by Melissa Crooks
Blockchain is not just cryptocurrency, it is an innovative technology for decentralized block recording of any database. You are mistaken if you think that the hype around blockchain systems is a temporary phenomenon. The technology has many undeniable advantages and can solve many of the problems that centralized services face.
What is so unique about Blockchain?
Decentralization: All information that falls into the block registry is stored simultaneously on all computers on the network. Any participant can see the information, view the story, but no one can change anything in it. The centralized database is stored on a specific server, which means it has a vulnerability: the server can undergo a hacker attack, fail, be stolen, destroyed, etc. Blockchain in this regard is much more stable.
All money transactions that are conducted through the blockchain platform are formed into blocks and closed with a digital signature. The uniqueness of the technology is that the signature has not only information about current transactions, but also part of the hash of the previous block. That is, all blocks of the network are interconnected by a hash signature, up to the very first block. The data added to the blockchain cannot be faked, modified or deleted.
Blockchain has a very high error threshold. Miners of the system check each transaction for the origin of the amounts sent. Only after receiving the number of confirmations determined by the network, the transaction can be added to the block and conducted.
What is SWIFT?
SWIFT is a cooperative association of 248 banks operating in 19 countries, founded in 1973. It operates based on Belgian law; its headquarters are located in Brussels. Every day, the system conducts more than 1 million international transfers.
At the moment, SWIFT is the most popular service for multicurrency international transfers. It is available in many foreign countries and not only through banks that directly cooperate with the SWIFT system. You can send and receive transfers through correspondent banks.
SWIFT payment is suitable for:
conducting major financial transactions in another country;
payment for goods and services to foreign companies;
multicurrency transfers.
Why blockchain can replace SWIFT
Blockchain technology can globally change the financial world. For example, since 2013, an online bank Bitbond has been operating in Germany, which operates with amounts close to one million dollars per month. His leadership suggests using Bitcoin transactions instead of traditional payments on loan obligations through the Swift system.
Classical international transfers involve certain fees, which significantly increase the cost of such transactions. And besides this, it takes time to conduct transactions, sometimes a transfer can take several days.
Blockchain transfers do not have such disadvantages: there is no dependence on the place of stay of the sender and the recipient, Internet transfers arrive quickly enough to the account and have a very low commission.
The only risk of cryptocurrency transfers is the volatility of the digital market. But the processing speed of such operations can reduce this drawback to a minimum. Blockchain has the largest distributed computing power in the world and its open-source software has every chance to improve the bank transfer system.
And not only Bitcoin has the potential to compete with SWIFT in the field of financial transactions. Today, there are more than 150 cryptocurrencies, 30 of which are considered the main ones, and 10 of them carry out the bulk of transfers.
For example, a product from IBM, a manufacturer and supplier of hardware and software, has successfully combined blockchain technology with conventional electronic transfers: the software performs the bulk of clearing operations, but the final calculation is made on the Stellar blockchain. The platform will be able to serve more than half of the international retail market in the South Pacific region.
A serious competitor of SWIFT is the Ripple project, which offers the best solutions and successfully cooperates with 7 banks on international money transfers. There are even rumors about Ripple's partnership with Amazon.
The banking systems of the transnational Standard Chartered Corporation, the Santander bank and one of the largest banks in Sweden - SEB use both technologies: Ripple and Swift blockchain simultaneously.
The Chinese also do not stand aside, offering the world a PVP system for currency settlements between the Chinese yuan and other foreign money. The originality of the PVP method lies in the fact that transactions in both currencies are conducted at a time. The obligatory side of the PVP operation must be a credit company registered in the country from where or to where the transfer is made. You can conduct PVP transactions in RUB, KZT, USD, HKD, GBP, EUR, CHF, and CNY.
Two American companies are also competing for the right to become the “new Swift” for banks around the world: the banking blockchain consortium R3 and the financial technology blockchain company Digital Asset Holdings.
What is in the way?
And the lack of legal regulation hinders the widespread introduction of interesting and progressive technology. Today, banks perform the following functions:
· storage of money;
· conducting transfers;
· issuance of credit loans;
· trust operations services;
· brokerage services.
From the moment the world has learned Blockchain development, a blockchain project is created for each such function, which can make the area more efficient. Experts even voiced the figure of potential cost savings: 15-20 billion dollars a year!
The closest areas where the technology will be used the fastest are payments, clearing transfers and smart contracts. The absence of regulatory and regulatory acts incites startup projects not only to compete with banks but to establish cooperation with them. Despite all the criticism, today banks and financial institutions still have fairly stable positions and confidently hold the initiative in their hands.
Author Bio:
Melissa Crooks is Content Writer who writes for Hyperlink InfoSystem, a mobile app development company in New York, USA and India that holds the best team of skilled and expert app developers. She is a versatile tech writer and loves exploring latest technology trends, entrepreneur and startup column. She also writes for top app development companies.