Payment ecosystems are evolving at an accelerating pace to embrace new transaction processing methods and technologies. Let us understand how we can use blockchain use in simplifying payments.
The payment verticals of retail banking, merchant retail, transaction banking, billers, and digital banking that have traditionally operated in isolation are evolving toward a consolidated, real-time, any-to-any ecosystem.
Payment ecosystems square measure evolving toward a period of time, any-to-any payments experience for consumers; blockchain is a fundamentally disruptive technology that will play a role in the evolution toward real time.
Blockchain has the flexibility to modernize a payment’s elementary imperative of transferring price between multiple parties, securely and with minimal operational or technical friction. Modernizing the fundamental imperative delivers substantial benefits in the future use of computing for banks, businesses and governments.
Recent rapid growth of peer-to-peer market exchanges for lending (Zopa, Lending Club and Funding Circle, etc.), accommodation (AirBnB) and taxi services (Uber) has demonstrated the potential of peer-to-peer architectures. Blockchain has the potential to accelerate and change such models in each new and existing markets.
The areas of application for blockchain stretch so much on the far side pure payments. Across the banking system, uses include post-trade settlement, asset management, securities, and trade finance. Beyond banking, blockchain interest includes insurance, government, identity management, and accounting services. Not only is this likely to generate new opportunities for payment providers, but also new entrants with disruptive business models, as new market areas become more practically addressable.
Blockchain technologies are immature and their ability to support the challenging non-functional requirements of payment services has yet to be proven.
Current blockchain proof-of-work algorithms require seven seconds on average to gain consensus; further technical maturity is required in this area to support consensus in under 25 milliseconds. Recent advancements leveraging a proof-of-stake approach hold promise to improve consensus performance. Technical advancements are being made toward maturity; technical maturity has accelerated over the past year, fuelled by increasing blockchain investments worldwide that exceed $1.5 billion.
Different types of uses in payment system:
Value Transfer: The use case for transferring funds between parties is the major focus. Blockchain 2.0 technologies could be applied to a variety of different payment sceneries.
In single currency domestic payment the impact could be to reduce or remove the need for central counterparty and the delays in setting transaction net or gross in real-time. Transfers in multiple currencies between countries cross border payments.
Trade Finance: The use case for trade finance covers a single common record of the liabilities and obligations of parties in trade finance. Possible users of blockchain 2.0 include: invoice fraud prevention, process efficiency, service improvement.
Reference Data: Enable the rapid, auditable and secure updating of records by any authorized participant and sharing the change across the network of users. Potential areas where these technologies could be used to streamline the update process and simplify integration into existing payments processing include hot card files, sanctions lists, routing records etc.
As real-time, open-source and trusted platforms that securely transmit data and value, they can help banks not only reduce the cost of processing payments, but also create new products and services that can generate important new revenue streams.
The biggest key to turning the potential of blockchain’s use in simplifying payments into reality is a collaborative effort among banks to create the network necessary to support global payments. Blockchain technology itself works—there’s no debate about that. Now it’s time for banks to seem at the larger image and work along and with non-banks—to facilitate outline the backbone which will underpin a universally accepted, ubiquitous global payment system which will remodel however banks execute transactions.
The blockchain serves as an immutable ledger which allows transactions to take place in a decentralized manner. Blockchain-based applications are springing up, covering numerous ﬁelds including ﬁnancial services, reputation system and Internet of Things (IoT) and so on. Let us understand through this blog how does Blockchain Architecture work.
Overview of Blockchain Architecture
Blockchain systems can seem complex; however, they can be easily understood by examining each component technology individually. At a high level, blockchains utilize well-known computer science mechanisms (linked lists, distributed networking) as well as cryptographic primitives (hashing, digital signatures, public/private keys) mixed with financial concepts (such as ledgers).
Hashes An important component of the blockchain technology is the use of cryptographic hash functions for many operations, such as hashing the content of a block.
Hashing is a method of calculating a relatively unique fixed-size output (called a message digest, or just digest) for an input of nearly any size (e.g., a file, some text, or an image). Even the smallest change of input (e.g., a single bit) will result in a completely different output digest. Hash algorithms are designed to be one-way (known as being preimage resistant): it is computationally infeasible to find any input that maps to any pre-specified output. If a particular output is desired, many inputs must be tried by passing them through the hash function until an input is found that produces the desired result. Hash algorithms are also designed to be collision resistant (known as second preimage resistant): it is computationally infeasible to find two or more inputs that produce the same output.
Transactions A transaction is a recording of a transfer of assets (digital currency, units of inventory, etc.) between parties. An analog to this would be a record in a checking account for each time money was deposited or withdrawn. Each block in a blockchain architecture contains multiple transactions.
Amount – The total amount of the digital asset to transfer.
Inputs – A list of the digital assets to be transferred (their total value equals the amount). Note that each digital asset is uniquely identified and may have different values from other assets. However, assets cannot be added or removed from existing digital assets. Instead, digital assets can be split into multiple new digital assets (each with lesser value) or combined to form fewer new digital assets (each with a correspondingly greater value).
Outputs – The accounts that will be the recipients of the digital assets. Each output specifies the value to be transferred to the new owner(s), the identity of the new owner(s) and a set of conditions the new owners must meet to receive that value. If the digital assets provided are more than required, the extra funds are returned to the sender (this is a mechanism to “make change”).
Transaction ID/Hash – A unique identifier for each transaction. Some blockchains use an ID and others take a hash of the specific transaction as a unique identifier
Asymmetric-Key Cryptography A fundamental technology utilized by blockchain technologies is asymmetric-key cryptography (also referred to as public/private key cryptography). Asymmetric-key cryptography uses a pair of keys: a public key and a private key that are mathematically related to each other. The public key may be made public without reducing the security of the process, but the private key must remain secret if the data is to retain its cryptographic protection. Even though there is a relationship between the two keys, the private key cannot efficiently be determined based on knowledge of the public key. Asymmetric key cryptography uses the different keys of the key pair for specific functions, dependent on which service is to be provided. For example, when digitally signing data, the cryptographic algorithm utilizes the private key to sign. The signature can then be verified using the corresponding public key.
Addresses and Address Derivation A user’s address is a short, alphanumeric string derived from the user’s public key using a hash function, along with some additional data (used to detect errors). Addresses are used to send and receive digital assets. Most blockchain systems make use of addresses as the “to” and “from” endpoints in a transaction.
Ledgers A ledger is a collection of transactions. Throughout history, pen and paper ledgers have been used to keep track of the exchange of goods and services. More recently, ledgers have been stored digitally, often in large databases owned and operated solely by centralized “trusted” third parties on behalf of a community of users (i.e., the third party is the owner of the ledger).
Blocks Users may submit candidate transactions to the ledger by sending these transactions to some of the nodes participating in the blockchain. Submitted transactions are propagated to the other nodes in the network (but this by itself does not include the transaction in the blockchain). The distributed transactions then wait in a queue, or transaction pool, until they are added to the blockchain by a mining node.
Chaining Blocks Blocks are chained together through each block containing the hash of the previous block’s header, thus forming the blockchain. If a previously published block were changed, it would have a different hash. This, in turn, would cause all subsequent blocks to also have different hashes since they include the hash of the previous block. This makes it possible to easily detect and reject any changes to previously published blocks.
A blockchain is simply a distributed data structure that is built linearly, over time and is independently verified and audited by all actors in the network.
In general, blockchains contain transactions packaged into blocks that are mined using significant resources and new “tokens” are created as a result of this mining.
The network-at-large cryptographically verifies that all transactions are legitimate and uses consensus rules to determine what the valid blockchain contains. As a consequence, blockchains introduce a revolutionary new way to create systems that are free from reliance on any centralized trusted entity to dictate truth.
Bitcoins (BTC) frenzy is becoming huge by the day. People are mortgaging their precious properties to purchase and trade Bitcoins. Companies are being founded by investing Bitcoins. Bitcoins have their own exchange rate and ATMs. Fortune 500 companies like Expedia and Dell are accepting Bitcoin payments. Governments and public sector banks are also experimenting with this digital currency. This blog is Bitcoin Buying Guide to help you make the right move.
Are you also looking to make hay while the Sun shines? Are you looking for guidance on Bitcoin trading before you start heavy-duty Bitcoin trading? This article will explain the basics about Bitcoins, and the step-by-step process of buying and trading Bitcoins.
How to Get Bitcoins?
There are four places where you can get your first stash of Bitcoins:
Cryptocurrency exchanges– These are open marketplaces or brokers where you can use regular cash, cheques or wire transfers for purchasing Bitcoins. You can create an account in an exchange and purchase Bitcoins and start trading here. For newbies, trading through exchanges is best. Coinbase, BitHumb, and LocalBitcoins are some exchanges.
Bitcoin ATMs– These machines send Bitcoins to your wallet in exchange for cash. Just feed in your cash, hold up your wallet’s QR code for scanning, and an equal amount of Bitcoins are transferred instantly to your wallet. Use Coinatmradar to find a Bitcoin ATM near you.
Classified sellers: You can buy Bitcoins from individual sellers in exchange of cash or assets. LocalBitcoins is a leading seller in U.S.A..
Sale of assets or services: Sites like Purse can help you sell your goods, assets, or services to get Bitcoins.
It’s advisable to read reviews of exchanges and sellers before investing any money. Some crypto exchanges have gained notoriety for conducting large transactions on their private ledger, using investors’ private accounts.
Preparation Step: Get a wallet
A wallet is used to store your Bitcoins. Instead of holding actual Bitcoins, wallets contain your encrypted signature (private key). Some exchanges like CoinBase are also a wallet. You will need a wallet whether or not you use a cryptoexchange. You can own an account in one exchange and wallet in some other. Wallets allow you to trade freely with individuals and exchanges.
Here are the five main types of wallets and their advantages and disadvantages:
Electronic wallets– These are actually downloaded files that exist on your computer. If they are cloud-based, you will allow a third party, the cloud hosting company) to access your private keys.
Software wallet– These are applications that you will have to download from Google Play or Apple store, depending on your system’s iOS. Their advantage is that they give you complete control of your private keys. A downside is their security issues. You will have to take regular backups else you lose your private keys if your system gets stolen or compromised. If somebody hacks your computer, they can access your private keys. These wallets are also of three types- full client, lightweight, and web-based. It’s better to use a lightweight wallet like Electrum or Exodus that downloads only real-time transactions on the blockchain, instead of the entire history of transactions since the first Bitcoin was created.
Online wallets– These wallets are cloud-based and allow you to handle your Bitcoins from any computer or location if you know your passwords. They are easily downloadable and usually free. Their questionable security makes them a risky option. Coinbase and Xapo offer secure online wallets.
Mobile wallets– These are available as mobile applications that you can use on the move. They are great if you want to do shopping using Bitcoins. Bread and Arba are exclusively for smartphones and tablets.
Hardware wallets– These are compact flash drive-like devices that can be plugged in when you start transacting. They are very secure.
Paper wallets– These are hard copy of your private keys. They can be stored safely or gifted to someone, but are prone to water and fire hazards.
The type of wallet you choose depends on your spending strategy. You could hold a Bitcoin balance offline (in hardware or paper wallets) and some liquid Bitcoins (in software wallets) for immediate spending. The only word of advice is to keep your private keys secure and share only with trusted people.
Next, you will need to pick a reliable crytoexchange to buy your first Bitcoins. You can buy Bitcoins directly from a Bitcoin holder, but it’s too risky. Exchanges like GDax and CoinBase offer real-time exchange rates that let you buy Bitcoins at fair market value. They also have many great features and tools to manage your Bitcoins. CoinBase also has an integrated wallet.
If you will deal occasionally, you will not be required to open an account in the exchange. But if you plan to be a long-time investor and make big transactions, you will have to sign up into the exchange.
There are three types of exchanges:
Brokers: They are like foreign exchange or gold for cash brokers. They set a purchase rate for Bitcoins and you will have to buy your Bitcoins at that price.
Trading exchanges: These are brokers that connect buyers and sellers and charge a fees from both parties.
Direct trading: They allow peer to peer exchange of Bitcoins at a rate set by each individual seller.
To guide you in selecting the best exchange for your first buy, we created a five-point checklist:
Favorable reviews on forums like Bitcointalk and Reddit will tell you about the reputation of an exchange. Reputable exchanges tell about their regulatory compliance on their websites.
Full disclosure of fees-related information on the exchange website. Most exchanges charge 1% pre transaction flat rate fees for selling directly to buyers. Large-ticket transactions can be done at lower fees of 0.25%.
Multiple payment methods such as credit card, online wallets, and wire transfers are great. Bear in mind that if an exchange allows payment only by credit card, they will require you to reveal your identity and also charge processing fees. Wire transfers can take longer.
A short verification process that lets you start trading instantly.
A low cryptocurrency exchange rate. Rates can vary by almost 10% between exchanges.
There should be no geographical restriction on the use of tools and wallets from an exchange. You should enjoy full access to all platform tools from any location you want.
Usually exchanges have a cap on the amount of Bitcoins that can be transacted per person in a day. The limit is more for fully-verified users and less for occasional users.
In the wake of many money-laundering cases in Bitcoin exchanges, IRS has mandated users to fill a KYC (Know Your Customer) form and offer photo identification in order to get registered at an exchange. These steps may seem cumbersome but are essential to safeguard your investment in the long run.
Read detailed reviews of all leading crypto exchanges here.
Buying Step: Buy your Bitcoins
Login to your exchange and start purchasing Bitcoins. You can purchase any amount of Bitcoins you wish, even less than one Bitcoin. You will be charged a transaction fee from the exchange and depending on your payment method (credit card, cash, transfers, or from another exchange) your transaction can be fast or slow.
Next, transfer your Bitcoins to your wallet and get a Bitcoin debit card to start shopping! Feel free to let us know about your experience from this blog on Bitcoin Buying Guide.
Mexico badly needs innovative solutions to fight the persistent problems of corruption and inefficient governance. At the same time, blockchain, being a decentralized technology, promises to reduce administrative costs and ensure transparency in public services. The article talks about the current state of Blockchain Development in Mexico economy and in the public administration of Mexico.
The Public Project “Blockchain HACKMX”
In September 2017, the Mexican government has initiated a blockchain project called “Blockchain HACKMX”. The project’s main goal is to “promote government digital innovation” and to address the issue of public contract corruption.
The project initially arose from the recommendations of the World Economic Forum, which suggested that the use of blockchain technology might be beneficial in combating corruption. Blockchain is considered by the Mexican Government as a technical solution to enhance transparency and trust to eventually improve the processes of public procurement. Blockchain HACKMX aims to address the issue of public contract corruption.
It involves five Government institutions and the state government of Jalisco. In collaboration with Campus Talent Mexico, they were creating a Talent Hackathon (i.e. contest) which encourages group of IT specialists to build blockchain solutions for public services such as tender process, identity management, certificates of deposits and public property register. In total, 40 teams participated in the first hackathon whereby the majority of the projects of the ten finalists are in the area of identity management and public registers. The winning team created a blockchain-based solution for public tenders, which will allow for citizen participation.
2. Regulatory Framework
The new regulatory bill “Ley para Regular las Instituciones de Tecnología Financiera” (Mexico Fintech Law) on Fintech companies, including firms operating in the field of cryptocurrency, was approved by the Mexican congress in March 2018.
This bill generally aims at greater regulatory certainty within the fast growing fintech sector in Mexico by providing more guidelines for electronic payments, crowdfunding and digital assets.
It also provides a conceptual legal framework for digital assets and therefore might be particularly valued by firms interacting with cryptocurrencies. One important aspect is that cryptocurrencies are now recognized as digital assets and thus as a legitimate mean of digital payments and transactions. This is crucial for the entire industry, notably, it favours companies operating in the e-commerce and the remittance sector.
With the Fintech Law, Mexico put itself among very few countries, which are proactively establishing laws for the fintech industry. In fact, Mexico became the first country in Latin America to specifically regulate this industry. Since the newly approved law aims to provide regulatory certainty, proponents of the law are confident that it will boost the fintech industry and even create more competition for traditional banks at the same time.
3. Fintech Industry in Mexico
Mexico has a booming fintech industry, which experienced a 40% growth of startups within the last year. The 334 domestic fintech companies make Mexico a main driver to financial innovation in the region, second only to Brazil with 377 firms.
A study from 2017 revealed that new companies could take over 30% of the traditional banking market in Mexico within the next 10 years.
4. Cryptocurrency Market
With the new Fintech Law in force, Bitso strives for a closer collaboration with authorities (i.e. the central bank) and expects higher financial inclusion, reduced costs for remittance transactions and the “digitalization of money”.
Apart from the new law, the Mexican authorities have remained very quiet about their stance on blockchain and cryptocurrencies. Furthermore, there have been no ICOs(Initial Coin Offerings) in Mexico yet. This is most probably due to the existing legal uncertainty, driven by the finance ministry’s warning that ICOs could violate Mexican law.
Since many Mexicans do not use credit cards or bank accounts, digital payments for retailers in e-commerce get processed through convenience stores with systems like OXXO Pay.
Making use of this huge infrastructure, Bitso today offers cash deposits for bitcoin wallets as well as cash withdrawals at over 140’000 conveniences stores throughout the country. This means that 140’000 convenience stores were turned into cryptocurrency ATMs.
The long-term objective of the “Mexican Blockchain Initiative” is not only to develop separate projects such as this smart tender, but also to develop a national Mexican Blockchain for the public sector. This blockchain should be used as a foundation for further developments in the area of public property registers, identity management and certificates of deposits. Notably, the blockchain will not be fully public but rather a hybrid one, i.e. including public as well as private components.
Compared to the United States where the blockchain development is flourishing, Mexico’s blockchain development has started late and now struggles to retain talent since many Mexicans are tempted to work for tech-companies in the United States.
In response to the lack of local skill and to attract more talent, organizations like IBM, Tata Consultancy Services (TCS) Latin America and Telefónica Mexico aim to train the “technologically versatile” people in order that they can enhance their knowledge. In addition, the recently launched Blockchain Academy Mexico offers blockchain courses for beginners, software engineers as well as business people. According to their website, the Blockchain Academy Mexico aims to contribute to the country’s blockchain ecosystem by organizing courses as well as events.
Let us know if you are looking forward to Blockchain Development in Mexico.
The insurance industry will still have obstacles to overcome, but blockchain’s ability to provide complete accountability, transparency and superior security will help insurers save time and money, as well as improve customer satisfaction. Let us understand how Blockchain application in Insurance will be robust.
Problem with Current Insurance system
Fraud is estimated to cost the insurance industry more than $80 billion annually.
Health insurance fraud ranges from providers submitting claims for services never rendered to up-coding services to receive higher payments. Plan members can commit fraud by failing to report other types of health insurance coverage that would cover the billed services or ﬁling claims on behalf of ineligible members/dependents (e.g., keeping an ex-wife on an insurance plan after a divorce).
Life insurance fraud typically occurs during the application process—applicants withhold key medical information such as a history of diabetes or a heart condition, for example. To decrease costs, life and health insurers both look to protect themselves, their shareholders and their policyholders from fraud.
Information is an insurance company’s lifeblood. Properly acquiring, processing, sharing, securing and using that information to make decisions in a timely manner is crucial—but some of today’s transactions may take days (or weeks) to locate and process. Many insurers are using claims systems that were originally built more than 30 years ago.
Maintaining these outdated technologies increases costs for insurers and may hamper their eﬀorts to adopt new value-based payment strategies that will change the way insurers approach network development, provider contracting and payments.
How Blockchain helps?
When fraudulent information is submitted to a life or health insurer via false claims, falsiﬁed applications, or other channels, blockchain’s smart contracts can help determine if the submission is indeed valid.
Blockchain cannot verify all types of data (e.g., whether the claim was up-coded), but it can validate the submitter and the completeness of the information (e.g., billing code and date are included in the claim). For example, a health insurer could link a claim submission to a patient’s interoperable health record on the blockchain to verify that the patient was actually seen for the appropriate condition.
A life insurer could compare elements of an applicant’s health record—whether the person had been treated for cancer, or whether the person is a smoker—to public or employment records to verify that the information the applicant provided is correct. Once conﬁrmed, the claim would be paid. If not conﬁrmed, the claim either would not be paid or at least trigger further investigation.
The many millions of transactions and data exchanges between an insurance company and its customers, providers, vendors, employers, auditors, and regulators should become much easier to access and view securely with blockchain, saving time and resources.
Blockchain could automatically collect records of agreements, transactions and other valuable information sets, then link together the information and act on the data using smart contracts.
Blockchain-based provider directories could leverage the technology’s decentralized consensus protocols to allow providers and insurers to update listings more quickly and easily. If a provider changes networks or someone ﬁnds a mistake, they can initiate a correction, which can be automatically accepted or rejected by smart contracts based on other information in the blockchain (e.g., a recently rejected claim).
Health plans will be able to keep track of all provider updates and will know which information is most current. Providers, who currently have to maintain multiple directories, would only have to update their information in one place (e.g., a government-sponsored blockchain applications in insurance).
Blockchain has the potential to introduce new models, reinvent existing insurance processes and increase the capacity of insurance providers. Health and life insurers should be positive when it comes to blockchain. The greatest opportunities may extend beyond making incremental improvements in current business models to harnessing blockchain’s unique attributes to create entirely new types of interactive policies and launch innovative services that add value and grow the business.