One of the big impediments to blockchain adoption has been the amount of time it takes to execute a complex blockchain transaction. To remedy this, IBM has announced that its Blockchain World Wire (BWW) payment network is out of beta this week, a network based on the Stellar Development Foundation’s (SDF’s) financial infrastructure designed to speed worldwide access to low-cost financial services through the development and maintenance of technology and partnerships.
Using IBM LinuxONE servers, IBM has tuned SDF’s blockchain technology to efficiently simplify international settlements between banks “near real time” speed. The new product will allow the exchange of fiat money for cryptocurrencies – money that is legal tender, but it is not backed by a physical commodity. Without the use of a physical commodity, the processing speed of a transaction can be greatly increased.
What is Stellar?
Stellar’s blockchain technology is built on the Ripple protocol and is aimed at working with developing markets instead of directly with established banks and other financial institutions. Tricia Martinez, the founder and CEO of Wall, a customer of Stellar describes its design as “a payment network to integrate disparate currencies, payment systems and entities to move value quickly and reliably at almost no cost.” According to Ms. Martinez, “Stellar scales exceptionally well — transactions are generally confirmed in three to five seconds, and transaction throughput of up to 10,000 transactions per second has been reported. Furthermore, transactions on Stellar are extremely cheap in the region of 100,000 transactions for $0.01. This aligns with the core need identified when Dala was created: emerging market consumers need the ability to transact micropayments instantly at no cost.” Small banks, nonprofits, and other small businesses have shown interest in Stellar transaction processing due to both the speed of transactions processed as well as the low cost.
How Will IBM’s Blockchain World Wire Process Stellar Transactions?
Overall, IBM’s Stellar-based BWW looks to offer banks and other financial services institutions, a way to settle cross-border payments and clear them almost instantaneously. Over time it is expected that BWW eventually may compete with the Swift payment system and even Ripple’s blockchain-based xRapid transactional solution.
According to IBM’s blockchain website, “Financial institutions use their existing payment systems – seamlessly connected to World Wire’s APIs – to convert the first fiat currency into the digital asset. World Wire then simultaneously converts the digital asset into the second fiat currency, completing the transaction. All transaction details are recorded onto an immutable blockchain for clearing.” According to IBM, stablecoins will be used to connect two fiat currencies. Two different financial institutions will have to agree on the stablecoin and use their existing payment systems to process the transaction. Accordingly, World Wire transactions can be made because both companies are synced through APIs.
IPR Daily, a Chinese media outlet that conducts research, announced that tech giants Alibaba, and IBM are leaders in the number of blockchain-related patents filed to date – and both have shown interest in Stellar-based blockchain processing.
To increase market adoption IBM plans to present the new BWW blockchain processing system to bank and financial services representatives attending their Sibos conference in Sydney, Australia in late October.
At present, its too early to tell if IBM’s BWW approach will be widely adopted. But with the potential of faster blockchain processing at a significantly lower cost, BWW holds great promise for wide-scale, efficient blockchain processing in the future.