and lots of problems before it becomes a real payment system. The two most obvious are the volatility against the USD and the rising cost of transactions. However, if they get solved, I am cutting out all third parties (visa, fed reserve) and paying Verizon directly with a decentralized currency issued by a network of users.

Vanguard was the first step in this process away from their parties - " Vanguard has a fairly unique structure in terms of investment management companies. The company is owned by its funds. The company's different funds are then owned by the shareholders. Thus, the shareholders are the true owners of Vanguard."

In my slanted view, blockchains and tokens are arguably the next step. We no longer need a third party "investment management company", and it evolves into a "Smart Contract Fund" that we invest directly in and we own.

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Re: Vanguard will use blockchain to share index data

Post by regularguy455 » Sun Jan 21, 2018 12:55 pm

mws13 wrote:
The closest comparison is if you walk to your cable/wireless provider (verizon for me) and pay in cash. However, those USD are issued by the Federal Reserve (centralized government) rather than a decentralized system like bitcoin. If I pay Verizon via MasterCard, there are third party fees.

Bitcoin (and other potential currencies) has lots and lots of problems before it becomes a real payment system. The two most obvious are the volatility against the USD and the rising cost of transactions. However, if they get solved, I am cutting out all third parties (visa, fed reserve) and paying Verizon directly with a decentralized currency issued by a network of users.

Vanguard was the first step in this process away from their parties - " Vanguard has a fairly unique structure in terms of investment management companies. The company is owned by its funds. The company's different funds are then owned by the shareholders. Thus, the shareholders are the true owners of Vanguard."

In my slanted view, blockchains and tokens are arguably the next step. We no longer need a third party "investment management company", and it evolves into a "Smart Contract Fund" that we invest directly in and we own.
Great post. This is a great use case for Blockchain. That NYTimes article “Beyond Bitcoin” really clarified the value of Blockchain for me and why it’s here to stay. It’s really about putting control back to the individual. You create decentralized systems to undercut siloed and high barrier to entry ecosystems. It’s impractical for sometime to create their own index fund by buying individual stocks. Low cost ETFs like vanguard do this as a service, but even for them, it’s inefficent.

If someone could automatically track indexes using the Blockchain, you are in control, not a financial service company.

This is just a simple use case. Imagine owning your data for any number of services and taking it out of the hands of mega organizations. You wouldn’t be locked in to using Google, Facebook, Uber, etc. Anyone could leverage the same data they have and build a better product. That’s where the value is.

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Re: Vanguard will use blockchain to share index data

Post by zeugmite » Sun Jan 21, 2018 2:19 pm

This is an insane amount of gobbledygook. Let me translate:

"Vanguard will explore the use of a distributed database to store index data."

From the page on Symbiont's technology:
Symbiont Assembly is a blockchain platform for building networks in which multiple, independent entities may share data and logic in real time. It is a decentralized database that replicates and executes application logic in the form of smart contracts. This platform may be used to create financial instruments -- such as loans and securities -- in a digital form from their inception. Assembly was purpose-built to meet the standards of institutional finance in security, reliability and performance.
or
Symbiont Assembly is a piece of software for deploying distributed databases in which multiple, independent entities may share data and create transactions in real time. It is a decentralized database that replicates and applies transactional logic in the form of customizable transactions. If entities keep all their data in these databases, this software may be used to keep track of financial instruments -- such as loans and securities -- in a digital form from their inception. Assembly was purpose-built to meet the standards of institutional finance in security, reliability and performance.

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Re: Vanguard will use blockchain to share index data

Post by hilink73 » Mon Jan 22, 2018 12:40 am

triceratop wrote:
Wed Dec 13, 2017 10:58 am
Taylor Larimore wrote:
Wed Dec 13, 2017 10:48 am
Bogleheads:

There is lots I don't know (and don't need to know) about investing. This is one of them.

Best wishes.
Taylor
Taylor,
I wouldn't consider this an investing topic. It's a technology problem, and the technology that some financial companies are using for their backend services.
Probably. :)

http://doyouneedablockchain.com/

Also, have a look at the paper linked there.

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Re: Vanguard will use blockchain to share index data

Post by golfCaddy » Mon Jan 22, 2018 1:15 am

mws13 wrote:
Sun Jan 21, 2018 11:24 am
Bitcoin (and other potential currencies) has lots and lots of problems before it becomes a real payment system. The two most obvious are the volatility against the USD and the rising cost of transactions. However, if they get solved, I am cutting out all third parties (visa, fed reserve) and paying Verizon directly with a decentralized currency issued by a network of users.
The other big problem is security. If my credit card number is compromised, the credit card company or the vendor absorbs the loss. Likewise, if my debit card is compromised, the bank will refund the fraudulent transactions. If my bitcoin wallet is stolen, the money just vanishes.

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Re: Vanguard will use blockchain to share index data

Post by roymeo » Mon Jan 22, 2018 1:22 am

if it worked for Kodak, why not Vanguard employee shareholders that want to cash out?
The sewer system is a form of welfare state. | -- "Libra", Don DeLillo

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Re: Vanguard will use blockchain to share index data

Post by DrGoogle2017 » Mon Jan 22, 2018 2:38 am

Jags4186 wrote:
Wed Dec 13, 2017 9:54 am
triceratop wrote:
Wed Dec 13, 2017 8:48 am
Jags4186 wrote:
Wed Dec 13, 2017 8:42 am
My question is if Vanguard can create a new ledger to take care of its needs what is driving the value of Bitcoin. It would seem to me if you need the use of a block chain ledger you would create your own. I don’t understand the demand of Bitcoin other than to say you have it.
None of the Vanguard statements mention Bitcoin. Blockchain's viability as an idea is much different from Bitcoin's.
I understand that. But my question is if bitcoin is an implementation of blockchain, but you can create as many implementations of the block chain as you want, why would bitcoin have value.
Banks will have their own ledgers too. Bitcoin will have no advantage.

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Re: Vanguard will use blockchain to share index data

Post by mws13 » Mon Jan 22, 2018 5:47 am

DrGoogle2017 wrote:
Mon Jan 22, 2018 2:38 am


Banks will have their own ledgers too. Bitcoin will have no advantage.
Banks will have private blockchains (probably) and they will continue to make their money through third party fees. Bitcoin is a public blockchain and I don't need a bank or the Federal Reserve. i can send you money directly and it is verified by the network as a valid transaction. There is no third party and there is no centralized authority. Bitcoin used to have very very low fees. Now that the transaction fees have increased, the question is - will it have value against a bank's private blockchain? I personally do not want my Cardiac Surgeon to be worried about these things when he is about to cut into me :) I believe that Crypto currencies are simply a new competitive force.

I have some bitcoin on Coinbase (arguably a bitcoin bank), some in 'cold storage (very safe, very complicated storage, google it), and some in the Bitcoin Core Wallet where the coins are "hot" in that they are on the network. https://bitcoin.org/en/download this wallet is always live but it has become too unwieldy.

It's an evolving conversation and the conversations about asset transfer (ex - eliminate title companies in real estate) are more compelling to me.....

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Re: Vanguard will use blockchain to share index data

Post by mws13 » Mon Jan 22, 2018 5:55 am

golfCaddy wrote:
Mon Jan 22, 2018 1:15 am
mws13 wrote:
Sun Jan 21, 2018 11:24 am
Bitcoin (and other potential currencies) has lots and lots of problems before it becomes a real payment system. The two most obvious are the volatility against the USD and the rising cost of transactions. However, if they get solved, I am cutting out all third parties (visa, fed reserve) and paying Verizon directly with a decentralized currency issued by a network of users.
The other big problem is security. If my credit card number is compromised, the credit card company or the vendor absorbs the loss. Likewise, if my debit card is compromised, the bank will refund the fraudulent transactions. If my bitcoin wallet is stolen, the money just vanishes.
There are no 'fraudulent transactions' on the ledger system, but there are human errors of putting in the wrong amount or typing in a wrong key symbol. Obviously the credit card company is paying for fraud and errors from fees charged. Let's call it insurance, and you have identified a real issue in that most people don't want to deal with the hassles of Crypto. That is why you have bogel heads and non-bogelheads. Vanguard, same as Crypto, is not for everyone.

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Re: Vanguard will use blockchain to share index data

Post by golfCaddy » Mon Jan 22, 2018 10:04 am

mws13 wrote:
Mon Jan 22, 2018 5:55 am
There are no 'fraudulent transactions' on the ledger system, but there are human errors of putting in the wrong amount or typing in a wrong key symbol. Obviously the credit card company is paying for fraud and errors from fees charged. Let's call it insurance, and you have identified a real issue in that most people don't want to deal with the hassles of Crypto. That is why you have bogel heads and non-bogelheads. Vanguard, same as Crypto, is not for everyone.
If you don't consider this fraud, you must have a peculiar definition of fraudulent.
https://arstechnica.com/tech-policy/201 ... nd-frauds/
https://www.theguardian.com/technology/ ... -passwords
http://money.cnn.com/2017/12/20/technol ... index.html

mws13
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Re: Vanguard will use blockchain to share index data

Post by mws13 » Mon Jan 22, 2018 10:22 am

golfCaddy wrote:
Mon Jan 22, 2018 10:04 am
mws13 wrote:
Mon Jan 22, 2018 5:55 am
There are no 'fraudulent transactions' on the ledger system, but there are human errors of putting in the wrong amount or typing in a wrong key symbol. Obviously the credit card company is paying for fraud and errors from fees charged. Let's call it insurance, and you have identified a real issue in that most people don't want to deal with the hassles of Crypto. That is why you have bogel heads and non-bogelheads. Vanguard, same as Crypto, is not for everyone.
If you don't consider this fraud, you must have a peculiar definition of fraudulent.
https://arstechnica.com/tech-policy/201 ... nd-frauds/
https://www.theguardian.com/technology/ ... -passwords
http://money.cnn.com/2017/12/20/technol ... index.html
I recognize that this is confusing, but they were all exchanges, wallets, and "off the Bitcoin protocol" examples that you posted. At this moment in time, I have no interest is selling or trading what I have in Bitcoin.

1) If I stay 100% on the Bitcoin network, using my "Core Bitcoin Wallet" which is a "node" on the system, and I never transfer to USD or any other digital or fiat currency, the only way to hack/steal my bitcoin is through my computer. 2) The Bitcoin that I have in "cold storage" there are no hacks to date. It will take years for that to be possible, however, there are possibilities for human error in cold storage.

Once you go off the Bitcoin network, which are the examples that you posted, then you are in the Wild West.

At this point, I am diversified into other Crypto Currencies and I am still learning about those.

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Re: Vanguard will use blockchain to share index data

Post by Epsilon Delta » Mon Jan 22, 2018 2:19 pm

mws13 wrote:
Mon Jan 22, 2018 10:22 am
1) If I stay 100% on the Bitcoin network, using my "Core Bitcoin Wallet" which is a "node" on the system, and I never transfer to USD or any other digital or fiat currency, the only way to hack/steal my bitcoin is through my computer.
There is also the good old fashioned fraud where you order and pay for an office chair and they send you a bobcat. Payment systems such as credit cards, debit cards and paypal deal with these. Bitcoin (as a payment system) doesn't. Irresistibility is a bug not a feature. Bitcoin is still subject to the courts ordering a refund, but this only works for moderately bad actors, the real scammers simply ignore the courts.

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