Why Blockchain Is Better Than Swift
Blockchain is not just a cryptocurrency, it is an innovative technology of 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 a number of undeniable advantages and can solve many problems faced by centralized services.
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 history, 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 be subjected to a hacker attack, fail, be stolen, destroyed, etc. Blockchain is much more stable in this respect.
• Reliability: All monetary 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, right down to the very first block. Data added to the blockchain cannot be falsified, modified or deleted.
• Blockchain has a very high error tolerance threshold. The system miners check each transaction for the origin of the amounts being sent. Only after receiving the number of confirmations determined by the network can the transaction be added to the block and executed.
What is SWIFT
SWIFT is a cooperative association of 248 banks operating in the territory of 19 countries and was founded in 1973. It operates on the basis of Belgian law, with its headquarters located in Brussels. Every day, the system conducts over 1,000,000 international transfers.
At the moment, SWIFT is the most popular service for multi-currency 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 money transfers through correspondent banks.
SWIFT payment is suitable for:
• conducting major financial transactions in another country;
• payment of goods and services to foreign companies;
• multi-currency transfers.
Why blockchain can replace SWIFT
Blockchain technology can globally change the financial world. For example, since 2013, Bitbond online bank has been operating in Germany, which operates with amounts close to $1,000,000 per month. Its management suggests using Bitcoin transactions instead of traditional payments on loan commitments through the Swift system.
Classic international transfers involve certain fees, which significantly increase the cost of such operations. And besides, it takes time to conduct transactions, sometimes the transfer can take several days.
Blockchain transfers do not have such flaws: there is no dependence on the sender’s and recipient’s place of residence; online transfers come to the account fairly quickly and have a very low commission.
The only risk of cryptocurrency transfers is the volatility of the digital market. But the speed of processing such operations can reduce this disadvantage to a minimum. Blockchain has the largest distributed computing power in the world and its open source software has every chance of improving the bank transfer system.
And not only Bitcoin has the potential to offset SWIFT in the area of financial transactions. Today, more than 150 cryptocurrencies are functioning, 30 of which are considered major, and in 10 of them, the bulk of transfers are made.
For example, a product from IBM, a manufacturer, and supplier of hardware and software, successfully combined the blockchain technology with the usual electronic transfers: the software performs most of the clearing operations, but the final calculation is performed on the Stellar blockchain. The platform will be able to serve more than half of the international retail market in the South Pacific region. You can hire blockchain developers by contacting blockchain companies.
A serious competitor to SWIFT is the Ripple project, which offers the best solutions and successfully cooperates with 7 banks on international money transfers. There are even rumors of a partnership with Ripple Amazon.
The banking systems of Standard Chartered, Santander Bank, and SEB, one of the largest banks in Sweden, use both technologies: the Ripple and Swift blockchain.
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 carried out at a time. The obligatory party of the PVP operation must be a credit company registered in the country from where the transfer is made. You can perform PVP transactions in RUB, KZT, USD, HKD, GBP, EUR, CHF, and CNY.
For the right to become a “new Swift” for banks around the world, 2 US companies are also competing: the banking blockchain-consortium R3 and the blockchain-financial technologies company Digital Asset Holdings.
And the lack of legal regulation hinders the widespread introduction of interesting and progressive technology. Today, banks perform the following functions:
• keeping money;
• making transfers;
• the issuance of credit loans;
• trust operations services;
• brokerage services.
From the moment the world learned about Blockchain technology, there have been different projects to make it more efficient in different areas. Experts even voice the figure of potential cost savings: 15-20 billion dollars a year!
The closest areas where technology will be applied most quickly are payments, clearing transfers, and smart contracts. The lack of regulatory acts inclines start-up projects not so much to compete with banks, as to establish cooperation with them. Despite all the criticism, today banks and financial institutions still have fairly stable positions and confidently keep the initiative in their hands. You can hire blockchain developers by contacting blockchain companies.