[Part 1 in a five part series from Andrea which will run every Tuesday on decentralize.today for the next month]
You can also read it as how blockchain will disrupt banks.
Basically blockchain is about shared databases and cryptography. This technology allows multiple parties to have simultaneous access to a constantly updated digital ledger that cannot be altered.
The fact that all information shared in this ledger canot be alterate generates the mutual trust of the participants in the data stored by the blockchain. Trust that makes it comparable or similar to the registries managed by recognized and regulated authorities such as banks, insurance companies and governments.
Blockchain is transforming everything but my focus will be on banks ad everything comes around this field, from payments transactions to how money is raised in the private market.
Main question is Banks will embrace this new technology or be replaced by it?
Every day you can read the blockchain as a dead technology and, the next day, about a new startup that has raised millions of dollars for a blockchain based service. In all this, banks are watching, uncertain or scared by technology, waiting to see if it is really useful or if it is the new bubble of the internet.
Do the entire financial system have to be afraid of?
The short answer is Yes. The long one, will be proposed in a 5 part article that starts today, with a focus on Payments.
1. Payments on blockchain
Today, trillions of dollars travels around the world via an old system of slow payments and added fees.
If you work in Milan and want to send money to your friend in Beijin, you might have to pay a €15 or €20 flat fee for the wire, even if you have to send €5 to him. Your bank gets a slice, as the receiving bank, and your friend has to wait days before to see the amount registered on his bank account.
A very clear artile on The Guardian describes how much money comes from this fees. Blockchain disrupts this process by offering a secure and cheaper way to send P2P payments, without intermediaries.
Cryptocurrencies, like Bitcoin, are built around a public and decentralized ledger that anyone can use to send and receive money, by acting in this way blockchain reduces the need for trusted third parties to verify transactions, saving money in taxes.
Working as P2P allows the registry to be faster, so a blockchain based transaction can take anywhere 30 minutes to settle, up to 16 hours in extreme and rare cases.
This means fast, economic and borderless payment technology. It’s not perfect yet, but blockchain is a step up from the average 3-day average processing time for bank transfers.
Thanks for reading, see you on the next post.
I'm HX designer with a passion for financial and crypto field. I'm focused on innovative stuff and to share what I learn. Feel free to reach me on andreapaci.me