What applications can the characteristics of blockchain technology match?
- Areas with low communication efficiency and high cost of communication between different entities
Traditional cross-border payment and settlement requires the use of multiple institutions, and requires multiple procedures such as account opening banks, central banks, and overseas banks. Different institutions have their own independent accounting systems, and the systems are not interconnected. Therefore, multiple parties need to establish agency relationships, record in different systems, reconcile accounts with counterparties and settle accounts, etc., and traditional payment systems cannot achieve trustlessness. The credit of both parties to the transaction can be guaranteed through a third-party institution similar to a margin system, which often leads to high and slow cross-border payments. The role of the intermediary bank in cross-border remittances has different currency accounts to assist both parties in currency exchange. Cross-currency processing is slow and costly.
To solve cross-border payments based on blockchain, you can build a consortium chain composed of multiple cross-border payment demanders (the public blockchain is free and open to all network users, and the consortium chain is open to some authorized users). Each node in the network uses the virtual currency of the alliance chain consensus as the medium to carry out point-to-point currency transmission, eliminating any third-party intermediary links, and achieving transaction settlement-no third party is required to act as a counterparty to adjust the changes in the accounts of both parties , Reconciliation, while greatly reducing costs, the payment can be completed very quickly.
In the global cross-border payment market, the first to use blockchain technology to realize its commercial application is the cross-border payment network Ripple developed by Ripple Labs. Ripple mainly provides banks with foreign exchange transfer solutions based on blockchain protocols, and is committed to replacing SWIFT to create a blockchain-based global bank network financial transmission protocol.
Through the InterLedger protocol project developed by Ripple, it has established a communication bridge for different accounting systems and created a global unified network financial transmission protocol. In the InterLedger protocol system, different banks can maintain the original accounting system and use the software provided by Ripple to freely transmit currency through a third-party "verification terminal". At the same time, transactions between banks can be hidden. The "verification terminal" uses encryption algorithms to transfer money. You will not see the details of the transaction, only the bank’s own accounting system can track the details of the transaction.
In the Ripple network, a unified distributed accounting system can verify transactions and keep accounts through a consensus mechanism through many nodes, without any trust center, and can realize 24/7 payment. In addition, financial institutions such as banks and currency changers play the role of market makers in the Ripple network. The remittance bank can choose the market makers it trusts. As long as there are enough market makers, they can theoretically provide a competitive exchange rate level. The Ripple network also uses algorithms to find the optimal exchange rate level. Market makers can provide cross-border payment services anytime and anywhere to improve efficiency.
Different from Ripple, OKLink focuses on providing services to small and medium-sized financial participants around the world. Ripple uses Ripple as a medium for cross-border payments, while OKLink uses OKD. The two are used as transit tokens and have no use value. the difference.
The specific business scenario is that the remittance company and the collection company that use OKLink services are registered as an authorized node in the OKlink blockchain network, and OKD can be transferred directly between the nodes, and the buyers and sellers have passed the OKD and the local law. Currency exchange is used to realize cross-border payment and settlement between different sovereign currencies, eliminating all intermediate link costs, including all costs of OKLink and collection companies. The entire network only charges no more than 0.5% on the basis of the intermediate exchange rate. It greatly saves the cost of small cross-border remittances for small and medium-sized enterprises. Using the characteristics of "transaction and settlement" in the blockchain network to achieve fast transactions, all remittance processes including payment, exchange rate conversion, and settlement are completed within 10 minutes, which is an average of three or four waits compared to the traditional cross-border remittance process One working day can be said to be a leap-forward development.
Securities registration and settlement
Securities registration is the act of a securities issuer to establish and update the register of securities holders, which accompanies securities transactions. In the centralized securities system, market participants entrust all securities registration and settlement tasks to the central registration and settlement agency. Maintaining the credibility of this central structural system requires extremely complicated regulations and audit procedures. Traditional securities transactions need to be completed by asset custodians, securities brokers, central banks and central registration and settlement institutions. The compatibility between systems is low, the processing methods are different, and the entire process is low in efficiency and high in cost. From transaction order issuance to settlement It also takes T+3 days to complete, and the lengthy settlement process leads to longer capital occupation and longer risk exposure. It also creates a strong intermediary, and investors who are at an information disadvantage often cannot get the protection of their rights and interests.
The securities registration and settlement system based on blockchain technology can reduce system risks and costs, improve settlement efficiency, and use a real-time full settlement model as a supplement and replacement for the central counterparty system.
Blockchain technology can enable economic entities that have not established a traditional trust relationship with each other to reach an equal cooperative relationship in the same blockchain system. Each node can communicate fully and freely, saving transaction costs caused by information asymmetry. And it greatly simplifies the intermediate links and transaction processes, improves the efficiency of market transactions, and helps promote transaction settlement to achieve T+0 real-time full-value transactions.
Overstock, one of the top ten retailers in the United States, created a blockchain securities issuance platform tØ in 2015, stating that securities can be traded directly on the blockchain without having to go through trading platforms such as Nasdaq. In December of the same year, the US Securities and Exchange Commission (SEC) ) Overstock has been approved to issue the company's stock through the blockchain. The platform is committed to issuing digital assets, such as bonds and stocks, based on the blockchain, subverting the existing T+3 settlement model, and becoming a more efficient and transparent securities issuance and trading platform with "transaction as settlement". Overstock issued bonds and stocks in tØ in 2015 and 2016.
Through cooperation with the blockchain startup Chain, Nasdaq has officially launched the Linq platform for private equity transactions. Share issuers through Nasdaq Linq's private placement enjoy digital ownership, and Linq can greatly reduce settlement time. Chain pointed out: The current standard settlement time of the equity trading market is 3 days, but the application of blockchain technology can increase the efficiency to 10 minutes, which can reduce the settlement risk by 99%, thereby effectively reducing the capital cost and systemic risk. The platform also provides functions such as a dashboard for managing valuations, a timeline chart of equity changes, and investors’ personal equity certificates for the companies it serves, so that issuing companies and investors can better track and manage securities information.