Blockchain has caused a revolution in the financial industry, no doubt. As such, it has hitherto been widely believed that this is set to cause major changes in the way banks do business. However, this may not necessarily be possible just yet, at least according to Ripple, one of the most notable startups.
Scalability and Privacy Concerns to Blame
David Schwartz, the chief cryptographer at Ripple, notes that there is a high chance that banks will be hesitant to deploy blockchain in its transactions, especially with regards to processing international payments. He reckons that this is most likely due to privacy problems as well as low scalability. During an interview with Reuters on June 13th, Schwartz noted that as much as banks have acknowledged that potential that blockchain comes with in terms of reducing costs and time taken for transactions to complete, he does not view the technology as yet able to provide enough privacy or scalability to the point that it can be implemented by banks on a global network.
A Look at Ripple’s xCurrent
According to Ripple, the immutable inter-ledger protocol from xCurrent provides instant settlements that makes it superior to current payment networks. However, Schwartz does not believe xCurrent to be a distributed ledger. In the case of xCurrent, the peers in the network do not get access to a shared ledger, yet this is the basis through which major blockchain networks like Hyperledger or Ethereum operate. He says:
What we hear from many of our customers is that it’s imperative to keep their transactions private, process thousands every second, and accommodate every type of currency and asset imaginable.
The senior VP of customer success at Ripple, Marcus Teacher, believed that the firm had launched a project that would offer banks “classic” blockchain-powered payments. The response from banks was pretty negative though, as they did not believe that one could just decide to “put the whole world in a blockchain”. Report from Reuters indicate that several banks have experimented with and incorporated xCurrent technology from Ripple for cross-border payments and this will finally plug into distributed networks.
Huge Savings and Reduced Transaction Times
Notably, several institutions took part in a pilot project by Ripple on its xRapid platform. This led to reported transaction savings of between 40-79 percent. It also noted a significant improvement with regards to the time taken for a transaction, from 2-3 days to about two minutes.
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What do you think about Ripple’s claims that banks are unlikely to apply blockchain for its cross border payments? Are the reasons viable? Let us know your views in the comments section below.