"Out of the Blue" and "quite in the shadows", IBM recently introduced a new product called Blockchain World Wire. A cross-border payment system for financial institutions based on blockchain technology. This new global financial network will work on
The star network will not only compete with the traditional Swift system, but it could also become a difficult rival for Ripple's xRapid. (See my previous blog: Ripple is making waves of blockchain, February 27, 2018).
For many of us the offer of Blockchain World Wire should be seen as one of the most secret blockchain projects that IBM describes as "the new financial railway" that can simultaneously liquidate and settle cross-border payments almost in real time. "IBM is planning
present its system at the SIBOS banking conference in Sydney, organized by SWIFT at the end of October.
What is Blockchain World Wire?
Blockchain World Wire, is a blockchain service for financial institutions that allows cross-border payments. This payment solution aims to offer financial institutions a means to liquidate and regulate quasi-real-time cross-border payment transactions.
time. In this way he is using the Stellar Blockchain network.
Stellar Protocol
IBM Blockchain World Wire was launched in collaboration with the blockchain Stellar company. Stellar has provided a payment system protocol The Stellar protocol, which is a fundamental part of Blockchain World Wire's technical framework, is an open source,
decentralized protocol for transferring digital currencies into fiat currencies, allowing cross-border transactions between any currency pair. This protocol promises simultaneous payment and compensation for faster cross-border transactions.
Stable money
The Blockchain World Wire converts legal currencies into digital resources for transmission over the network. According to IBM, the payments system will then use a stable currency as the bridge asset between two legal currencies. IBM has already run tests
of a "stable currency" with the US dollar developed by US financial services, launches Stronghold, which will run on the Stellar Lumens network and will use its consent mechanism to verify transactions. Users will be able to apply this stable currency with low volatility,
subsequently in the context of the Blockchain World Wire.
How will Blockchain World Wire work?
The Blockchain World Wire product replaces the bank intermediaries normally required for cross-border payments with digital resources sent over a distributed network. Blockchain World Wire thus guarantees simultaneous compensation and settlement
of all transactions by deleting multiple parts during transaction processing. It will also allow end-to-end transparency and a fixed exchange rate between all currencies.
"The sending of money across borders today requires a series of intermediaries for both clearing and settlement, adding each time and cost to the process." "With IBM Blockchain World Wire, compensation and the purpose regulation occur almost in real time. "
IBM website
The cross-border payment made through Blockchain World Wire, is performed using the following steps
The first step is that two financial institutions that treat each other will agree to use a stable currency (a digital currency of the central bank or other digital activities) as the active bridge between two fiat currencies. The digital asset facilitates commerce
and define settlement instructions. The financial institutions will then use their existing payment systems, linking them seamlessly to Blockchain World Wire through a series of APIs.
Actually, using the World Wire APIs inserted in the existing systems of the banks, the first fiat currency is exchanged / converted into a digital asset at bank A. This is the second step.
Blockchain World Wire then transmitted that digital currency to bank B, where it is simultaneously converted into the second fiat currency, completing the transaction. All details of the transaction are then recorded on an immutable blockchain for clearing.
"What we really want is to allow all types of digital transactional networks to regulate their digital fiat currency transactions on the same blockchain networks." Jesse Lund, IBM head of blockchain services for financial institutions
But what could lead Blockchain World Wire
The new Blockchain World Wire service could "revolutionize payments cross-border "compared to current international payment systems, according to IBM," in particular by addressing the two attributes that make current bulky cross-border payment systems
– time and costs ".
By integrating with existing payment systems in financial institutions, Blockchain World Wire could" replace expensive non-transparency with accessible transparency. "The new system would be able to simplify payment processes thanks to simultaneous compensation
and regulation, thus firmly reducing transaction costs. It will also contribute to increasing the efficiency triggered by end-to-end transparency. It will further open the door to new markets and operations, including Open Account commercial transactions.
"With IBM Blockchain World Wire, purposeful clearing and settlement takes place almost in real time – transactions – which serve as an agreed-upon deposit of value exchanged between the parties – as well as the integration of payment
instructions messages. All this means that funds can be transferred to a fraction of the cost and time of the traditional correspondent bank. " IBM Web site
Increasing competition with SWIFT and Ripple
Similar to other blockchain-based payment networks like Ripple, Blockchain World Wire attempts to" get rid of "intermediaries banking that adds complexity and cost to traditional international payment systems.
Blockchain World Wire could compete with the traditional old world SWIFT payment system, the organizer of the SIBOS event in Sydney, where IBM will show its Blockchain World Wire demo, but with its transition to blockchain payments, the main competition for
This service does not come from the traditional payment systems it seeks to replace, but from other blockchain-based payment services that are already used by the financial sector.
The most important candidate here is Ripple, which already offers several similar products targeted at financial institutions, such as the xCurrent and xRapid transaction solution based on blockchain. These have already seen increasing use globally. Companies
MoneyGram, IDT, Western Union, Cambridge Global Payments, Viamericas, Mercury FX, Currencies Direct, SBI Virtual Currencies, Cuallix and Zip Remit are all around the world who are testing and using xRapid.
XRP versus Lumens XML
The description of Blockchain World Wire seems to be quite similar to the Ripple product known as xRapid. The centralization of XRP cryptocurrency is however still a critical point for many technology companies and also for banks wishing to make use of the Ripple
Network. Stellar Lumens XLM, the cryptocurrency of the Stellar network, is intended to be used as the currency of the Blockchain Worlds Wire bridge. But Blockchain World Wire will support any cryptocurrency, not just Ripple's XRP.
While Ripple is a commercial company, Stellar is a nonprofit organization, therefore less expensive. And since Lumens XML is much more decentralized than Ripple's XRP, making it much more attractive this could trigger financial institutions to opt for IBM's Blockchain
World Wire. This given its much broader customer base.
The advantage of Ripple is that it is already operational for a while. However, the Blockchain World Wire product is not yet ready for launch. And IBM did not reveal all the technical details by giving a number of enigmatic pieces and is still far from the officials
to launch. In the meantime, it could give Ripple time to tie up the seat bells and make their offer more competitive. And this is good for the market!
