R3 – R3CEV Blockchain – BitcoinWiki

Benefits of Blockchain Technology in the Banking Industry

Benefits of Blockchain Technology in the Banking Industry
Link to original article: https://block.co/benefits-of-blockchain-technology-in-the-banking-industry/
The rapidly growing interest around blockchain is creating an increased amount of use cases across multiple industries, and a high demand for adoption by many governments. Banking, financial services, and insurance (BFSI) industry is predicted to be drastically transformed by this disruptive technology. According to Allied Market Research 2019, the blockchain value in the BFSI market reached $277.1 million in 2018 and is projected to reach $22.46 billion by 2026. Blockchain technology has the potential to solve the pain points of the current banking systems and operations including security, transparency, trust, privacy, programmability, and performance.
What is Blockchain?
Blockchain is the technology behind the Bitcoin cryptocurrency, that was proposed by Satoshi Nakamoto in 2008, as a response to the failing financial system during the crisis. It is often associated and confused with Bitcoin, but the scope of the technology is much wider. It is also important to differentiate between the Distributed Ledger Technology (DLT) and blockchain, as the terms often used interchangeably. All blockchains are DLT, but not all DLTs are blockchains. DLT is simply a decentralized database managed on a peer-to-peer basis.
“Blockchain is a type of DLT, a subcategory of a more broad definition, much like how the word ‘car’ falls under the umbrella term ‘vehicles’ and ‘Satoshi Nakamoto’ falls under ‘geniuses’.”
In essence, blockchain is a continuous sequential chain of records (‘blocks’) that are chronologically linked together with the aid of cryptography, to ensure immutability. These records are immutable, as any change to the information recorded in a particular block is stored in a new block. Moreover, the use of modern encryption algorithms enables the security of all the records from copying or editing by other users of the system. Blockchain can be programmed to record not only financial transactions as cryptocurrency but almost anything of value (Deloitte Insights, 2019).

https://preview.redd.it/k76j8u5401751.png?width=940&format=png&auto=webp&s=e7f6573a230c816a112ae4bf561f3501c353ad32
How Blockchain Can Improve Banking Industry?
The modern banking system is not perfect and commercial banks have not changed a lot to their servicing structure since the 1970s (Haycock & Richmond, 2015). Running a bank still requires large numbers of the workforce, reliance on quite outdated systems, bloated structures with high probabilities of human error, and manual work. There are several aspects, which could be improved by the application of blockchain technology in banking operations:
1) Security Enhancement
In the UK the overall value of the financial fraud losses (e.g. payment cards, remote banking, cheques) equaled £844.8 million in 2018. The situation is even worse in the US — $170 billion average yearly losses in the financial sector. According to KPMG’s Global Banking Fraud Survey 2019 the total volume, number, and value of the fraudulent activities are drastically increasing every year.
The nature of banking operations dictates the need for centralized systems, which proved to be vulnerable and subject to cyber and hack attacks. Now, the blockchain is immutable as it operates on the principles of decentralization and transparency, and all the network participants get an identical copy of the distributed ledger of transactions. Thus, if applied in banking, blockchain can increase the validity and security of the financial transactions, eliminate the need for third-party authentication, and solve the issue of a single point of failure and hacks.
Moreover, since each transaction on the blockchain has its unique fingerprint (hash) it can be easily traced and verified. Such functionality makes blockchain a great tool to combat money laundering and reduce fraudulent or illegal transactions (Guo & Liang, 2016).
2) Improving Financial Transactions Efficiency
As we mentioned previously, the utilization of obsolete mechanisms and operational systems slows down the performance of banking institutions and provides ground for human error, delays, and system failures. All these inefficiencies could be solved by applying blockchain technology. Take for example the time-consuming bilateral exchange. The process of data reconciliation needed for it could be simplified, as on the blockchain, it is inherently part of a transaction (IBM, 2016).
Blockchain and its decentralized nature eliminate intermediaries in banking operations, which significantly cuts transaction costs and boosts efficiency (Cocco et al., 2017). Blockchain does not require intermediaries, enables cross-border transfers and micro-payments, while drastically decreasing operational costs. Such transactions in the traditional banking environment are expensive (from 1% of the amount), and constitute a huge expense on a global scale. In cryptocurrency networks, transfers may range from a few minutes down to milliseconds, and the transaction fees are decided by the market forces, meaning users have the option to set their transaction fees (Deloitte, 2017).
3) Workflow Simplification
Blockchain can simplify the current complex workflow in banking institutions. As any operation can be traced, the ability to automate processes significantly reduces costs and the need for manual work. Moreover, it is impossible to make retroactive changes on the blockchain. This guarantees data immutability and excludes the human factor, thus the probability of error, data tampering, or even leakage. Using blockchain in banking operations will digitize and automate tons of manual work, greatly boost the productivity of the financial institutions and eliminate the probability of mistakes, delays, and errors.
4) Enhanced KYC & AML
Some financial institutions find it difficult to deal with problems related to policies such as Anti-Money Laundering (AML) and Know Your Customer (KYC). Numerous organizations are not able to solve these problems, due to the rapidly escalating costs. The adoption of the blockchain technology will enable the creation of a system where all clients’ information may be stored safely, making the independent verification an easy process or even automated securely. In this way, both AML and KYC processes will become simpler and easier, as all involved organizations will share the same system and the information will be updated in real-time, perhaps through the use of Digital Identities. In addition to this, blockchain technology will assist the organizations to minimize their administrative costs and reduce the workload.

https://preview.redd.it/200e0ap701751.png?width=600&format=png&auto=webp&s=6caaf26c53786c1341b7905ca33dd340f8929059
5) Smart Contracts
Smart contracts are an innovative development of blockchain technology which enables for time and resources saving, as they do not require a third-party interaction. Traditional contracts do not differ a lot from smart contracts, however, their key benefit is that obligations are automatically enforced and cannot be avoided by anyone.
When smart contracts are integrated with blockchain technology, we enjoy benefits such as security, automation, immutability, and transparency. The integration of smart contracts in the financial sector will provide opportunities for transparent auditing and real-time remittances. Traditional contracts are paper-based and require financial institutions to invest money in paperwork and maintain records. These records can be easily manipulated as they are on paper. Smart contracts offer bank tools for bookkeeping based on blockchain. Smart contracts have already been applied to the financial industry to gain greater automation.
6) Decentralized Finance
Another application of blockchain is Decentralized Finance, also known as DeFi. This application is at an early stage but its disruptiveness enables millions of people across the world to have access to financial services. DeFi refers to decentralized applications, financial smart contracts, digital assets as well as protocols popular as DApps, which are built on public blockchains such as Ethereum and Bitcoin. The aim of DeFi is the creation of a decentralized financial system that will not depend on the traditional banking system.
Decentralized Finance offers numerous benefits to the users as it eliminates middlemen, enables everyone who does not has access to financial services to enter the global economy as it is a permission-less technology, and enables innovation with the combination of DeFi products. Besides, the use of decentralized finance increases the symmetry of information and democratizes financial services in this sense. The evolution of DeFi over the years means that most people around the world are only limited by their imagination when considering how to gain benefits from the financial ecosystem. However, there are still many complexities that need addressing to further expand the full extent of the possibilities of DeFi.
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submitted by BlockDotCo to u/BlockDotCo [link] [comments]

Adoption, Remittance, Venezuela, ... -- A Proposal for Mass Adoption

Adoption is crucial! -- Adoption is king!
This has been pointed out in the interview with Colin, https://www.reddit.com/nanocurrency/comments/7un575/nano_xrb_creator_colin_lemahieu_interview, starting at min 27:35 and in several other recent posts.
We are currently counting 1530 cryptos. The game is called monopoly or survival of the fittest. The cryptos with the fastest and deepest market penetration will win. The others won't.
So what are the markets?
1) Real stores.
2) Online stores.
3) Vendors.
4) Gaming.
5) The music market.
6) The video market.
7) Donations.
8) Payments for online content (articles, videos, ...)
9) Remittances!
https://en.wikipedia.org/wiki/Remittance
Remittances are playing an increasingly large role in the economies of many countries. They contribute to economic growth and to the livelihoods of those countries. According to World Bank estimates, remittances will total US$585.1 billion in 2016, of which US$442 billion went to developing countries that involved 250 million migrant workers. For some individual recipient countries, remittances can be as high as a third of their GDP. ...
The remittance market in the U.S. - where the money goes, https://www.bbva.com/en/the-remittance-market-in-the-u-s-where-the-money-goes/
I believe that NANO will be a huge player in the entire crypto market because of the strong and committed community! -- This is one of our strongest advantages!
Unfortunately this original article by a Venezuelan living in the US had been deleted: https://www.reddit.com/Bitcoin/comments/7t0k1x/venezuela_a_prime_example_of_bitcoin_usefulness/?st=jcvnea4u&sh=74676c61
However: Go to https://www.reddit.com/Bitcoin and search for "Venezuela" and/or "remittance". -- It is huge!
Do you know any Mexican, Venezuelan, Honduran in your neighborhood, ... or any refugee in Europe, ... or any Asian worker in the Middle East?
Let's start educating them on NANO ... and give them a technical hand.
I consider this to be huge, low-hanging fruit!
It will be up to us, how fast and big NANO grows.
So, I am making the pledge, that within this month of Feb, I will address at least 10 people who so far have used a different and more expensive method of sending money "home".
What will the people in their home countries do with NANO?
Well, anything! -- People adopt to new currencies! -- Let them! -- They will figure this out. -- Here is the current price: https://www.worldcoinindex.com/coin/nano, valid worldwide.
(It's about time to bring some hundred million people into the game!)
How can they get their NANO?
1) We have managed as well.
2) daghub will open its doors in Q2, https://www.daghub.io.
Let's make daghub massively employ more staff ... to be able to manage the run on the bank!
And let's make this family restaurant in Venezuela get some massive NANO: https://www.reddit.com/nanocurrency/comments/7xn917/went_to_a_local_restaurant_that_accepts_btc_and/
submitted by Koba7 to nanocurrency [link] [comments]

Has anyone ever thought of a new type of payment system 2

Has anyone ever thought of a new type of payment system 2

https://preview.redd.it/skvs6r0gvzz21.png?width=1958&format=png&auto=webp&s=b106fe9a7cc282cce9d5b2451cfad10601f43855
I have received a lot of feedback after my post "Has anyone ever thought of a new type of payment system?". Thanks to all of those who tried to analyse and set out their vision. Special thanks to those who doubted my competence and brought out their own understanding of the processes and entered into a dispute. And very special thanks to those few who used only accusations in scam and profanity as arguments - they made me understand that it is impossible to explain to everyone, no matter how hard you try. Nevertheless, thanks to the first two categories It became clear to me that the information presented in the article is incomplete and needs to be described in more detail, but of course, only to the first two categories.
Disclaimer
The chain of relationships listed below has been greatly simplified to facilitate understanding. Consciously omitted many things, the description of which would take a huge amount of space.
Introduction.
Majority who oppose technology do not look up to the future and, most importantly, have no idea about the past. Technologies are similar to science, innovation, they can frighten with their ideas and cause rejection in the beginning. After adoption, adherents become ardent followers and hardly recognise something new that goes against already established convictions. Bethink of Christianity - some tried to eradicate it, destroy it, burn Christians on fires, feed them to lions, killed unarmed people in gladiatorial battles. Later, Christianity itself has struggled with dissent - Galileo, Copernicus, Bruno. Examples that are closer to us in time are cars with internal combustion engines, telephone, radio, airplanes ... all these inventions met resistance at the stage of their appearance and caused a storm of ridicule and aversion and misunderstanding of the “use cases”. Not such a distant example with the advent of the Internet, when the web pages were so simple and uninformative that the majority of the population of the Earth simply did not take it seriously and, moreover, did not see its use. There are many such examples. And even the temporary absence of the “use cases” does not indicate the uselessness or irrelevance of the technology, it indicates that the world is not ready yet to apply the technology at the moment due to habits, beliefs, interests, and sometimes, incompetence. The topic of the blockchain and cryptocurrency in particular is susceptible to reproaches in the absence of its practical use, which is understandable due to the youth of the technology and its initial stage of formation and development. In addition, in some cases, the line should be drawn between the cryptocurrency and the blockchain technology itself, since the majority of people do not see the technology itself, but only its derivative in the form of a mass of coins, most of which are dummies and really have no application. But, nevertheless, even at the present stage of development of the blockchain technology, the talk about the lack of “use cases” indicates not owning information, well, or not wanting to see the obvious - merchants, Jaguar, Facebook...
All this applies to today's financial sector conditions. And that is obvious, because the technology of making payment via plastic cards comes from the 1950s. Several generations of people grew up on the existing system and have a long-established habit of using it. Several generations of banks earn huge amounts of money on commissions that customers pay. Several generations of companies providing these payments have changed leadership. Some have gone, and those who remain hold such strong positions and their profits are so huge that they have no reason to rejoice in large numbers for the technology - after all, they can shake their incomes, and the scale of these companies does not allow them to respond quickly to changing time. But even with this in mind, the interest of these companies in technology is obvious. Such pillars like VISA, MC, WU, Barklays, BBVA and many others either look for ways to introduce the blockchain technology or already use it. But, nevertheless, attempts to introduce the technology are still being applied to the existing payment system, credit, and financial relations. Now, I will introduce my own arguments and briefly describe essentially new approach to making payments.
Part One - "What are the existing payment systems and how do they work."
In today's payment system relations, there are six subjects:
  1. Client - buyer of the goods;
  2. Bank-Issuer, where the client keeps his money;
  3. Seller of the goods (Merchant), which accepts the client's card for payment;
  4. Bank Acquirer, where the Merchant keeps his account;
  5. Switch - payment system (PS) that connects the Issuer and Acquirer (for ease of understanding - VISA, Master Card, AMEX, Union Pay, etc);
  6. Processing center - an enterprise certified by the PS, which processes payments of the Bank-Acquire and Bank-Issuer;
  7. There are still various clearing and settlement centers) authorized by payment systems and local securities in different countries to carry out payment operations and perform clearing processes, i.e., reducing settlements between banks' balances, but we will omit them for simplicity of explanation and understanding, since these functions Centers can be performed by Bank-Equal and, in our example, to simplify the description.
Suppose that an American client, whose account is held in a certain American bank, came to Australia to buy coffee. He pays with his plastic card, putting it to the merchant's terminal (POS-terminal). Money from a client is in the account of an American bank, how does the Merchant receive it? POS-terminal Merchant belongs to the bank in which the Merchant holds its account in Bank Acquirer.
  1. The terminal reads the client card and sends information about it to Bank-Acquirer;
  2. Bank-Acquirer is not connected in any way with the Bank-Issuer, therefore, it cannot request directly the payment, and the transfer directly from America to Australia will not allow the client to enjoy hot coffee. Therefore, Bank-Acquirer asks the Processing Center about the availability of the required balance on the client's card;
  3. The processing center requests Switch for the availability of the required balance on the client card;
  4. Switch contacts the Bank-Issuer and requests the availability of the necessary balance on the client's account;
  5. Bank-Issuer confirms to Switch the existence of the required balance (or does not confirm, then the refusal of the transaction occurs);
  6. Switch confirms to the Processing Center the presence of the required balance on the client’s card (account) and gives a signal to the terminal to confirm the payment;
  7. The processing center confirms to the Bank-Acquirer the existence of the necessary balance on the client’s card (account) and gives a signal to the terminal to confirm the payment;
  8. The client has paid and he leaves satisfied;
  9. Bank-Acquirer transfers the sum of purchase to the merchant's account;
  10. The Bank-Acquirer transfers information about the payment made to the Processing Center and issues a claim for compensation of the payment amount;
  11. The processing center transfers information about the payment the Bank-Acquirer made to Switch, since, in fact, the Bank-Acquire has transferred the money to its merchant;
  12. Switch pays from its funds to the Bank-Acquire (for simplicity of explanation, we omit here the clearing system of settlements through authorized clearing centers (in fact, the process is much more complicated);
  13. Switch bills the Bank-Issuer (for simplicity of explanation, we omit here the clearing system of settlements through authorized clearing centers (in fact, the process is much more complicated);
  14. Bank Issuer paid to Switch (for simplicity of explanation, we omit here the clearing system of settlements through authorized clearing centers (in fact, the process is much more complicated)
We can introduce scheme:

Traditional processing scheme
Switch is an intermediary between all the parties of the entire system and receives a commission for all transactions. Who can even imagine the infrastructure setting expenses to operate the processes of settlement analysis, comply with the requirements of KYC / AML, match modern safety requirementsfor the launching of data centers around the world. Of course, commission is the source to operate.
For ease of explanation, we imagine that the Switch is the processing center.
Conceptually, costs can be divided into Organizational and Technical
  1. Organizational:
  • creating jobs for staff of specialists, most of which are expensive: system administrators, engineers, 24 hrs. support services and an authorization center;
  • making decisions of the placement of software and hardware systems. Organization of your own premise(s) or placement of your software and hardware systems in the premises of a third-party company (outsourcer);
  • development of a system for controlling access to the premise(s) of the processing center, including such procedures as: organizing access monitoring, employees to the processing center premises, developing work procedures in high-security areas, etc .;
  • making a decision on the choice of the supplier of software necessary for building a processing center certified by an appropriate payment system;
  • deciding on the choice of suppliers of related services (for example, courier services and / or gateways for sending SMS or PUSH messages, and the subsequent construction of contractual and working relations with it;
  • development, coordination and implementation of procedures for correct work with cryptographic equipment and quantities, and issuance of domestic regulations governing the work of security officers (security officers);
  1. Technical:
  • The purchase of hardware (system units, hard drives, RAM (random access memory, Does RAM), uninterruptible and backup power supplies, racks, etc.),
  • the purchase of the server software (operating systems, database systems, etc.), including license fees vendors of such software,
  • the purchase of cryptographic equipment necessary for the generation and correct processing of operations on cryptographic values, such as CVV or CVC;
  • information security solutions (ensuring compliance with the requirements of PCI DSS, federal laws, protection document management systems);
And such (all of the above) costs must be borne constantly, if we are talking about expanding your presence. Switch (processing centers) can cover these costs only with a part of the commission for the implementation of monetary transactions, which is borne by the other participants in payment relations.
Since the recipient of the client’s money is ultimately the merchant (seller / trader), it is logical that the entire amount of the commission is charged to him. This commission is called Interchange Fee (hereinafter - IF), it can be from 0.7% to 5% depending on the riskiness of operations. For example, an ordinary store, on average, pays 1.5% of IF, while, for example, an online store can pay 5%.
It is noteworthy that for the client this commission is not visible and in 90% of cases he does not even know about it. Such a commission is included in the price of the goods. That is, by selling you a product for $ 100, the Merchant will receive (if he pays IF = 2.24%) $ 97.76. The Switch distributes these $ 2.24 between the participants as follows:
Traditional Processing (TP)
Consumer pays$ 100.00Overall Fee$ 2.24Issuer Receives$ 1.80Acquirer Receives$ 0.31Visa Receive$ 0.13Merchant Receives$ 97.76
o we pulled how the current payment system functions. Now, in detail about how this can function using blockchain technology.
Part 2 - “New payment system and how it works.”
One of the main significant achievements of blockchain technology is excluding of intermediaries. In the field of finance, this gives special advantages — cost savings.
A new type of payment systems based on blockchain can successfully use this advantage. Naturally, there are necessary assumptions for the use of this technology in the financial sphere:
  1. It is necessary that the two contractors and the Merchant are in the same blockchain;
  2. Merchant must have a POS terminal transmitting information to the blockchain;
  3. Banks must open clients wallets and implement data exchange between blockchain and ABS (automated banking system) of the bank,
  4. In order to comply with the requirements of KYC / AML, private keys are kept by the bank;
  5. Must be a blockchain base Switch to physically conduct clearing of payments between the Merchant and the Issuing Bank.
Just as in the situation above with our American customer buying coffee in Australia: the same American and Australian banks, but they are in the same blockchain. It is convenient to send just cryptocurrency, of course, but the question immediately arises - “Why does the Merchant need it and what will it do with it? How will he solve the issue of currency fluctuations? ”Immediately make a reservation that I will not describe the technology here thoroughly, since this is a commercial secret, but briefly, I will describe the principle of operation.
So, two banks are in the same blockchain. In the blockchain, there is a special protocol implemented that allows to “mirror” the client fiat accounts to the blockchain, thus, the exchange of information between the client’s account and the blockchain takes place on an ongoing basis.
  1. The client brings the card to the merchant's terminal; the terminal requests the availability of the required amount in the blockchain. If the required amount is available (if not - decline), the protocol starts the transaction, which the client confirms (fingerprint);
  2. The Fiat amount on the client’s account of the Bank-Issuer is held by the Bank (thus collaterizing the amount of cryptocurrency to be transferred);
  3. The required, “mirror” amount in cryptocurrency is transferred to the Merchant's wallet;
  4. Merchant's wallet, having received the transaction, sends information to the Merchant Terminal, payment is accepted;
  5. The American enjoys coffee. Now, the Merchant has a cryptocurrency on the wallet, Bank-Issuer hold amount in fiat currency;
  6. Switch (the very same payment system), “buys” the cryptocurrency for the Australian dollar from the Merchant in Australia, in America, the Bank-Issuer transfers Switch a collaterized amount of USD.
Again, for ease of explanation, I omit some points that accompany the clearing process.
The scheme of the work of the new payment system can be represented as follows:

Decentralized Processing scheme

What is the advantage?
  1. Switch can set the price for its services significantly lower than existing today, because it saves on the entire infrastructure - hardware, data centers, personnel.
  2. The Bank-Acquirer does not lend, in fact, the Merchant’s account, so its remuneration can be significantly reduced. In addition, in this chain of relations Bank-Acquirer is not needed at all, because the Merchant can hold an account immediately in the Switch;
  3. There is no need to create processing centers, which means that you do not need to bear the costs of creating infrastructure;
  4. The cost of the transaction in the blockchain network is from $ 0.01- $ 0,05;
  5. Transaction time - from 1 to 5 seconds;
In numbers, everything looks like this:
Decentralized Processing (DP)SavingConsumer pays$ 100.00Overall Fee$ 0.650-70.98%Issuer Receives$ 0.35Acquirer Receives$ 0.30Switch$ 0.13Merchant Receives$ 99.22-65.18%
The savings in the process are obvious! The merchant receives 65.18% more money on his account. Bank-Acquirer receives almost as much as in the scheme with traditional processing. The Bank-Issuer receives less remuneration, but under a scheme with decentralized processing, it bears much less expenses on security of payments, payment verification, customer verification, respectively, personnel costs, which always constitute the bulk of costs, decrease.
Conclusion.
In addition to the above economic factors, a new type of payment system has another, perhaps one of the most important advantages compared to traditional PS - to provide an infrastructure for the issuing of plastic cards for issuing banks is much cheaper than traditional PS.
The main problem that the new PS will face is the speed of processing payments. VISA today can handle 150 million transactions per day or 1,700 transactions per second with the possibility of securing up to 24,000 transactions per second. Until a certain time, no public blockchain could solve this problem. Now, compared to the published data on the speed of other blockchains on main net, NeuronChain can confidently claim 2nd place at its speed of 100,000 tps, so this issue is no longer a deterrent.
Of course, to implement the payment relations described above, it is necessary to do a great deal of work, not only on the IT part, but also on technical and legal issues, to spend tremendous efforts on marketing and explaining the processes of the participants in the relationship. But impossible is nothing. In any case, the blockchain technology gives us this opportunity.
submitted by neuronchain to NeuronChain [link] [comments]

Has anyone ever thought of a new type of payment system - 2

Has anyone ever thought of a new type of payment system - 2

https://preview.redd.it/joq0knsisvx21.png?width=1958&format=png&auto=webp&s=fa6c9f6cce01bd413fc961fe54bb9f950e274112
I have received a lot of feedback after my post "Has anyone ever thought of a new type of payment system?". Thanks to all of those who tried to analyse and set out their vision. Special thanks to those who doubted my competence and brought out their own understanding of the processes and entered into a dispute. And very special thanks to those few who used only accusations in scam and profanity as arguments - they made me understand that it is impossible to explain to everyone, no matter how hard you try. Nevertheless, thanks to the first two categories It became clear to me that the information presented in the article is incomplete and needs to be described in more detail, but of course, only to the first two categories.
Disclaimer
The chain of relationships listed below has been greatly simplified to facilitate understanding. Consciously omitted many things, the description of which would take a huge amount of space.
Introduction.
Majority who oppose technology do not look up to the future and, most importantly, have no idea about the past. Technologies are similar to science, innovation, they can frighten with their ideas and cause rejection in the beginning. After adoption, adherents become ardent followers and hardly recognise something new that goes against already established convictions. Bethink of Christianity - some tried to eradicate it, destroy it, burn Christians on fires, feed them to lions, killed unarmed people in gladiatorial battles. Later, Christianity itself has struggled with dissent - Galileo, Copernicus, Bruno. Examples that are closer to us in time are cars with internal combustion engines, telephone, radio, airplanes ... all these inventions met resistance at the stage of their appearance and caused a storm of ridicule and aversion and misunderstanding of the “use cases”. Not such a distant example with the advent of the Internet, when the web pages were so simple and uninformative that the majority of the population of the Earth simply did not take it seriously and, moreover, did not see its use. There are many such examples. And even the temporary absence of the “use cases” does not indicate the uselessness or irrelevance of the technology, it indicates that the world is not ready yet to apply the technology at the moment due to habits, beliefs, interests, and sometimes, incompetence. The topic of the blockchain and cryptocurrency in particular is susceptible to reproaches in the absence of its practical use, which is understandable due to the youth of the technology and its initial stage of formation and development. In addition, in some cases, the line should be drawn between the cryptocurrency and the blockchain technology itself, since the majority of people do not see the technology itself, but only its derivative in the form of a mass of coins, most of which are dummies and really have no application. But, nevertheless, even at the present stage of development of the blockchain technology, the talk about the lack of “use cases” indicates not owning information, well, or not wanting to see the obvious - merchants, Jaguar, Facebook...
All this applies to today's financial sector conditions. And that is obvious, because the technology of making payment via plastic cards comes from the 1950s. Several generations of people grew up on the existing system and have a long-established habit of using it. Several generations of banks earn huge amounts of money on commissions that customers pay. Several generations of companies providing these payments have changed leadership. Some have gone, and those who remain hold such strong positions and their profits are so huge that they have no reason to rejoice in large numbers for the technology - after all, they can shake their incomes, and the scale of these companies does not allow them to respond quickly to changing time. But even with this in mind, the interest of these companies in technology is obvious. Such pillars like VISA, MC, WU, Barklays, BBVA and many others either look for ways to introduce the blockchain technology or already use it. But, nevertheless, attempts to introduce the technology are still being applied to the existing payment system, credit, and financial relations. Now, I will introduce my own arguments and briefly describe essentially new approach to making payments.
Part One - "What are the existing payment systems and how do they work."
In today's payment system relations, there are six subjects:
  1. Client - buyer of the goods;
  2. Bank-Issuer, where the client keeps his money;
  3. Seller of the goods (Merchant), which accepts the client's card for payment;
  4. Bank Acquirer, where the Merchant keeps his account;
  5. Switch - payment system (PS) that connects the Issuer and Acquirer (for ease of understanding - VISA, Master Card, AMEX, Union Pay, etc);
  6. Processing center - an enterprise certified by the PS, which processes payments of the Bank-Acquire and Bank-Issuer;
  7. There are still various clearing and settlement centers) authorized by payment systems and local securities in different countries to carry out payment operations and perform clearing processes, i.e., reducing settlements between banks' balances, but we will omit them for simplicity of explanation and understanding, since these functions can be performed by Bank-Acquirer and, in our example, to simplify the description).
Suppose that an American client, whose account is held in a certain American bank, came to Australia to buy coffee. He pays with his plastic card, putting it to the merchant's terminal (POS-terminal). Money from a client is in the account of an American bank, how does the Merchant receive it? POS-terminal Merchant belongs to the bank in which the Merchant holds its account in Bank-Acquirer.
  1. The terminal reads the client card and sends information about it to Bank-Acquirer;
  2. Bank-Acquirer is not connected in any way with the Bank-Issuer, therefore, it cannot request directly the payment, and the transfer directly from America to Australia will not allow the client to enjoy hot coffee. Therefore, Bank-Acquirer asks the Processing Center about the availability of the required balance on the client's card;
  3. The processing center requests Switch for the availability of the required balance on the client card;
  4. Switch contacts the Bank-Issuer and requests the availability of the necessary balance on the client's account;
  5. Bank-Issuer confirms to Switch the existence of the required balance (or does not confirm, then the refusal of the transaction occurs);
  6. Switch confirms to the Processing Center the presence of the required balance on the client’s card (account) and gives a signal to the terminal to confirm the payment;
  7. The processing center confirms to the Bank-Acquirer the existence of the necessary balance on the client’s card (account) and gives a signal to the terminal to confirm the payment;
  8. The client has paid and he leaves satisfied;
  9. Bank-Acquirer transfers the sum of purchase to the merchant's account;
  10. The Bank-Acquirer transfers information about the payment made to the Processing Center and issues a claim for compensation of the payment amount;
  11. The processing center transfers information about the payment the Bank-Acquirer made to Switch, since, in fact, the Bank-Acquire has transferred the money to its merchant;
  12. Switch pays from its funds to the Bank-Acquire (for simplicity of explanation, we omit here the clearing system of settlements through authorized clearing centers (in fact, the process is much more complicated);
  13. Switch bills the Bank-Issuer (for simplicity of explanation, we omit here the clearing system of settlements through authorized clearing centers (in fact, the process is much more complicated);
  14. Bank Issuer paid to Switch (for simplicity of explanation, we omit here the clearing system of settlements through authorized clearing centers (in fact, the process is much more complicated)
We can introduce scheme:

Traditional Processing scheme
Switch is an intermediary between all the parties of the entire system and receives a commission for all transactions. Who can even imagine the infrastructure launching expenses to operate the processes of settlement analysis, comply with the requirements of KYC / AML, match modern safety requirements for the launching of data centers around the world. Of course, commission is the source to do it.
For ease of explanation, we imagine that the Switch is the processing center.
Conceptually, costs can be divided into Organizational and Technical
  1. Organizational:
  • creating jobs for staff of specialists, most of which are expensive: system administrators, engineers, 24 hrs. support services and an authorization center;
  • making decisions of the placement of software and hardware systems. Organization of your own premise(s) or placement of your software and hardware systems in the premises of a third-party company (outsourcer);
  • development of a system for controlling access to the premise(s) of the processing center, including such procedures as: organizing access monitoring, employees to the processing center premises, developing work procedures in high-security areas, etc;
  • making a decision on the choice of the supplier of software necessary for building a processing center certified by an appropriate payment system;
  • deciding on the choice of suppliers of related services (for example, courier services and / or gateways for sending SMS or PUSH messages, and the subsequent construction of contractual and working relations with it;
  • development, coordination and implementation of procedures for correct work with cryptographic equipment and quantities, and issuance of domestic regulations governing the work of security officers (security officers);
  1. Technical:
  • The purchase of hardware (system units, hard drives, RAM (random access memory, Does RAM), uninterruptible and backup power supplies, racks, etc.),
  • the purchase of the server software (operating systems, database systems, etc.), including license fees vendors of such software,
  • the purchase of cryptographic equipment necessary for the generation and correct processing of operations on cryptographic values, such as CVV or CVC;
  • information security solutions (ensuring compliance with the requirements of PCI DSS, federal laws, protection document management systems);
And such (all of the above) costs must be borne constantly, if we are talking about expanding your presence. Switch (processing centers) can cover these costs only with a part of the commission for the implementation of monetary transactions, which is borne by the other participants in payment relations.
Since the recipient of the client’s money is ultimately the merchant (seller / trader), it is logical that the entire amount of the commission is charged to him. This commission is called Interchange Fee (hereinafter - IF), it can be from 0.7% to 5% depending on the riskiness of operations. For example, an ordinary store, on average, pays 1.5% of IF, while, for example, an online store can pay 5%.
It is noteworthy that for the client this commission is not visible and in 90% of cases he does not even know about it. Such a commission is included in the price of the goods. That is, by selling you a product for $ 100, the Merchant will receive (if he pays IF = 2.24%) $ 97.76. The Switch distributes these $ 2.24 between the participants as follows:

Traditional Processing Sum
Consumer pays $ 100.00
Overall Fee $ 2.24
Issuer Receives $ 1.80
Acquirer Receives $ 0.31
Visa Receives $ 0.13
Merchant Receives $ 97.76
So we pulled how the current payment system functions. Now, in detail about how this can function using blockchain technology.
Part 2 - “New payment system and how it works.”
One of the main significant achievements of blockchain technology is excluding of intermediaries. In the field of finance, this gives special advantages — cost savings.
A new type of payment systems based on blockchain can successfully use this advantage. Naturally, there are necessary assumptions for the use of this technology in the financial sphere:
  1. It is necessary that the two contractors and the Merchant are in the same blockchain;
  2. Merchant must have a POS terminal transmitting information to the blockchain;
  3. Banks must open clients wallets and implement data exchange between blockchain and ABS (automated banking system) of the bank,
  4. In order to comply with the requirements of KYC / AML, private keys are kept by the bank;
  5. Must be a blockchain base Switch to physically conduct clearing of payments between the Merchant and the Issuing Bank.
Just as in the situation above with our American customer buying coffee in Australia: the same American and Australian banks, but they are in the same blockchain. It is convenient to send just cryptocurrency, of course, but the question immediately arises - “Why does the Merchant need it and what will it do with it? How will he solve the issue of currency fluctuations? ”Immediately make a reservation that I will not describe the technology here thoroughly, since this is a commercial secret, but briefly, I will describe the principle of operation.
So, two banks are in the same blockchain. In the blockchain, there is a special protocol implemented that allows to “mirror” the client fiat accounts to the blockchain, thus, the exchange of information between the client’s account and the blockchain takes place on an ongoing basis.
  1. The client brings the card to the merchant's terminal; the terminal requests the availability of the required amount in the blockchain. If the required amount is available (if not - decline), the protocol starts the transaction, which the client confirms (fingerprint);
  2. The Fiat amount on the client’s account of the Bank-Issuer is held by the Bank (thus collaterizing the amount of cryptocurrency to be transferred);
  3. The required, “mirror” amount in cryptocurrency is transferred to the Merchant's wallet;
  4. Merchant's wallet, having received the transaction, sends information to the Merchant Terminal, payment is accepted;
  5. The American enjoys coffee. Now, the Merchant has a cryptocurrency on the wallet, Bank-Issuer hold amount in fiat currency;
  6. Switch (the very same payment system), “buys” the cryptocurrency for the Australian dollar from the Merchant in Australia, in America, the Bank-Issuer transfers Switch a collaterized amount of USD.
Again, for ease of explanation, I omit some points that accompany the clearing process.
The scheme of the work of the new payment system can be represented as follows:

Decentralized Processing scheme

What is the advantage?
  1. Switch can set the price for its services significantly lower than existing today, because it saves on the entire infrastructure - hardware, data centers, personnel.
  2. The Bank-Acquirer does not lend, in fact, the Merchant’s account, so its remuneration can be significantly reduced. In addition, in this chain of relations Bank-Acquirer is not needed at all, because the Merchant can hold an account immediately in the Switch;
  3. There is no need to create processing centers, which means that you do not need to bear the costs of creating infrastructure;
  4. The cost of the transaction in the blockchain network is from $ 0.01- $ 0,05;
  5. Transaction time - from 1 to 5 seconds;
In numbers, everything looks like this:

Decentralized Processing (DP) Sum Saving
Consumer pays $ 100.00
Overall Fee $ 0.650 -70.98%
Issuer Receives $ 0.35
Acquirer Receives $ 0.30
Switch $ 0.13
Merchant Receives $ 99.22 -65.18%

The savings in the process are obvious! The merchant receives 65.18% more money on his account. Bank-Acquirer receives almost as much as in the scheme with traditional processing. The Bank-Issuer receives less remuneration, but under a scheme with decentralized processing, it bears much less expenses on security of payments, payment verification, customer verification, respectively, personnel costs, which always constitute the bulk of costs, decrease.
Conclusion.
In addition to the above economic factors, a new type of payment system has another, perhaps one of the most important advantages compared to traditional PS - to provide an infrastructure for the issuing of plastic cards for issuing banks is much cheaper than traditional PS.
The main problem that the new PS will face is the speed of processing payments. VISA today can handle 150 million transactions per day or 1,700 transactions per second with the possibility of securing up to 24,000 transactions per second. Until a certain time, no public blockchain could solve this problem. Now, compared to the published data on the speed of other blockchains on main net, NeuronChain can confidently claim 2nd place at its speed of 100,000 tps, so this issue is no longer a deterrent.
Of course, to implement the payment relations described above, it is necessary to do a great deal of work, not only on the IT part, but also on technical and legal issues, to spend tremendous efforts on marketing and explaining the processes of the participants in the relationship. But impossible is nothing. In any case, the blockchain technology gives us this opportunity.
Join us -
https://t.me/neuronchain
https://twitter.com/neuronchain
https://medium.com/@neuronchain
https://steemit.com/@neuronchain
https: //www.facebook. com / NeuronChain /
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