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Bitcoin and Blockchain | Banks Must Embrace or “Bite the Dust”

With all the constant news about the price of Bitcoin, it’s possible to forget what it was invented for. Cryptocurrency trading plays only a small role in what Bitcoin and blockchain technology can do for our world. Most importantly, they can end the hegemony central banks have on the way we make payments to each other.

Today, there are supposedly thousands of cryptocurrencies available. Many of which seeks to fix the issues central banks have created. However, they don’t all have the same goals. While some may wish to obliterate our current banking system, others simply want to improve it. Banks must find a way to work with these co-operative cryptocurrencies or they will likely face extinction.

The Current Banking System is Too Complicated

In 2015 a global financial literacy test found that 57% of adult Americans are financially illiterate. It’s not surprising then that most people don’t know how complicated it is to transfer money between banks. It’s painstakingly complicated, it’s the reason why payments can take so long – days or even weeks in some circumstances.

When money doesn’t leave a bank, transfers are easy. For example, if two people use the same bank and transfer funds between themselves it’s very straightforward. The bank simply debits the payer funds and credits the receiver.

But when we need to pay someone who uses a different bank this becomes an issue. You would assume that it would work the same way, but unfortunately not. Instead, each bank must have an account with each other to give and receive funds.

To pay someone who belongs to another bank, the funds must first be given to the bank. The bank then takes that money and puts it in their own account in the other bank. Once that money is there, it is transferred to the receiver. This means funds can sometimes be swapped between different hands numerous times before they reach their destination. This entire process becomes even longer when there are large quantities of funds involved.

Blockchain technology can simplify this process, making transactions more direct. Additionally, this also makes transactions cheaper as well.

Blockchain Technology is Ripe for the Globalized World

The old method that is currently in place does not fit in with the world we now live in. Companies are increasingly multinational with offices in many different countries. The process above becomes even more complex when it includes foreign banks. These banks may not have accounts with each other, which might mean a third country may need to be involved.

This is an irrelevant issue for blockchain technology which overcomes this issue. With Bitcoin, overseas transactions can take place at the same speed as domestic transactions.

Funds will be safer

Blockchain technology has also been highlighted as a safer alternative to transferring funds as well.

Decentralized vs. Centralized

One of the key selling points blockchain is that it is decentralized. Centralized networks, such as banks, put themselves at risk because they are easier to hack. Once inside a centralized network, a hacker has access to everything. It only takes one weakness to be manipulated.

By being decentralized, all information is shared amongst everyone all the time. This means that no one is in control of the network. For a hacker to manipulate the information on the network, they would need to control at least 51% of it. This is no easy feat and would require an extremely powerful computer.

Restoring Trust with Transparency

Trust is a major issue for many banks, especially after the 2008 crash. In 2017, a YouGov survey uncovered a number of interesting insights into global trust in banks. While 74% of Americans trust banks, only 37% of Europeans do.

Blockchain technology is also able to restore people’s trust in banks. Most blockchain’s use what is called a distributed ledger. This ledger is used to record every single transaction that takes place and can be viewed by anyone.

With such a powerful tool, banks can be properly regulated. This not only reduces illegal activity, such as money laundering. It also shows clients how their money is being used and transferred.

Cryptocurrencies Working with Banks

Some cryptocurrencies have been designed specifically to work with banks. One of the largest already doing this is Ripple, which is also considered the third largest cryptocurrency. Ripple works by acting as an exchange for money transfer. By doing this, transactions are more direct, much faster and cheaper as well.

Bitcoin’s Position

Bitcoin was designed as an alternative to fiat money. In an ideal world, users would not need to have banks or bank accounts, they would only need bitcoin. This, of course, puts it at odds with the banking world.

Despite the above, it is still possible Bitcoin can integrate with it. Some banks are already doing it and it could ensure their survival. Though, for wide-scale adoption to happen, it is likely Bitcoin will need to be a lot more stable.

Until that point is reached, Bitcoin is prime to be traded. Traders can utilize BitMex signals and Deribit Signals to make the most of it.

Conclusion

Blockchain technology benefits many industries for the better, most of the time making them more efficient. Banking is another industry that urgently needs to be simplified and blockchain looks like the perfect way to do that.

There are several benefits to adopting blockchain technology: banks can simplify transactions between themselves, making the process quicker and cheaper; banking institutions will be impenetrable to hackers, ensuring their client’s funds are safe; banks will be able to increase trust in their clients by utilizing a distributed ledger.

The banking sector will find it tough to accept the changes and some may fight them. This may even result in some banks closing and some new ones opening. It should be considered that different countries may adopt blockchain at a slower rate and may use a different blockchain. But the result will be the same, banks must embrace change or “bite the dust”.

Feaetured Image: depositphotos/ nils.ackermanm.gmail.com

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Blockchain Adoption | Sberbank CEO Anticipates 1-2 More Years

The head of Russia’s Sberbank has set tongues wagging after he emerged bullish about the future of blockchain adoption. CEO Herman Gref is forecasting industrial scale adoption in as little as one or two years.

Blockchain Adoption

Gref believes the technology is on the cusp of entering the industrial development stage of its evolution. Speaking to journalists this week, he said:

“The hype around the technology [blockchain] is now over, and the technology is entering the stage of industrial development. It needs a year or two to be implemented at the industrial scale.”

The head of Sberbank furthered that the global markets are “not yet ready” for large-scale blockchain adoption due to the “immaturity of the technology.” However, in under two years, the technology will be ready.

Sberbank and Blockchain

Since 2017, Sberbank, along with other major Russian banks and institutions, has been actively trialing blockchain. In December of that year, Sberbank partnered with Russia’s Federal Antimonopoly Service to store documents and transfer data on the blockchain.

Then, in June 2018, the bank partnered with Alfa Bank to test investment options with cryptocurrency for retail investors.

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Four months later, Sberbank became an advisor to Rosseti to help it trial blockchain solutions. At that time, the bank gave a time frame of three to five years for blockchain adoption.

But now, Gref is saying one-to-two years, indicating successful trials and a fast maturity.

Russia’s Finance and Blockchain

The Russian finance sector seems to be quickly moving towards the technology as another bank, the Russian branch of Raiffeisen Bank, announced its use of blockchain. The bank said it will first implement the technology to log digital mortgages and bank guarantees. However, it has plans to extend its use to other areas in the months to come.

Featured Image: Depositphotos/© Piter2121

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Public vs Private Blockchain | Ernst & Young’s New Blockchain Prototype

On October 30th, Ernst & Young (EY) announced a world-first for distributed ledgers. Called the Ernst & Young Ops Chain Public Edition, the company created a new blockchain prototype that combines the security of the public ledger model with the privacy of the private ledger model—thus a private blockchain.

It does this by using zero-knowledge proof (ZKP) technology on the public Ethereum blockchain. The result, it claims, is a network that will suit the needs of institutions, especially in the financial sector.

But why the need to combine the pro’s of both networks, what’s missing?

The Benefits and Problems of a Public Blockchain, Compared to Private

Anyone is able to join a public blockchain and read or write transactions. As a result, public blockchains are made up of hundreds of thousands of independent computers known as ‘nodes.’ This massive ecosystem means resilience and security—a huge positive of this blockchain model. Bitcoin and Ethereum are well-known examples of this type of blockchain.

However, every transaction on this type of ledger must be verified by each node. And with hundreds of thousands of nodes making up the network, this has become an issue.

It’s an issue because to reach consensus or verification, nodes perform a proof-of-work (PoW). A PoW is a complex cryptographic equation that is solved by the computer. Therefore, transaction times can be slow and costly and this becomes especially evident during times of high activity and volume.

This is given the term scalability, and it refers to a network’s ability to handle and process large numbers of transactions at any given time. Until scalability improves on public blockchains, many enterprises are reluctant to use them.

Another issue facing public blockchains is privacy. Each transaction provides details such as the amount, date, sender address and receiver address. This is visible to anyone on the network. Though many users love this type of transparency for safety reasons, institutions or anyone dealing in larger sums, lack business privacy.

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The Benefits and Problems of a Private Blockchain, Compared to Public

A user must be invited to a private blockchain. As such, the network is considered closed or exclusive and can be referred to as permissioned blockchains. Naturally enough, this network model has fewer members than a public blockchain and so can be more vulnerable to hacking.

If a blockchain is fully private, then the network rules are usually controlled by one organization or by several pre-selected nodes. A consensus is reached not by every member on the network but by the selected group of nodes.

Because private blockchains are just that, private, they are well-suited to business and enterprise adoptions. Transactions are only visible to the limited numbers of invited participants.

Hyperledger is a good example of this type of blockchain. R3 is another, being a global banking and financial institution blockchain consortium based on their distributed ledger technology product, Corda.

However, as stated, what private blockchains gain in privacy, they lack in security. With far fewer nodes on the network, manipulation and/or hacking is far more plausible.

Conclusion

There are the two basic blockchain models in a nutshell. Can Ernst & Young’s new prototype truly solve the scalability issue of a large distributed ledger whilst also providing maximum security and privacy to its users? Sounds almost too good to be true, right?

Featured Image: Depositphotos/© kataklinger

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Blockchain Trade Finance Platform | eTrade Connect Officially Launches

A new Hong Kong-based blockchain trade finance platform has just launched this week that was developed by twelve major global banks, Reuters reported this Wednesday. The platform was developed by Canadian-based HSBC, France-based BNP Paribas, Great Britain-based Standard Chartered, and nine other major banks.

Blockchain Trade Finance Platform

The new platform is called eTrade Connect, and on Wednesday, HSBC said it reduced the time it takes to approve trade loan applications. Usually, these loans would take a day and a half to process, but thanks to eTrade, it has been reduced to four hours.

Trade finance transactions were worth over $9 trillion in 2017. Despite the high volume, most of the industry is paper-based and slow. Trade finance transaction processes and procedures haven’t changed in decades, until now.

“Blockchain has transformed a cumbersome, complex process into a simpler but more secure and efficient way of conducting trade,” said Pricerite Chairman Bankee Kwan in a statement issued by HSBC.

The new blockchain trade finance platform is set to revolutionize how trade loan applications are processed around the world. The eTrade platform digitizes the trade documents and automates many trade finance processes. The first successful transactions exchanged and confirmed on the new platform were purchased by Pricerite, a furniture and household goods retailer.

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Blockchain Shift

This last July, We.trade collaborated with Hyperledger Fabric-powered European blockchain to complete its first live operation. In the mix of this live operation was Deutsche Bank, HSBC, Santander, and Rabobank.

In the near future, most cross-border transactions will be held on blockchain technology, but it just depends on how fast banks can adapt to the new switch. Many larger banks around the world have assigned a group of employees within their company to research and test blockchain. The new eTrade Connect Blockchain trade finance platform launch this week confirms it.

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