Deutsche Bank Research Report: Bitcoin Does Not Eliminate Intermediaries

A new Deutsche Bank research paper suggests that the Bitcoin network is not living up to its original vision in some ways.

In the report, published on Dec. 9, Deutsche Bank noted that Bitcoin was originally conceived to create a decentralized p2p cash system that did not require physical entities, but its ecosystem now includes many financial intermediaries.

According to the report, these intermediaries include Bitcoin exchanges and custodial wallets. Report author Heike Mai wrote:

“The original vision of Bitcoin – to build a distributed solution that is independent of intermediaries and central agents – has been somewhat deviated from in reality. The Bitcoin ecosystem, including some of the current financial intermediaries such as钱包提供商and交易所, has shown a trend towards centralization.”

“While blockchain technology is still in its infancy, it has the potential to revolutionize the financial industry, where many markets are based on hierarchical, centralized networks,” the report said.

Among other things, the report analyses different closed-loop and open-loop payment systems and how they can enable real-time global payments.

The findings suggest that Deutsche Bank, which joined the R3 distributed ledger consortium in September, is optimistic about the potential of distributed cryptography, even if its future prospects remain unclear:

“Given that blockchain technology is in its early stages of development, it remains unclear whether it will be suitable for future real-time payments.”

Instant processing

Notably, the report mentions that cryptographic ledger systems have already succeeded in enabling real-time payments to a certain extent in relatively small markets.

The report notes that while Bitcoin transactions can take up to 10 minutes to be confirmed, consensus protocols such as Ripple allow transactions to occur “within seconds.” Nevertheless, in the view of the report’s authors, these systems still have problems and the application of these technologies is still limited to small-scale testing.

If these networks grow in size, Mai speculates, new problems will come with new pressures.

“I suspect that distributed (i.e., decentralized) payment systems will not be able to compete on cost with centralized transmission systems unless the problem of mining centralization can be solved,” he wrote.

Additionally, Mai said, blockchain systems still face many unresolved legal issues.

Original article: http://www.coindesk.com/deutsche-bank-research-bitcoin-intermediaries/
By Pete Rizzo
Translation: Overnight porridge
Source (translation): Babbitt Information (http://www.8btc.com/deutsche-bank ‎)