BY - Ripple’s Marcus Treacher
Ripple, which touts itself as the “Global Settlement Network” and has been involved with various banks to move money around the world, has its own ideas about how Blockchain can and can’t help the banking sector.
Blockchain has been touted as the be all and end all solution for most if not all of the world’s problems. We have seen the application of Blockchain for everything from gift giving to releasing music.
On the face of it, Blockchain appears to be the best possible solution for banking. Bitcoin has already demonstrated that it is possible to move money across the world quickly, efficiently and safely.
Doesn’t it just make more sense just to extend this usability to banks and have them all use some cryptocurrency or another to conduct transactions. What could possibly be wrong with it?
Hybrid approach
Banks by their very nature are in a business where they need to be prudent about the trust and privacy of their customers.
In the case of a public Blockchain, one of the issues that banks face is that vital information is available for every user of the Blockchain.
This problem can be resolved by deploying a private Blockchain, but even then there is a sticky issue of interoperability.
Cointelegraph asked Marcus Treacher, the Global Head of Strategic Accounts at Ripple how suitable Blockchain technology is for banks.
Marcus is of the view that banks need a ‘hybrid approach to Blockchain technology.’
This hybrid approach can solve issues related to transaction privacy and interoperability.
In an emailed response Marcus tells us,
“At Ripple, we have adapted the technology to overcome the hurdles of speed, scalability and cost. Ripple’s technology is designed to connect the world’s ledger and networks without replacing the existing systems and to give financial institutions full control and privacy over their transactions through interledger protocol. Ripple’s software is currently used by Axis and YES Bank (two of India’s largest banks) along with other financial institutions to power real-time payments across borders.”
Speed
Then there is a whole debate about transactions per second and the slowness at which transactions take place on Blockchains such as Bitcoin.
According to themerkle, Ripple is one of the faster cryptocurrencies out there with a ripple network block being generated in just 3.5 seconds.
In order for banks to consider a Blockchain system, it should certainly meet their need for speed.
Marcus Treacher says that Blockchain in its ‘purist form’ is not able to process transactions at the speeds required by banks globally. He thinks that no one has yet been able to put a figure on how many financial transactions occur globally each year but he says to put the scale in perspective, Visa handles 2,000 transactions per second, while Bitcoin, which is ‘underpinned by Blockchain’ can only handle seven per second.
Ripple approach
Talking about the Ripple approach, Marcus says, “Ripple’s hybrid approach is designed to overcome this. Ripple’s technology is enterprise ready and can handle the volume of transactions at speeds required by financial institutions. It is also designed to provide one frictionless experience for financial institutions to send money globally instantly, reliably and cost effectively. Ripple’s record for sending a payment through its own Blockchain is four seconds which is almost near instant and is working to reduce the transfer time even further.”
Getting faster
The end story is when will our bank transactions get faster? This is possibly only of concern to people who are interested in using banks and not for cryptocurrency purists who think that banks are passé.
The present scenario is one where banking transactions can take days and rely on the ironically named SWIFT, an acronym for the Society for Worldwide Interbank Financial Telecommunications.
SWIFT acts like a messaging system, which financial institutions can use to transfer information and instruction using a system of codes securely.
SWIFT replaced an archaic Telex based system and does not really transfer any money but just passes down instructions.
Ripple is fast emerging as an alternative and we are told is being used by over 75 financial institutions as well as central banks.
Dynamics changes
The dynamics are changing and for the end user it may not be long before near-instant transfers are a reality.
As Marcus puts it,
“Ripple recently partnered with the Bank of England to test if Ripple’s solution could be used to support the synchronization of cash movements across BOE’s real-time gross settlement system through interledger protocol. A summary of the insights can be found here. Ripple believes in the Internet of value, where cross-border payments should move at the same speed as information, and as the number of financial institutions adopt Ripple’s solution grows, we believe that we are close to bringing that vision to reality.”