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Ari Paul
Obsolete Fintech
The Problem
Before 2008, to prevent doublespends there needed to be some grand arbiter who could see
every balance and every transfer and confirm that nothing is being spent more than once. In the
US, that arbiter is the Federal Reserve. Every single Wire Transfer is first reviewed by the Federal
Reserve before being executed. The ACH system works similarly, and uses a combination of the
Federal Reserve and the Electronic Payments Network (EPN) to check every single ACH transfer
for doublespends. For international transfers, banks communicate with their own central banks
and utilize bilateral and multilateral international agreements like SWIFT.
US CB MEX CB CAN CB
The current system relies on a central banks and/or various banking coalitions to monitor for
doublespends.
WellsFargo
Citibank
CA
USA
$1,000
Chase MEX
SWIFT
|3
Obsolete Fintech
Trade Reconciliation
Depositor
y
Clearing
Custodian
Bank
|4
Blockchains
Whats a Blockchain?
|5
Blockchains
The Basics - Visuals
|6
Blockchains
The Basics - Jargon
|9
Blockchains
Other Blockchain Uses: Cryptocurrencies and asset-
backed tokens
A cryptocurrency is a tradeable intrinsic token of a blockchain. An
intrinsic token is a token that is native to the blockchain. The most
famous cryptocurrency is Bitcoin (BTC) with a market cap of $16
billion. Bitcoins can be converted to US dollars on exchanges or
spent on products and services at thousands of retailers.
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Blockchains
Whats Next?
Most large financial and technology companies are in various stages
of implementing blockchains for a variety of purposes. Banks are
implementing blockchains to settle transactions between one another
and transfer assets more quickly and cheaply. IBM and Microsoft are
experimenting with blockchains for the Internet of Things.
For some use cases, blockchains will improve efficiency. For other
uses, they are likely to be wildly disruptive. What future does
Western Union have when monetary transfers become near-free and
instantaneous to anyone with a smart phone? How much will
financial back offices shrink when trade reconciliation becomes
simple?