The Blockchain Revolution Page 4

  “Why do they get involved?” Frank already knew the usual answer, but he wanted to confirm it applied to the BankCoin project, too.

  “Status, mostly. As with Linux, getting recognized as a top BankCoin developer makes you a big deal in the software development community.”

  “And very employable as well,” Frank prompted.

  Magnus blinked several times. “Yes, this also is true. With all the banks joining, good BankCoin developers are in great demand.”

  “Does the meritocracy apply to the Technical Steering Committee, too?” Frank asked, referring to the small group of developers that made all the important technical decisions.

  “Again, of course. Several TSC members do not work for member banks or technology companies.”

  “Got it,” Frank said. “So, let’s talk about the code itself. Where do things stand there?”

  “So far, we have made two major releases since Schwert posted the first version to GitHub. The last version was otherwise ready to go live but needed further work to handle a full volume of transactions. Schwert calls this release London –”

  “Okay – I got it. Also, the name of a financial center.”

  “Yes,” Magnus said. “May I continue now?”

  “Sorry.”

  “So,” Magnus said. “We have been cleaning this third release up and testing for weeks. It is now almost ready to go.” Magnus’s eyes somehow managed to open even wider. “Unless things slip, the banks will transition over to it next week.”

  “What’s that version called?”

  “Manhattan, of course,” Magnus said.

  By the time Magnus left, Frank felt reasonably well grounded in the history of the Foundation and BankCoin. But he hadn’t learned much at all about Schwert, and his interest was very much piqued. Either there wasn’t much of interest to be told about the project leader or Magnus just didn’t care. Frank typed Schwert’s name into Wikipedia. But all he found were a few references to him on the BankCoin topic page. One of those mentions noted that Schwert was an early bitcoin “miner.” Under Nakamoto’s system, bitcoins only came into existence when someone solved a difficult computer-generated problem. The first person to do so was paid a set number of bitcoins as a reward. That process came to be called mining, as if a bitcoin was a precious metal obtainable only through the expenditure of great effort.

  There weren’t many miners back then, and each was paid thousands of bitcoins when a block of transactions she tendered was accepted and added to the blockchain. Not that they were worth anything at first. What value did a bitcoin have if no one would accept it in payment for anything? It was another year before someone did for the first time, accepting ten thousand bitcoins from a Florida miner in exchange for two large Papa John’s pizzas, delivered. The faithful still celebrated May twenty-second as Bitcoin Pizza Day.

  Frank opened up a cryptocurrency tracking site. Wow. Those ten thousand bitcoins would be worth thirty million dollars today! And at bitcoin’s all-time high, their owner could have cashed them in for one hundred fifty million dollars. Frank went back to the BankCoin Wikipedia page and saw Schwert was believed to be a bitcoin millionaire. Lucky for him. He must not have been fond of pizza.

  * * *

  Frank felt his phone vibrate. It was a text from Marla.

  >Did you see they’re going to make a movie out of The Lafayette Campaign? Isn’t that cool!?!

  Frank stared at his phone. No! It wasn’t the least bit cool! It was bad enough his role in stopping the election hacking had become public, and worse yet, that his co-author had written a book about it without Frank’s cooperation or blessing. Worst of all – until now, that is – the writer had concocted all kinds of melodramatic nonsense to fill in the blanks whenever his sources came up dry. Now a scriptwriter was going to take a crack at the story?

  Frank clicked on the link from Marla’s text and groaned. There were the dreaded words he feared he’d find: “Based on a true story” – meaning the scriptwriter would rely on the facts only when they were exciting and make up the rest.

  His phone vibrated again.

  >I’m thinking Nicolas Cage to play you. What do you think?

  Frank thought he’d turn his phone off and leave it that way.

  Chapter 4

  Heads, You Lose, and Tails, the Banks Win

  Frank was finishing his lunch and a scan of the news when a headline caught his eye. It read Your Bitcoin or Your Life.

  A pop-up alert opened on his computer, breaking his concentration. It was almost time for his call with Vijay Patel, the guy he was replacing on the BankCoin Foundation board. Okay.

  He went back to the article. Apparently, cryptocurrency thefts were now occurring in the physical world, too. In each case, people foolish enough to brag about making a killing in a cryptocurrency were targeted. Typically, they answered their doors late at night to find armed men threatening to kill them unless they transferred hundreds of thousands, or even millions, of dollars’ worth of cryptocurrency to the thieves’ anonymous, untraceable, accounts. How about that? The perfect crime.

  Frank shook his head. Everyone kept confusing ledger accuracy with system security. Just because multiple copies of a database existed didn’t make it harder for a thief to steal from a digital wallet. Or any easier to get the money back after they did. Developers had made plenty of mistakes in creating cryptocurrency exchanges and the wallets where alt coins – i.e., electronic tokens used as alternatives to traditional currency – were stored, and thieves had exploited them to steal hundreds of millions of dollars’ worth of cyber currency. A non-bank blockchain-based ecosystem might be secure someday, but that day hadn’t arrived yet, at least as far as Frank was concerned.

  The ringing of his phone startled him. “Hello?” he said.

  “Hi, Frank. Vijay here. Hey – thanks for taking over the BankCoin Foundation board seat on so little warning. It seems like every time I blink the bank’s doing another reorganization.”

  “Sure. No problem,” Frank said.

  “So,” Patel said, “let me give you a quick overview. As you know, there are millions of open source projects out there but only a couple hundred with lots of corporate support. The big, well-funded ones have boards of directors to take care of the business side of things and a developer committee that calls the technical shots. That’s the setup at the BankCoin Foundation, too, where we call the developer group the Technical Steering Committee.

  “On the participation side, the Foundation has several membership levels. First Manhattan’s a platinum member – that’s the top tier – along with fifteen other companies, mostly banks but also some technology vendors. The five hundred thousand bucks we pay annually to be a platinum member buys us a guaranteed board seat. On top of that, platinum members have to commit two of their best programmers to work full-time on the project. All in, that sets us back well over a million a year after you take salary, bonus, benefits, and travel into account. So, you can see how important the bank thinks it is to keep a close eye on how the BankCoin sausage gets made.”

  “Any reason beyond wanting to be sure we end up with good code?” Frank asked.

  “Actually, yes,” Patel said. “We think there’s no doubt every transaction in the future is going to take place on somebody’s blockchain network. The question is whose. Will the banks be in the driver’s seat making lots of money, or will they be on the sidelines, watching someone else rake it in? Plus, First Manhattan wants to be sure BankCoin is the only global banking blockchain.”

  “Why so?” Frank asked.

  “Well, profit, of course. We’ll make two basis points – that’s two hundredths of a cent – every time a dollar changes hands on the BankCoin network. That’s not much per dollar, but we’re talking about a heck of a lot of dollars – a trillion a month pretty soon. That translates into almost two and a half billion dollars a ye
ar for First Manhattan.”

  “I know we manage security for BankCoin,” Frank asked. “Are we doing anything else for that fee?”

  “Sure. For starters, we made a big cash investment setting the whole thing up. And we’ve had ten of our best developers working on the software from the beginning. We also volunteered Dirk to be the chair of the Technical Steering Committee. A lot of the code that Schwert didn’t write, one of our employees did. For the last six months, about half our BankCoin staff have been working – and they will keep working – full-time spotting vulnerabilities and fixing them. That sounds high until you remember the BankCoin Foundation keeps adding new code. We also fix vulnerabilities other banks find and tell us about on a confidential basis. When we do, we privately send a patch out to every other bank so no one ever knows there was a problem that could have been exploited. We’ll only get one chance to move the banking world over to BankCoin, so we’ve got to get it right.”

  “What’s happens if we screw up?” Frank asked.

  “Well, think how this technology changes the marketplace,” Patel said. “If the blockchain solves the problems of security, transparency, and speed without using a bank, who needs us? We realized that if we couldn’t stop the blockchain, we better make sure we own it.”

  “Got it,” Frank said, “But will people be comfortable switching over to a blockchain?”

  “Why not?” Patel said. “Look what happened to stock brokerages. Once upon a time, if you wanted to invest, you had to use a stockbroker, because only brokerage firms had seats on the stock exchanges. The brokers loved that, because they could charge a hefty trading fee. They also gave advice, wrote research reports, and maintained retail offices all over the place so you could meet with your broker. All of which took a lot of money to support.

  “But once the internet came along, some smart entrepreneurs figured out most people didn’t care about the extra trappings any more. So, companies like eTrade built slick online platforms anyone could use to buy and sell securities really cheaply and without ever talking to a human being.”

  “So, I guess you’re right,” Frank said. “If I was launching a financial blockchain startup, I’d build a consumer app that looks just like the online banking software everyone’s already using.”

  “Exactly,” Patel said. “First Manhattan realized it needed to kill its old business model before someone else did. You’ve got to give Ben Cronin credit for seeing that and selling it to the board; that couldn’t have been easy. Of course, brand-new startups are trying to do the same thing, but we’ve got advantages – our existing customers, our IT department, lots of regulatory expertise, lobbyists out the wazoo, longstanding relationships with other banks, and so on. In theory we should beat any startup that comes along, no matter how much financing it has. But if we don’t do it fast and do it right, we can still blow it.”

  “Okay, thanks,” Frank said. “I get the picture.”

  “Good,” Patel said. “So back to my overview. The board of directors makes the strategic decisions, like how to promote the BankCoin platform and how to satisfy the regulators. It also takes care of the nuts and bolts stuff, like approving a budget and making sure the bills get paid, and, maybe most importantly, keeping the developers happy.”

  “And are they?” Frank asked.

  “Ah, well, that’s always an interesting question, isn’t it?” Patel said.

  “How so?”

  “Hmm,” Patel paused. “So, you’re a developer, aren’t you?”

  “Sure. Why?”

  “So, how to ask delicately? What’s your opinion of the emotional maturity of the best developers you know?”

  “Oh. Okay. So, you’ve got personality issues among developers?”

  “That would be an understatement. Sometimes, it’s a challenge keeping them focused on the current release instead of setting off flame wars or going down rat holes on things that don’t matter.”

  “What about Schwert?”

  “Oh, if it weren’t for him, we’d be sunk. The guy’s a rock. Always on message, always getting things back on track when they get derailed.”

  “Have you met him?” Frank asked.

  “Me? No. There’s no in-person interaction between the board and the developers. Or even among the guys who write the code, for that matter. But that’s okay. Anyway, let’s switch over to the Manhattan release. The banks have been testing it on a virtual platform for a month now, and we’re satisfied it’s stable. At midnight this Friday, we’ll start running live transactions on it in parallel to our existing processes. If all goes well through Wednesday, every bank will shut down its old system and run all new business on the blockchain.”

  “That’s a big step,” Frank said.

  “You bet! And it better go smoothly.”

  “But if we’re going to have a problem, better sooner than later, right?” Frank asked.

  “Well, I guess. One of the beauties of the blockchain is, no matter what happens, we could always go back to our old systems. Every transaction would be recorded on hundreds of copies of the same blockchain on bank computers all over the world. But it would be a nightmare.”

  “I bet,” Frank said. “Still, it’s awfully new technology. Doesn’t that make you nervous?”

  “Heck yes!” Patel said. “But it’s too late to second-guess the decision now. Our best estimate is, next week, ninety-five percent of all international banking transactions will be completed on the BankCoin platform. And almost all the domestic ones, too.”

  * * *

  Frank settled into his first-class seat waiting for his short flight to Washington, DC to begin. He wondered how much more the bank had paid for his wider armrests. This wasn’t what he was used to, and it made him uncomfortable. But he reminded himself, if traveling in comfort was what it took to endow his grandchildren’s education, well, he’d have to suck it up. Along with the scotch the flight attendant was handing him just now.

  He turned and looked out the window. There was a storm in the distance; a towering thunderhead soared miles into the air behind the Manhattan skyline. The crown of the massive cloud mass gleamed eerily white, but its nether regions were a dusky orange, illuminated by the jagged bolts of lightning flickering inside. The jet-black skyscrapers silhouetted against them made him think of the towers and parapets of a medieval city, its gates barricaded against an approaching barbarian horde.

  That image matched his mood. Patel’s prediction had made a deep impression on Frank: ninety-five percent of all global banking transactions would soon be running on technology that until a few years ago was mostly used to complete illegal drug sales. Hackers had already made off with ten percent of all the cryptocurrency that ever existed! What were the banks thinking?

  Well, he’d found out the answer to that question from Patel. For five hundred years, banks had grown wealthy by playing the middleman, always keeping something for themselves when money changed hands. Some financial intermediaries were even worse. When some poor immigrant sent a hundred hard-earned dollars home to his family in Honduras, Western Union charged him as much as ten percent. It was highway robbery. But there was nothing the immigrant could do, because the banks owned the highway. At least until now. With a blockchain, that same transaction could theoretically cost less than a penny. That made working for First Manhattan seem almost virtuous – assuming they kept their fees low. And it sounded like they would, if only in their own self-interest.

  The plane started rolling, and the pilot told the flight attendants to take their seats.

  The big surprise was that the banks were being so realistic, unlike all the businesses that had sat and watched as internet-based startups shoved them out of the way. If the banks played their cards wisely and had a bit of luck, they’d likely hang in there in the center of the financial world.

  Well, so be it, Frank thought, as the plane swung around onto
the runway. As usual, Wall Street banks would take the world wherever they wanted to, whether it was good for humanity or not. Would the blockchain prove to be a good direction? Who knew? The financial powers that be had dragged the nation into a recession or worse about every ten years for as long as Frank could remember.

  And probably always would, he thought, as the plane rumbled down the runway, gathering speed, until it lifted off and thundered into the troubled sky.

  Chapter 5

  Happy Birthday to You!

  “Open it!” Marla said over the phone.

  “Don’t you want me to wait till the next time you’re over here?”

  “No, today’s your birthday, so go ahead.”

  Frank gave the package a gentle shake but heard nothing.

  “I hope you didn’t get me anything alive again.”

  “Well, not exactly. And anyway, you like Thor.”

  “Okay, I do. But I’m not interested in managing a zoo here.”

  “Quit whining and open it.”

  “Okay, okay.” He removed the wrapping paper and frowned. “A bird feeder? Why a bird feeder?”

  “Because you always got a kick out of Julius visiting you on your balcony. Maybe he’ll come back if he sees the feeder. And if not, there must be lots of other birds in your neighborhood.”

  He did miss Julius. After the crow flew away with Frank’s thumb drive, he’d never seen the bird again. So why not?

  “Well, that’s true. This is very thoughtful of you. I’ll figure out a way to put it up this afternoon.”

  “Great. Let me know what kinds of birds show up. Love you.”

  “Will do, and you too.” He hung up and took the bird feeder out of the box. It looked like you could either mount it on something or hang it up. He walked outside and found it clamped easily onto the railing. Back inside, he ordered a ten-pound sack of mixed bird seed online and promptly forgot about his present.