(HashReport is pleased to welcome Jacques Reulet as the first contributor to take advantage of our article submission process. Do you have something to say? Email your submission to submissions@hashreport.net)

Most people in Bitcoin haven’t heard of Reggie Middleton of boombustblog.com, but that’s about to change. Attending the North American Bitcoin Conference in Chicago last month, Middleton spoke about the beta release of his new Ultra-Coin system - a Bitcoin2.0 app built on, and enforced by, the Bitcoin blockchain.

Here’s how it works: by keeping track of over 75,000 different (mostly Bloomberg) tickers, the UC client allows you to structure unbreakable contracts based on their movements. Say, for example, you want to short the price of Apple stock and bet long on the price of gold, you would simply enter a set of parameters and submit the contract for someone to accept. The orders are then funded with Bitcoin.

You can also look for and accept orders that are being set up by others. If a customer wanted to bet on the price of Dogecoin in relation to the Chinese Yuan, the customer doesn’t have to own either of them to trade their prices. When the trade parameters are set, and parties agree, it gets entered into a 2/3 multisig holding.

Once the UC client recognizes the conditions are met, it prompts the traders to acknowledge and sign the transaction for their returns with a nominal fee going to Ultra-Coin. At no point does UC control the funds and thus have the ability to abscond with the money, so they’re definitely not an investment bank. It’s just more of a trade locator service.

As you might imagine, getting this through the heads of regulators is going to require some very patient and quite granulated explanation, not to mention pointing out that the licensing to do this as a traditional entity is unnecessary as the innovation behind it has innovated away the concerns that are usually regulated away by the likes of sheriff Lawsky and his posse.

You can also see how this system may not be something the bankers will like for several reasons.

First and foremost, Ultra-Coin never holds your money. The contracts are enforced by the Bitcoin blockchain itself.

Next, UC’s fees are 1/8th of what banks normally charge, offering a huge savings to Ultra-Coin users. Plus, there are few worries with compliance - it is written into the Ultra-Coin code.

Finally, customers can trade on prices of goods they don’t need access to, as Bitcoin funds the trade and represents the designated commodities. It’s the perfect storm of disruption, as it renders trading fees, brokerage fees, and those infamous Wall Street bonuses obsolete.

The sheer scale of disruption this technology brings with it makes it something to watch. But the more interesting question is how regulators will approach it. This is the perfect test case for whether a ‘2.0’ technology can fulfill the promise to innovate away what regulators currently try go get companies to comply away. This may also determine how regulators will approach such a complex and layered product and whether they will seek to stifle, or foster, blockchain-leveraging technologies.

Given the outright hostility of the proposed BitLicense requirements, a close eye must be kept to see whether New York will leave itself out of the equation. On the one hand, that’s where the money’s at. But on the other, a system like this will definitely be enough to entice a lot of money out of the Empire State. After his presentation at TNABC, Middleton was approached by paradimeshift.org’s Karl Gray offering to discuss basing the operation in Isle of Man, to which Middleton replied “I’m definitely open… let’s talk.”

Unexpected pressure may be mounting against Lawsky if ‘big money’ and ‘big innovation’ are talking about how to cut New York out of the deal altogether. But, with or without the NYDFS on board, Ultra-Coin may very well change the way we trade.

Tipping address: 1JQiuuAahXtUMkKhSd8477WnAd1EVaEZK4

(The views and opinions expressed in this article solely the author’s and do not represent the opinions of HashReport.net, related third-parties, or advertisers)

Related articles across the web