Blockchain in the banking industry

Blockchain technology is a potentially revolutionizing technology that many industries are looking to take advantage of. Blockchain technology is a decentralized ledger that records transactions in the form of digital assets. This provides many benefits to businesses such as reduced cost, reduced taxes, more security, transparency, and immutability. One important implication of blockchain technology is crypto currency. Crypto currencies are forms of digital currencies that are created through cryptography, writing and solving complex codes. These codes are ran through blockchains that allow transactions that are cheaper, safer, more adaptable, and much faster than traditional wire transfers. One industry in particular that plans to take advantage of the blockchain and crypto currencies is the banking industry.
Currently most banks transfer money using wire transfers. A wire transfer is the electronic transfer of money from one bank account to another and it has been used for the last 150 years. The first primitive wire transfer was done by Western Union after they built the first transcontinental telegraph line in 1861. Modern wire transfer is conducted using computers and we have been using them for roughly thirty years. The wire transfer has been proven to be safe and reliable, so we have continued to use it over the years however, it has been proven to be very inefficient. Even today the fastest way to transfer money from New York to L.A. would be to fill a bag with cash and board a plane. A domestic wire transfer requires at least twenty-four hours and can even take up to a week to be cleared compared to a five and half hour flight from LAX to JFK. This is the problem that the original crypto currency pioneers set out to fix.
The original crypto currency Bitcoin was invented by Satoshi Nakamoto in 2008 and released in 2009 in the midst of the global financial crisis. The goal of Bitcoin was to give the average person control over their own assets. Ultimately the government and the banking system was in control of everyone’s money and transactions having the ability to freeze or seize assets. Therefore, Bitcoin was invented to verify transactions through cryptography instead of banking creating an anonymous and efficient form of digital cash. The goal to keep government and banking out of crypto currencies ultimately failed with governments taxing crypto trades and holdings. However, they succeeded in creating efficient trades. A cross continental Bitcoin trade can be cleared in a few hours, significantly faster than a wire transfer. Bitcoin paved the way for other blockchains to be developed that could potentially transfer at an even faster rate and thus the cryptocurrency boom began.
Soon after bitcoin started to receive some notoriety other coins and blockchains began to appear. Most notably Ethereum and lite coin. These currencies also allowed for efficient transfers of less regulated transfers which led to the crypto currency boom of 2018 where bitcoin famously reached its twenty-thousand-dollar peak. Which led to the inevitable crash leaving bitcoin with a more consistent and realistic price of around six to seven thousand dollars. This boom and inevitable crash is when an influx of many other crypto currencies began, of which the most important is XRP.
XRP is a crypto currency that was developed in 2012 and released in 2018 to run on the Ripple blockchain. XRP has the most efficient and stable transfer rate that can clear transactions in three seconds or less. XRP was developed to increase liquidity, lower foreign exchange costs, and create a faster payment system. The goal was to be able to liquidate assets on demand and they have come closer than any other transaction system. XRP is incredibly scalable and although it is only worth roughly nineteen cents per share, it was developed to handle around ten thousand dollars per share. Due to its stability, scalability and transfer speeds many banks and financial institutes such as PNC, MoneyGram, and American Express either plan on running on XRP’s blockchain or they have already implemented it.
The banking industry is taking advantage of the ripple blockchain to increase the efficiency of transfer rates, liquidity, and consumer trust in the banking system. If all financial systems begin to implement blockchain and crypto currencies into their regular operations, we may be headed towards a much more decentralized system. Governments are able to tax crypto currency holding but they are not able to control or make decisions regarding crypto transactions. As blockchains become more common in currency transfer we may be moving away from the use of central currencies backed by nations. This would increase the amount of wealth in the world and completely change the way we earn and spend money.
The banking industry has found itself stuck using outdated and inefficient technology. Transfers are too slow, too centralized, and too controlled for the modern world and the banking industry is looking towards blockchain technology to change that. By implementing XRP and the Ripple blockchain banks have been able to reduce cross national transfers speeds from a matter of days to a matter of seconds. We are moving in a direction where in five to ten years blockchain will be used by all financial institutes and the way money is earned and valued will be drastically different.