The financial system has undergone significant changes over the past fifty years. Gone are the years when the exchange took place by transferring a piece of gold, silver, a barrel of oil and skins from the mammoth asshole. At the beginning of the state, the fiat currency was issued, which was provided by the state’s resource reserves (gold fund, oil, etc.). But, realizing that all the resources of the world are not enough to secure their ambitions, the treasury began to abandon the binding to the natural wealth, and now we see the uncontrolled emission of most of the world's key currencies.
A small disclaimer: I am not a financier, but a crypto enthusiast and an information security specialist. Therefore, the assessment is biased, picky and has an infotainment character, based on information obtained from open sources. Also, the information may not be relevant to individual organizations in individual countries.
One of the reasons for the emergence of cryptocurrency was the presence of intermediaries between the sender and the recipient. Financial institutions control all Fiat transfer nodes from sending and sending to final delivery. It would seem that there is nothing bad in it, because the issue of the safe transfer of funds really should be handled by qualified specialists from the relevant organizations. Because the first thing that is put at the forefront is security. There is no point in the speed of the transfer, if every second transfer is lost somewhere or unknown. In addition, each operation in the bank is protected both technically and legally. And so around the world.
As I just said, for a bank, speed is not the main thing. But is this true? Micropayments, transactions in the millions of dollars or whatever else - everything must go with sufficient, relevant speed. The question “why?” Should not even arise, because any major transaction of the company is a momentary question. Buying a cup of coffee should not take a day. And so in everything. The current realities of life show that the movement of funds must be so quick that it covers the difference with the actual transfer of funds from hand to hand.
Is it possible to achieve this?
First of all, you need to make a clear distinction between transaction and transfer. In the banking sector, this is essential. A transaction is a debt receipt processed by the system automatically and almost instantly. Transfer is the real movement of funds from one bank to another.
How it works? You make a transaction by paying dinner at a restaurant, money is debited instantly from your account and credited to the restaurant’s account. Everything? Not! Then the money is physically sent from your bank to the bank serving the legal account of the restaurant. Well, when the bank is the same, then it is a question of one day. If not, the money can go for several days. And if you are traveling and paid in another city / country? Here the delivery of funds will take about five days.
You do not think about it, for you the money was written off instantly. But it can even give you a headache.
Let's consider the Fiat movement in classic financial companies.
When it comes to transferring funds, most can recall such methods as Swift, American Express, Western Union, as well as a number of representative offices. I will dwell on the first, referring to a wonderful overview article from Hiktimes (list of sources at the end of the article).
Without going into historical details, appealing only with dry figures, I will tell the following about Swift: more than 7,000 financial organizations and banks from 190 countries are included in this system. Transaction speed from 2 to 15 minutes depending on the degree of urgency. But the transfer takes up to five days. And yet, in addition to the speed itself, it is important to take into account the cost of such a referral. And it varies from the number of issuers between the sender and receiver. As you need to pay for sending, receiving, transaction of the Swift network itself, as well as services of each issuer participating in the transaction.
At the same time, Swift provides security for translations. And this, of course, is a plus. But they are not the only one.
All over the world, cards are widespread, on which the inscriptions Visa or MasterCard (Maestro) stand. In Russia, recently appeared its analogue (MIR). How do they differ from money transfer companies?
First of all, these companies provide their chips that organize the identification of the cardholder. As well as transaction services.
As in the example with the restaurant above, you conduct the transaction by entering the pincode on the chip supporting terminal. After that, the bank system issues a debt receipt, which is sent to the payee’s bank.
The speed of transactions in the network VisaNet on January 10, 2018 is registered at a rate of 24.000 transactions per second. What does this give us? Large-scale exchange of debt promises. At the end of the day, collectors around the world begin to transfer funds between banks to provide physical transfer of funds. A reasonable question may arise, but what is the matter for us, how does it work physically, if this very receipt is enough?
First, despite the transaction, the funds will be unavailable until the physical arrival at the issuing bank, if you are a legal entity. A day or two, it seemed a short time, and you can suffer but a five-day wait for funds from another country for business can turn into a real problem.
Secondly, even if you are an individual, you may also have problems. There is a type of debit card called overdraft. This means that you can go into the minus on a debit card. If you have just received money, then having paid them, you can see the negative balance on your account, which you can enter into a stupor. Of course, the money will arrive, and you will get out of the minus, but this is only after their physical arrival at the bank. The same situation with translations. If you come to withdraw money to the bank, you may have problems, since the issuing bank of your account may refuse to withdraw (through the cashier). But you will be able to withdraw money through the terminal or in another bank, because another debt receipt will be created.
Speaking of digital assets, the world-famous example is PayPal, whose application processing speed is about 190 transactions per second, which in reality takes from several minutes to days. This is a service intermediary between you and other companies around the world, which for the commission assumes all the functions of sending money, and also provides appropriate guarantees. Then he uses one of his accounts to send funds to the recipient and performs the necessary iterations on security and insurance. Depending on the contract with the bank that provided the account in the final recipient country, the necessary money manipulations take place.
All these methods exist for a reason, and they are really necessary even now, because they provide something more than simple dispatch: usability, delivery guarantee, insurance of funds movement. Today, banks and intermediary companies are primarily services that provide convenient services.
In the second part, I will touch on technologies that seek to oust the banking system we are used to, but before that a small postscript in the form of real realization of unreal money.
There is such a Yap nationality in Micronesia. They have a unique financial system. Rai stones are used as a unit of account. And everything would be fine, but only these stones can weigh more than one hundred kilograms (the largest weighs about 4 tons), and are made from limestone brought from the neighboring islands.
How does currency exchange happen? Just all the inhabitants of the islands know to whom what stones belong. Does a stone own one or several people, and the stones themselves can not even be moved at the same time, because they are all under consideration.
Once local sailors, transporting one such stone from island to island, landed in a storm. People survived, but Rai's stone went to the deep. Returning to shore, they told what had happened. Do you think that stone is out of circulation? Not! He continued to exist in the system and participate in operations, but remained calmly at the bottom of the sea.
This is an indicative story in which the financial system can be transparent. And what else, in a more modern way, wait for the second part.
Links to a number of sources:
1.
About Swift on GeekTimes2. The
speed of the main payment systems in January 20183.
Wiki page on the Yap people