A system called a blockchain is emerging as a solution to help people get paid faster for their products or services no matter how far they are apart.
Let's us introduce Adam, he's an exclusive Applion (apple cross-bred with onion) farmer whose products are highly in demand. No, unfortunately not in his own country, it's a cluster of elite chefs across the globe that wants it. Now that he looks forward to sell his unique product globally, he has to be pitted against our conventional banking cross-border payment system, and yes, we know it's taking too long.
Adam complained over how long it took him to receive a payment. Not only that he has to find a work-around to keep his product staying fresh during delivery, he also have to take more burden to keep his production cost covered as payment ised. Thanks to our slow cross-border payment system, that's a sarcasm.
Unfortunately, Adam and his dear Applion are only few of many small fish in the big pond. They either have to wait to get bigger to better sustain themselves or simply got, what's the word..., ah yes assimilated by the bigger fish.
Until someday, a disturbance started to ripple throughout that said pond. A system which called a blockchain is emerging as a solution to help people got paid faster for their products or services no matter how far they are apart.
Uhm, I Heard Mt. Gox Failed Hard By Adopting These Bitcoin's Blockchain
Wait, before we muddled the pond with what happen of Bitcoin and Mt. Gox filing for bankruptcy, let's separate these following three points:
A) Bitcoin is a registered trademark of a system that distributes digital currency.
B) Mt. Gox was a Bitcoin exchange firm that managed and mass-traded bitcoin unit globally.
C) Blockchain (Digital Ledger Technology) is an underlying technology of which all form of digital products are being transferred through secure and publicly accessible ledger.
Let's just ignore the Bitcoin and their digital currency. The Blockchain is the real diamond here.
So, Why Should We Bother?
Depends on who these we are collectively, Blockchain can and will matter to the global world trading. Especially if you're an active commodities import or export trader, and let's not forget the bank equity holders, they'd be the one at the hot-seat.
Let me repeat it in simpler manner. Blockchain will simply kickstart the 4th generation industrial revolution, according to UBS White Paper. So if you plan to stay on same level with those market players in near future, be sure to follow the current development of Blockchain technology.
How Does Blockchain Work?
Let's take a look at our current cross-border payment system, it's slow, yes? It may take around 3-5 working days to get Adam's elite chef's Bank to transfer the money to Adam's domestic Bank. Compare that to your granny bread shop next house, you sell it, you get paid for it immediately.
Much Wow. So Slow.
The conventional cross-border payment system ingrain deep necessity for affiliated banks to stick themselves to one centralized clearing house, simply to make sure no one got screwed over. That's why it took quite a labor intensive and time consuming process to grind through each and every recent global transactions. Can you picture the numbers of files they need to process each day?
Compared to blockchain technology, distributed ledger system potentially give a massive relief for that stupidly slow iteration of labors.
Here's what we quote from UBS whitepaper, when money is transferred between banks, each institution needs to engage in a labor-intensive process of ledger reconciliation to confirm that the correct sums have been processed. A blockchain system, by eliminating the need for such a process, could allow banks to cut middle-skill administrative labor.
Blockchain, or known generally as Distributed Ledger Technology (DLT), is fast, non-decentralized, publicly accessible ledger to track where and by whom each and existing transactions takes place. From the very first transaction ever to the last bit of Adam's Applion!
All that while promising a very secure mechanism that made tampering the data a near-impossibility, because every ledger affiliated within the trade will be synced before you can say ah.
Just imagine a near future where Adam can actually sell his adorable Applion to each of his customer accros the globe and get paid almost immediately so he can manage his production cost with less of a headache. Cheers!
Okay, So How Far Blockchain Is Actually Developing Currently?
It's no secret that large investment banks are racing their way to develop blockchain. Barclays, Credit Suisse, Commonwealth Bank of Australia, HSBC, Royal Bank of Scotland, dan UBS are now connected within R3 network to test how efficient this emulation of distributed ledger is.
If you wondered why, here's the second line of UBS whitepaper quoted above, According to Santander, more efficient digital ledgers could cut costs in the banking industry by up to USD 20 billion a year.
See, that's why Banks around the world are in hypes to develop this blockchain technology!
However, according to Bitpay CEO, Stephen Pair, real world adoption of blockchain would take around at least five years from now.
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2 Comments
Gary
Oct 24 2022
The blockchain is an incredibly brilliant answer for global trade. Imagine that under the old payment system, it could take up to a week to receive funds from a foreign customer, and that the value of the currency may have changed by the time you received the funds. Therefore, a lot of people worldwide, including myself, do not wish to engage in international trade without online marketplaces like Amazon, Shopee, etc.
At marketplaces, we occasionally pay higher admin fees as sellers, which can reduce our profits and prevent us from receiving payment before the buyer receives their order. On the other side, if we sell our product without a marketplace, the issue is still present in that we can't get paid right away. Like me, many sellers prefer that the buyer pay upfront before we deliver. It's safer for us and wise buyers because they need to research the seller's history, which is not our problem. When we receive our money more quickly, we can keep replenishing our merchandise because certain distributors require new funds rather than incurring debt. How about other forms of payment, such PayPal or others? Big no, I say! If the transfer process failed, , it would cost us $5! Additionally, if we transfer money, there is a fee! Because of so many administrative fees, yep, we can only sell within our own nation. Don't consider exporting; as tiny or new businesses, we cannot afford the fee.
To recap: I really favor blockchain! I only ever used it to send bitcoin from my bitcoin wallet to my brother's bitcoin wallet. Free of cost, fees, and waiting. My brother gets his Bitcoin when the transfer is complete. We only require an Internet connection, though! There is no requirement to check with the clearing house, central bank, or whatever they call it. What if Bitcoin or another cryptocurrency replaced traditional cash in online transactions? As a merchant, I can envision the possibility of selling our goods for free and receiving payment in cryptocurrency while also waiting for the exchange rate to our local currency.
And once again, to process money like that only blockchain technology can do it!!!
William
Nov 6 2022
mr Gary:
In 2022, all cryptocurrencies are evolving and growing rapidly but I still dont want to use blockchain payment. All because illegal activity, including drug sales, money laundering and other criminal financing, can be hidden in a blockchain ledger. Law enforcement agencies such as the police, FBI, and others are at great risk because they cannot track criminal assets, when, where, for whom, and by whom. I mean, you can catch me, but you can't catch my money. All because of the blockchain system, which is called decentralized, no third party can be involved in the transaction except the senders and reveicers. And only the sender and the reveicers know the transactions.
What about centralized transaction? Let's take a simple example:
When we make some bank transaction including drawing and keeping money, the bank knows when, where and what we used it for. So even when ex: drug dealers make hard-to-trace cash transactions, police still know what they're doing. how do the police know? They can track the bank accounts of suspected drug buyers to see when money was withdrawn and how much was withdrawn. People say it's anti-privacy these days, but as long as you're not buying or selling illegal stuff, what are they afraid of?
Anyway, I have nothing against blockchain. This simple one-click payment is safe and secure for both sellers and buyers and fast and simple payments that offer many feature, but as long as blockchain uses decentralized systems, not only me but also goverment will reconsider using it.