Babbitt column | Inciting oligarchy intermediary: blockchain + finance (below)

In the previous article, "Fragile Mirage: Blockchain + Finance (I)" , the author once mentioned to you that the financial industry is not an area that is suitable for substantial decentralization and sinking power. Because extreme decentralization will inevitably disrupt the existing industry order, however, everything can not go to extremes. From the relevant experience, excessive financial centralization is not the best choice. If the power of some industrial chain links is concentrated in the hands of individual institutions, it is likely to lead to a decline in the efficiency of system operation.

Take the banking industry as an example. At present, the clearing and settlement business of large and medium-sized financial institutions is often completed in the upper-level financial institutions. For example, the settlement between branches of commercial banks needs to pass through the domestic clearing business of the head office and the head office of commercial banks. The central bank, while the foreign clearing business will pass the SWIFT system [Note]. And as we mentioned in the previous "Blockchain + Accommodation Traffic" – such a financial intermediation system that performs clearing and settlement work, that is, the implementation of the book change, because its related power is too centralized, very It may be due to the slack of subjective attitude or the backlog of objective work, and it is impossible to deal with the need for clearing settlement in time.

For example, the survey in mid-2018 shows that the current SWIFT system can process about 347 transactions per second. This level is not prominent even in blockchain networks that do not pursue traffic, let alone global. Transfer transaction. Therefore, in recent years, people's complaints about the inefficiency of SWIFT have become more and more serious. For example, many people say that the speed of cross-border remittances is sometimes not as fast as taking cash. While the domestic business of inter-bank and commercial banks is not as exaggerated as cross-border payments, it faces similar problems more or less. After all, these institutions have some similarities between SQFT and SWIFT.

Figure: Every interbank transfer requires the intervention of the central bank

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[Note] SWIFT: The full name of the "Global Interbank Financial Telecommunication Association" is an international cooperation organization among international banks. The SWIFT network it controls is the main financial clearing network used by banks around the world.

As a multi-line layout of business and a highly complex system, the inefficiency of transaction processing may not be the biggest pain point in the banking industry, but it is one of the most painful points in recent years. After all, banks and One of the most unique features of other direct financing institutions is the ability to set up a pool of funds. Especially with the development of transportation and information, the frequency of people's activities is getting higher and higher, and the efficiency of production and life is more important. Under such circumstances, if the money runs without information or even people, it will inevitably be seriously reduced. Customer experience.

In fact, this is also the original intention of many people to use blockchain products including Bitcoin. For commercial banks' branches and head offices, many times they have no other choice: branches cannot be slow because of the transfer. Yizhi is another bank, and commercial banks are not likely to move to other countries simply because the head office has a slow settlement. After all, the regulations of enterprises and countries are there, but for the customers who give the bank funds, they are You can jump out of the rules and look for networks outside the existing financial transfer system to quickly transfer value.

Strictly speaking, for the existing financial intermediaries, that is, the centralized value transfer network, they are not unable to improve their system efficiency, but it is impossible to meet the needs of downstream customers regardless of cost and anytime and anywhere. For example, if the efficiency of the clearing system is now 1000 transactions per second, the external demand at this time is 3,000, and the original system has become 5,000 after technical transformation, but it is assumed that the external demand becomes one day. With 7,000 pens per second, how do you solve this situation?

It is important to know that with the increase in international trade, there will be only a lot of similar cross-border transfers in the future. The improvement of technical efficiency is far from easy. It is very unlikely that you want to catch up quickly and catch up. For example, since the establishment of the SWIFT network in 1973, for a series of reasons, it has not been greatly upgraded and transformed for more than 40 years. It is easy to carry out self-reformation with the times.

In this case, there is only one way to keep the existing financial clearing system up to the ever-increasing volume of transactions: the decentralization of the settlement rights of financial networks such as SWIFT. Sinking in the hands of multiple networks, in order to carry out related business more efficiently, to avoid the situation of transaction blocking.

In fact, there are already many similar projects in the world, such as the pound clearing system CHAPS, the Bank of Japan Financial Network System (BOJ-NET), and the Euro Payment System (TARGET), but these systems generally have the following problems: First, there are certain restrictions on the participants. For example, the use of CHAPS is limited to 14 British banks. Second, it is difficult for these payment systems to say that they can be completely neutral. For example, the SWIFT system, which is considered to be relatively neutral, is actually very affected by the United States. It is evident from the successive threats to cut Iran’s access in recent years. In other words, the industry's most ideal demand for payment networks is actually a system that covers a wider range of participants and is relatively neutral. However, people have not been able to find such an option. After all, international coordination and It is not so easy for all parties to create a highly accountable accounting network.

The emergence of blockchain has given people such a new choice. Since the recording and modification rights of the blockchain network information are distributed among multiple nodes, by duplicating the transfer interface with the blockchain network and recording the information on the chain, people can obtain highly reliable transfers. Recording, there is no need to worry about third parties doing evil, such as the situation where some payment networks want to freeze accounts or intercept tampering transactions. In other words, the blockchain network is highly reliable for everyone who intends to transfer money, and its credibility is no less than the SWIFT system that has long relied on.

In this way, for the efficiency of clearing the settlement network, people now have a better option: that is, to clear the clearing power from a centralized organization like SWIFT system to the blockchain network, and then realize Decentralization of funds clearing and settlement.

Practically speaking, although the efficiency of some blockchain networks is not in line with commercial standards (such as Bitcoin can only handle 7 transactions per second), it has promoted the currency clearing network in at least two aspects: On the other hand, for the traditional accounting system like SWIFT, in view of the decentralization of the industry structure of the trusted financial network, it will inevitably face significant self-improvement pressure, otherwise the business will be like the blockchain network. On the other hand, if the existing payment system increases efficiency to the limit and it is difficult to make further improvements, social capital will develop a new blockchain accounting network based on the current demand gap. And then through the market means to achieve the balance of supply and demand in the payment settlement system.

Figure: The emergence of blockchain networks provides more clearing options for transferers.

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It should be pointed out that, like public administration industries including fiscal and taxation, financial systems such as money banks are in the upper reaches of most real economy. When people do macroeconomic analysis, they are often analyzing public finances and taxes and banks. Currency, a segment that has a vital impact on other industries, so the turmoil of these systems is likely to trigger an unimaginable butterfly effect, just as e-government can save the government's financial resources in public administration. Health care social security is more reliable. Blockchain technology is the cost savings of the financial network and the entire economic system because of the quality improvement of the blockchain. It not only improves the efficiency of your money banking field, but is more likely to be in the future. It produces unimaginable changes, but this future is still not clear to people.