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Anonymous Sat Oct 12 05:31:24 2019 No.15895629 [Reply] [Original]

To perform extremely high value exchanges (like trading derivatives), banks currently have to make use of what is called a Central Counterparty Clearing House, or CCP.
The CCP is a third party which acts as a middleman between the banks, and reduces the risk of one of the banks not following through with their contractual obligations. One of the ways that this risk is ameliorated is the CCP holds a "default fund", or DF. The default fund is a pool of money that every bank that uses the CCP pays into. If two banks enter into an agreement and one of the banks fails to follow through, the bank that would lose out is paid out from the DF. It is essentially a way for all the banks using the CCP to have a sort of group insurance. When a bank is paid out by the DF, it is the responsibility of all of the banks in the group to top the DF back up. Given the value of the contracts that are being exchanged through this process, DFs likely hold billions if not tens of billions worldwide.

The use of smart contracts to administer derivatives trades completely removes the need for a default fund. As the DF constitutes a type of counterparty insurance (insurance against the fact you can't guarantee that the other party will perform their side of the trade honestly), the removal of counterparty risks through smart contracts means that ALL of the money that is currently being held in default funds can be liberated back to the banks who are currently paying into them. As mentioned above, this constitutes billions if not tens of billions in savings that will instantly be returned to the banks.
This is just one of the benefits of a smart contract based derivatives system, many more are laid out in the recent Chainlink blog post, but it is a striking example of how strong the incentives will be to adopt a smart contract system as quickly as possible, and how competitively disadvantageous it will be to lag in adopting this technology.

>>	Anonymous Sat Oct 12 05:51:59 2019 No.15895694 when a bank says they have money somewhere backing them up, do you actually believe it?

>>	Anonymous Sat Oct 12 05:55:31 2019 No.15895707 >>15895629 Now that's a rare Sergey

>>	Anonymous Sat Oct 12 06:06:03 2019 No.15895749 >>15895707 >he doesen't follow Sergeys IG

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