IBM has quietly introduced "Blockchain World Wire", what it calls "the new financial rail that can simultaneously clear and settle cross-border payments in near real-time", and a product that has the chance to become a competitor to Ripple's xRapid.
Here are two diagrams from IBM's website showing how the system is designed to work:
The process of making a cross-border payment using Blockchain World Wire (which uses the Stellar protocol) has the following steps:
- "Two financial institutions transacting together agree to use a stable coin, central bank digital currency or other digital asset as the bridge asset between any two fiat currencies."
- "The 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.")
IBM claims Blockchain World Wire has the following advantages over traditional payment solutions:
- Faster Payment Processing (simultaneous clearing and settlement)
- Lower Costs (reduced capital requirements for cross-border transactions)
- Increased Efficiency (one exchange fee between all currencies)
- Supports payments of any size, in any asset type, to any destination
Given the lack of a press release and the fact that neither IBM's nor Stellar Development Foundation's Twitter account has any mention of this product, it seems like the two parties are working together, but the product is not ready for launch yet. Also, on its website, IBM does not provide much in the way of technical details other than revealing that it uses technology from Stellar, which was created by Jed McCaleb and Joyce Kim. At this point, it is worth noting that prior to releasing Stellar in July 2014, McCaleb co-founded Ripple (with Chris Larsen, in 2012) and served as its CTO until 2013.
A surface level reading of Blockchain World Wire's description makes it sound a little like Ripple's xRapid. IBM's solution appears capable of using any digital currency -- not just XRP -- as the bridge currency, which could be seen both as a good thing and a bad thing. Stellar fans are generally excited because they are hoping that in most cases Lumens (XLM) will get used as the bridge currency. Some Ripple fans are a little worried that some financial institutions might choose Blockchain World Wire (whenever it becomes ready) instead of Ripple's xRapid (which uses XRP as the bridge currency, and which eliminates the need for nostro accounts) because of their existing relationships with IBM, even though to them IBM's solution sounds inferior to xRapid.
We will update you as more details about Blockchain World Wire become available.
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