Blockchain replacing SWIFT is something most people don’t dare to think about!

This article is adapted from the forthcoming book, “ValueWeb: How Fintech Companies Are Using Bitcoin, Blockchain, and Mobile Technology to Create Value Webs.”

I made the news for a provocative statement I made during my keynote at a recent conference:

“The technology behind Bitcoin could be transformative and could even replace the Swift network as the interbank payment system.”

This sentence has sparked a lot of discussion, because Swift is very important and is the backbone of the global banking industry. SWIFT was founded in the 1970s. Its emergence provides banks with safe, reliable, fast, standardized and automated communication services, thereby greatly improving the settlement speed of banks. Its name shows its cooperative nature: Society for Worldwide Interbank Financial Telecommunication.

Swift provides a network that enables financial institutions to send and receive relevant financial transaction information in a safe, standardized and reliable environment. Currently, most banks in most countries around the world have used the SWIFT system. As of September 2010, more than 9,000 financial institutions in 209 countries send and receive more than 15 million transaction messages through the SWIFT network on average every day, while in 1995, this number was only 2.4 million.

In addition, banks process approximately $5 trillion in currency transactions every day, most of which are processed through information exchanges on the SWIFT network.

So, when I say that a young emerging technology like blockchain can replace a 50-year-old system, it sounds provocative to many people. But I find that many people who oppose my point of view do not understand what blockchain technology is. Of course, banks have also noticed Bitcoin, and more importantly, they have realized the ability of blockchain technology to transform the banking system, but their response is not fast enough.

Blockchain technology has more distributed computing power than any open source project in history and has the potential to fundamentally reshape the banking system. Unfortunately, few bankers understand this technology, and they made many obviously wrong comments after listening to my keynote.

First , there is a view that Bitcoin is only used for payments. This is not true. Bitcoin is a protocol that can record any form of digital exchange of value, from payments to wedding vows.

Second , based on the first point of view, many people believe that Bitcoin cannot threaten systems like Swift, because Swift is not just a payment system. Half of Swift's activities are also used for securities settlement. But Bitcoin's technology can also easily record securities settlements, just like recording marriage contracts or payments. This can be demonstrated by a newly launched investment market service, Colored Coins, which records investment activities on the blockchain.

Third , Swift is scalable, secure, and resilient, and has a long history of providing network trust. These are all things that digital currencies such as Bitcoin cannot match. Wrong! Bitcoin has more scalable and capable network computing power than SETI. SETI, the Search for Extraterrestrial Intelligence, was once the largest network system in the world.

Fourth , the Bitcoin blockchain is interesting, but forget about Bitcoin. Some people think we can’t abandon local currencies to create a blockchain for banks, which is an interesting discussion. I personally disagree with the view that we can build a dollarchain or eurochain without the Bitcoin blockchain, but only time will tell if this will happen.

Fifth , the collapse of Mt. Gox has destroyed all trust in Bitcoin and its ecosystem. This is not true. The collapse of just one trading system does not erase the robustness of the Bitcoin protocol. If Northern Rock collapses, will you stop buying pounds?

Finally , Bitcoin is difficult to use. This is true, but as the Bitcoin ecosystem grows, this problem will gradually improve. Bitcoin is like the Internet before the World Wide Web, it will continue to evolve, so we need to keep an eye on its development.

I’ve been writing about Bitcoin for a while now, not to hype it, but because it has the potential to reshape banking, money, and regulation. Bitcoin’s blockchain is the core technology of the ValueWeb. Marc Andreessen, a leading advocate and investor in Bitcoin startups, has often stressed this point. In February 2012, he told TechCrunch:

“Through conversations with many experts in intelligent computer science, we have come to the conclusion that blockchain is a fundamental breakthrough in technology.”

“We have an opportunity to re-architect the system because financial transactions are just numbers, they’re just information,” Anderson told Bloomberg in October 2014.

“I’m eager to fund a disruptive bank,” he wrote on Twitter in February 2014.

Anderson is betting that the technology will succeed.

One last point I want to clarify:

“While Bitcoin has the potential to replace Swift in processing financial transactions, I cannot guarantee that it will. In fact, Swift is very inclusive of distributed technologies such as Ripple and colored coins, and its internal and external discussions on blockchain show that Swift, like me, is concerned about the importance of these technological developments to its financial community.”

Original article: http://www.americanbanker.com/bankthink/will-the-blockchain-replace-swift-1079740-1.html
By Chris Skinner
Translator: printemps
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/swift-blockchain)