Thursday, June 14, 2018

Thrifty Thinking: Blockchain Technology for Currency Transfer

There’s considerable confusion surrounding “cryptocurrency” and for good reason – few of us are using digital Bitcoins and even less know what it is. Even though a single Bitcoin was valued at just shy of $20,000 in late 2017, its practical usage has yet to see mainstream application despite the fact that it can “be used to buy or sell items from people and companies that accept bitcoin as payment,” according to The Independent. It’s no surprise then that the technology that makes cryptocurrency possible, such as blockchain processes, have an even thicker fog of confusion surrounding them.

However, Systems America, Inc. President Adesh Tyagi says that there’s nothing nefarious shrouded in that fog and his company, among others, will be able to modernize antiquated financial processes with innovative applications of such technology.

“Were talking about taking currency in South Africa and converting it from sitting in a bank to electronically being picked up through an automated clearing house (ACH) process,” Tyagi, whose company provides cloud computer and software-as-a-service offerings, said of blockchain-driven bank transfers. “Instead of going through a regular bank, this can happen in minutes.”

Tyagi says the technology that makes cryptocurrency exchanges possible has more practical implications:
·       The blockchain ledger is what puts the “crypto” in the currency. Despite widespread and unrestricted access, its constant expansion lends it an utmost level of encryption. By taking this secure string of data and using it as a way to expedite international money transfers, Tyagi says days-long delays will be eliminated.
·       “An ACH takes a day. An international wire takes three days. These things should take minutes,” says Tyagi. The payment app Zelle can complete a user-to-user financial transfer in minutes. “I can transfer money to your account as long as I have your username,” Tyagi says of Zelle and that’s attributable to immediate transfer and de-coding of secure information.
·       Systems America helps clients improve their internal unseen infrastructure. Should they wish to address payment processes, Tyagi says the foundation of information that’s driving Bitcoin processes can be used to eliminate overlap and save clients money as a result.

I had a chance to interview Adesh Tyagi to learn more.

1) Why are bitcoins not widely used?
Bitcoins are not widely used due to the number of factors such as:
- Bitcoins first have to be converted into a named country currency and that likely incurs FX fees.
- Established network of merchants do not have the infrastructure to transact Bitcoins. Moreover, trust in the transaction is an issue.
- The number of transactions that can be processed on Bitcoin network is limited.
- Lack of regulation on Bitcoins or any other cryptocurrency is also a major factor.
- Bitcoin price fluctuations and differential in price by the time the transaction is done.
2) What is blockchain technology?
Blockchain technology is a globally-distributed network of computers to jointly manage the database that records transactions. The blockchain is managed by its network and not any one central system unlike user-to-user or peer-to-peer basis. Unlike cryptocurrencies such as bitcoin and bitcoin cash, there aren't many real-world applications of blockchain that allows data to be cryptographically tracked and secured.
3) How can this technology be leveraged for everyday payments?
Blockchain technology can be leveraged for everyday consumer and business-to-business payments eliminating fees that are charged by financial institutions, brokerage houses, and payment processors (like fees charged to the merchant by credit card companies). For example, business-to-business payments can be done on a secure and reliable network between businesses in seconds without the need of paying fees for ACH or wire transfer. Such transactions are huge benefits to small businesses in addition to large businesses to simply domestic and cross-border payments to vendors and contractors. Such payment transfers and movement of money occurs over a digital ledger in a matter of seconds whereas an automated clearing house (ACH) process takes a day, domestic wire transfer takes few hours and international wire transfers take few days.

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