he banking industry has praised blockchain technology for the potential it has shown in reducing cost and also making processes more efficient. It potentially underpins many operations. Banks usually prefer to call the blockchain technology Distributed Ledger Technology (DLT) for distinguishing it from the blockchain of Bitcoin. In fact, many banks are carrying out experiments with this technology.
2 Promising Experiments by Banks with Blockchain Technology
1. Banco Bilbao Vizcaya Argentaria’s Successful In-House Blockchain Experiment by using Ethereum Smart Contracts
Spanish bank BBVA’s in-house solution has used smart contracts to develop an app that cuts downtime and costs related to issuing loans. The bank’s head of digital transformation at the investment banking division, Alicia Pertusa, said:
“We saw that blockchain was not just disruptive tech but it could have an impact on the way we run our current products.”
On a trial basis, the bank has issued a 75 million euro (US$89.7 million) loan to a company called Indra. Pertusa said the transformative technology saves around 40-50% time while issuing a loan on the blockchain in comparison to the traditional process.
BBVA has made it clear that the loan was put on the public Ethereum blockchain. However, it has no link whatsoever with the Ether cryptocurrency.
2. Santander’s One Pay FX Cross-Border Money Transfer Mechanism by using Ripple blockchain’s xCurrent
An important cross-border money transfer mechanism developed by using blockchain technology is One Pay FX. It was launched by Spanish lender Santander. It works on xCurrent, a Ripple blockchain product.
This blockchain-based product helps customers in sending money from one currency to another across many countries including Brazil, the United Kingdom, and Poland.
First of all, messages are sent by Ripple’s xCurrent technology between the banks involved in the transaction. The messages carry the data needed for the transaction to get completed.
Once this message is transferred, a pre-transaction phase takes place. It includes verification checks. Then the funds are held across all banks, followed by transfer of funds. Santander UK’s head of innovation, Ed Metzger, said:
“As an industry, we recognize international payments is not the smoothest. Users of this technology are able to mitigate those pain points.”
The entire transaction takes place on a distributed ledger system. It enables verification of all the details across multiple banks. Customers can see the cost of the transaction as well as the money that will arrive in their app.
This is very clear how disruptive blockchain technology is to the financial world. It has the potential of bringing paradigm change in the industry, in terms of decentralization, transparency, cost-saving, and many other aspects.
This brings us to the moot question: what is blockchain? What’s so special about it? How does it work? What are the pros and cons? How can it help you in real-life situations?
What is Blockchain?
Let me try to explain blockchain in the most simple way possible so that even the newbies can also understand.
Blockchain is a record-keeping technology on which Bitcoin and other cryptocurrency networks are created. In simple words, blockchains are databases that store information electronically on computer systems.
The relevant information/data are stored in a structured way in table formats. This helps in easy search and filtering for specific information. Databases are larger forms of spreadsheets (which can store a limited amount of information). Servers solve the problem of housing huge amounts of information by using hundreds or thousands of computers.
Blockchains are also specialized forms of databases. The main difference between a blockchain and a database is the manner in which the data is structured. The information collected by a blockchain is in the form of groups, which are called “blocks”.
These “blocks” hold sets of information and they have certain defined capacities. When a block gets filled with data/information, it is chained onto the previously filled block. That’s how a blockchain (a chain of data blocks) are formed.
Blockchain and Bitcoin
Blockchain has come up as the biggest buzzwords in technology currently. The first major project where blockchain technology has been used successfully was Bitcoin, which was released in 2009. Bitcoin (BTC) is the first-ever cryptocurrency and its transactions are guided by the underlying blockchain technology. Cryptocurrency is a digital currency or coin that runs on blockchain technology.
Bitcoin’s first version was laid out by a whitepaper named “Bitcoin: A Peer-to-Peer Electronic Cash System”. It was the brainchild of an anonymous person or a group of persons called Satoshi Nakamoto.
The bitcoin blockchain is a public ledger of every transaction that has taken place. The best thing about it is that no one can change or tamper the transactions retrospectively. They say the Bitcoin blockchain transactions are more secure and safe than that of the current systems.
1. What’s so Special about Bitcoin Blockchain?
Specialties of Bitcoin blockchain are:
- No central authority, government, or owner issues Bitcoin.
- The maximum Bitcoins that can be in circulation is capped at 21-million.
- 18,604,468.75 Bitcoins are there in existence.
- 88.593% of Bitcoins have already been issued.
- 2,395,531.3 BTCs are yet to be mined.
- Around 900 BTCs are mined per day.
- It is likely to take around 100 more years till the last Bitcoin is mined.
- The Bitcoin miners receive mining rewards for successfully completing one block.
- Mining rewards are halved after every 210,000 blocks are completed, which takes around 4-years to complete.
- In 2009, the Bitcoin reward for mining 1 BTC block was 50 BTCs.
- In 2012, the Bitcoin reward for mining 1 BTC block was 25 BTCs.
- In 2016, the Bitcoin reward for mining 1 BTC block was 12.5 BTCs.
- In 2020, the Bitcoin reward for mining 1 BTC block was 6.25 BTCs.
- The first Bitcoin is believed widely to have been used by a programmer named Laszlo Hanyecz. In 2010, he reportedly spent 10,000 Bitcoins to buy two Papa John’s pizzas.
2. How does Bitcoin Blockchain Work?
Bitcoin is a decentralized cryptocurrency, which is not controlled by any central authority. Unlike fiat currencies such as the US Dollar, Euro, Yuan, or others, the Bitcoin blockchain is not issued by any government or central bank.
The concerned blockchain is maintained by a network of people, who are called Bitcoin miners. These miners are also sometimes known as “nodes” on the network. The miners run purpose-built computers or mining rigs and compete to solve complex mathematical problems for completing a transaction.
Many people make Bitcoin transactions across the world. The daily BTC transactions were 330,000 in December 2020, which increased to around 400,000 in early January 2021. Each BTC transaction starts from a wallet, which again has a “private key”. This private key is a digital signature, providing a mathematical proof that the transaction has come from a wallet’s owner.
Many such transactions are happening across the globe. They are grouped together and put in a block by following strict cryptographic rules. Once a block gets filled up by the transactions, they are sent out to the bitcoin network. The BTC network runs on high-powered computers. It is these computers that compete with one another for solving complex mathematical puzzles to validate the transactions.
The reward for completing one block goes to the one who first solves the puzzle. Once a Bitcoin block is validated, it is added to the BTC network’s previous blocks. This creates a chain of blocks, known as a blockchain.
3. Bitcoin Blockchain is Tamperproof: Is it True?
Bitcoin or any other blockchain cannot be tampered with. Every block in the blockchain has a hard, cryptographic reference to the previous block. This is part of the mathematical problem, which miners solve to complete the block and add it to the Bitcoin network to form the chain of blocks.
When a miner is solving the mathematical problem, it involves working out a random number known as the “nonce”. It along with other data (including the size of the transaction, etc.) creates a digital fingerprint known as a hash, which is encrypted. Certain cryptographic conditions are met by each unique hash. That’s how blocks are completed and added to the blockchain.
Hypothetically saying, if a person wants to tamper a block, he/she has to tamper with the previous block. In this way, the hacker has to tamper over half a million blocks. This means that the miner has to re-mine the cryptographic puzzles of all these half a million cryptographic puzzles, which is impossible.
4. What are the Advantages of Bitcoin Blockchain over Traditional Payment Methods?
Though Bitcoin blockchain has a complicated process of moving money, it has its own advantages.
Traditional payment methods are usually registered on privately-held databases. They are, in turn, owned by entities that are either government-controlled or corporate-controlled. The general public can’t access these databases. This means they are closed. As the traditional payment method is owned by a single entity, it is, therefore, open to cyber-attack or fraud. That’s why these traditional payment networks get crippled in case of frauds or attacks.
In the case of the Bitcoin blockchain, all the transactions are recorded and no-repeat payments are allowed. For authenticating the digital coin’s movement, several parties are needed. This decentralized aspect of blockchain ensures that the entire network never collapses even when a part of it went down. Even if one miner goes out of action, the transactions still carry on.
Blockchains, Cryptocurrencies, and Cross-Border Banking
Ethereum is the second most popular blockchain platform after Bitcoin. It specializes in smart contracts. Smart contracts are contracts that automatically execute when certain conditions are met by all interested parties. Automation speeds up the process and ensures that no mistakes are done.
Ether (ETH) is its digital coin. Ethereum allows developers to create decentralized apps (also called dapps) on its platform. It leverages the blockchain and potentially uses Ether to power their product.
Ripple is also a blockchain that specializes in cross-border currency transactions. When it comes to money transfer from one currency to another throughout the world, it is expensive and also takes lots of time. That’s where Ripple’s blockchain system called xCurrent comes in handy. It removes the intermediaries and therefore makes cross-currency transactions in seconds. XRP is the cryptocurrency attached to Ripple.
Chainlink solves a major the biggest problems of blockchain: how to communicate information to and from the blockchain?
ChainLink is a decentralized oracle system that solves the problem of communicating information to and from the blockchain. It, therefore, bridges the gap between the blockchain world and the outside world.
Traditionally, it is the sensors (called oracles) that transfer information to and from the blockchain. Almost anything can be monitored by the oracles including weather, the value of stocks, account balances, sports scores, and many more.
These oracles are useful to the blockchains because they provide a reliable way of initiating smart contracts when outside parameters are satisfied. However, the main problem with these oracles is that they are centralized in nature.
It is this centralized aspect that is the weakest spot in the blockchain. The entire network is subjected to risk if any one of the oracles gets compromised or corrupted.
The success of Chainlink is that it tries to solve the “Oracle Problem” by integrating various next-gen protocols and ultimately creating the first blockchain oracle network of the world.
Chainlink allows companies to leverage the powerful network expansion capability of oracles in a trustless manner. This new system ensures that all the users receive corruption-free, correct, and timely data. Even if there is a single node failure, the Chainlink system automatically replaces it with a higher ranking alternative.
The cryptocurrency associated with Chainlink is LINK.
How can you buy Bitcoin and Other Cryptocurrencies Automatically?
You can buy Bitcoin and all other major cryptocurrencies automatically by using crypto trading bots such as NapBots.com. These Cryptocurrency Trading Robots scan the market automatically in real-time and trades for you when put on autopilot.
They run 24/7, which means that you can keep earning your passive income even when you are sleeping. This gives you an edge over other investors as it enables the bot to book profits on your behalf when other investors are sleeping.
Smart crypto investors always remain prepared to get the best of a big market move. They don’t wake up suddenly. To remain alert round the clock, they use cryptocurrency trading bots such as NapBots.com so that they don’t miss any big market movement.
NapBots.com is a Trading Bot, cloud-based platform, on which you can connect to major exchanges such as Binance, Bitmex, Bitfinex, OKEX, Kraken, Bitstamp, and Bitpanda.
The best thing about the Napbots trading software is that you don’t have to monitor charts and candles to predict your next move. Any novice trader with zero skills can also start trading like a pro and earn money with this unique trading tool. Let Napbots take full control over your trades in just a few clicks. Now, sit back and enjoy earning money.
NapBots offers complete trading automation solutions through the use of its own tested trading strategies; offering quantitative trading strategies previously reserved for hedge funds to the public.
The setup and installation process are easy. So, the non-experts can also use it. The simple and special approach of NapBots helps it provide you with excellent ROI.
The team of professionals behind NapBots has extensive experience in the financial market. They have put their years of experience in place so that you can easily automate the management of your funds with no technical skills. This service can run 24/7 and work as your passive source of revenue even when you sleep.
Our pricing is simple and there are no setup fees. 7 days free trial is also available.
Are You Ready To Start Automating Your Passive Income Now?
If you still need assistance, you can refer to the following guides: