Adopting Blockchain Technology Only Remaining Option for Banks

One of the main concerns regarding Bitcoin is the current price volatility.  As a result, merchants are not keen on denominating prices in Bitcoin value and offer the customer a conversion from fiat value to Bitcoin value during checkout.  Once a payment has been received in Bitcoin; it will most likely be converted to fiat currency immediately.  But that situation could be about to change, assuming banks will embrace permissionless blockchains.

Current Financial Ecosystem is Hindering Growth

Fintech is one of the hottest topics in the world of finance these days.  The financial sector is struggling to innovative and exploring the mobile space seems to be the way forward for the time being.  But, to date, there is one inherent flaw with nearly all mobile payment solutions: they rely on aging infrastructure.

Regardless of whether a consumer pays with a credit card directly or links that card to a mobile application to pay for goods and services, the result will be exactly the same.  Payments remain subject to an average 3% fee, it will take a long time until balances are settled and there is still a huge risk for fraud and chargebacks.

For some unknown reason, nearly every payment provider is unwilling to explore options beyond the current financial ecosystem, despite all of it flaws.  Despite best efforts by the banks and teams of engineers focusing on innovating the payment ecosystem, there is still not much room left for improvement.  A fresh wind could put things in a whole new perspective, yet financial institutions are not willing to embrace change so easily.

“Bank bureaucracies are so heavily invested in the expertise and importance of local regulations and standards that it’s extremely difficult for them to cut the Gordian knot and implement seamless global systems.  So they keep trying to re-inject points of control and thus points of vulnerability, into blockchains, e.g. through ‘permissioning’; but this nullifies their main benefits, which come from removing points of vulnerability.” – Nick Szabo told the media in a recent interview.

To make matters even worse, the banking infrastructure is far from secure at this point.  Even though these institutions are responsible for billions in fiat currency, system security leaves a lot to be desired.  As long as a human element remains involved in the intermediary process between making and receiving payments, these flaws will pertain and only grow worse over time.

Giving up that total control is not something that comes naturally to either financial institutions or humans.  This tried and tested system has been working adequately for decades, so until it is completely broken, there is no rush in looking at other alternatives.  This strategy could very well be the downfall of the banking infrastructure as we know it in the not-so-distant future.

Adopting Blockchain Technology Before It Is Too Late

There is a viable alternative right around the corner, which not only offers more security but also works independently and is available at any given time.  Checking the workload of all systems is taking many working hours, which have to be filled in by relying on human employees.  Decentralized blockchain technology could take over these tasks and perform a far better job than any human ever could.

“There are half a dozen or so different entities involved when you do a stock trade on Wall Street, again checking each others’ work.  You typically see full vulnerability to unaccountable third parties only in pathological situations where naive newcomers try to do money on the centralized web, as with Mt.Gox.  But the traditional ‘human blockchain’ is very labor-intensive and very local — each is based on local regulations and customs and thus splits the world up into mutually untrusting national silos.  Permissionless blockchains cut through that like Alexander cutting through the Gordian knot.” – Nick Szabo continued to explain.

One of the biggest innovations offered by blockchain technology comes in the form of smart contracts.  Agreements between multiple parties, overseen by arbitrators – computers, not humans – are to be settled without any delays and any doubt of the outcome.  Smart contracts are not just beneficial to commercial agreements, as they can be extended to any form of relationship.

Source: IB Times

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