It is estimated that more than $150 trillion in cross-border transactions occurs each and every year, with the vast majority of this amount facilitated through the SWIFT network. The entire global payments system has subsequently become rather intransigent, with no alternatives on offer for institutions to consider. However, that was until the introduction of distributed ledger technology, and more specifically, a decentralized blockchain provider such as Kvantor. Here are some key differences between the stagnant SWIFT network and the innovative Kvantor protocol.
Please Note: This is a Press Release
Too many cooks spoil the broth
In reality, the SWIFT network isn’t really a payments system at all. In fact, it could be argued that it acts more like a messaging service. Why? The sender must communicate with their bank, who then communicates with their beneficiary bank, who then communicates with SWIFT, who then communicates with the receivers beneficiary bank and then who finally communicates with the receiver. That’s a lot of communication!
On the contrary, Kvantor eliminates all intermediary third parties. The sender transfers funds through a decentralized ecosystem that has the capacity to confirm and validate a transaction in seconds. It does so by using its native Kvantor token, acting as a bridge of liquidity between competing fiat currencies. Ultimately, this will allow banks to engage with one another directly, without going through countless middle-men.
A long list of stakeholders that all need to be paid
As explained in the previous section, the SWIFT network consists of a considerable amount of actors. Intermediary banks do not offer their services for free, which subsequently adds additional costs for the institutions that need to transact.
In contrast, as Kvantor is able to operate in a decentralized environment, meaning that no single person or authority has control over the network, organizations can transfer funds on a peer-to-peer basis. Not only this, but the consensus mechanism used, which is based on the theory of Proof of Asymmetrically Apprised Authority (PoAAA), means that transaction fees are in the “cents”.
Who determines the exchange rate at which funds are settled?
Trading alternating currencies isn’t an easy feat. At least not in the current climate of the SWIFT monopoly. Each rate is determined by the bank board rate, which can be highly adverse for institutions trading with less demanded currencies. Ultimately, the bank board rate favours major fiat currencies such as USD and EUR, with those located in emerging markets confronted with wide margin spreads.
However, Kvantor solves this problem by offering the best possible market rate at the time of the transaction. This links directly to the previous discussion on speed, as currencies need only remain on the network for a few seconds at most. This acts as a safeguard against volatile market swings, which is often the case when exchanging minor or exotic currency pairings.
A global payments system that isn’t really global
One of the most pertinent points of discussion when analyzing the monopolization of the SWIFT network, is that influential geo-political administrations have the ability to decide who uses the network. Being able to trade internationally should be a fundamental right, not a privilege.
To explore this idea further, take a look at how Iran were demonized by the American-led sanctioning of its economy. As one of the largest exporters of oil in the world, Iran relied heavily on accessing the SWIFT payments network. However, when the U.S. began its trade sanctions on Iran, it also convinced SWIFT to block their domestic institutions from accessing the network.
Even though we are not advocating that anyone should break international laws, we do think that any country in the world may ask itself if it wants to stay vulnerable to being cut off from the international payments network by the switch of a button at the whim of a politician. Blanket trading sanctions are meant to put pressure on politicians but often end up hurting innocent civilians. So why put your faith into the hands of a western run framework when decentralized alternatives are now available.
Kvantor are already in discussions with major financial institutions as to how our protocol will not only benefit their own abilities to transact internationally, but for the entire global financial system.
Find out more at www.kvantor.com
Arsen Bakhshiyan, CFO Kvantor
(KVANTOR is a platform which facilitates borderless transactions and seamlessly integrates with banks and FinTech providers who are disenfranchised and are looking for alternatives to traditional channels, such as SWIFT.)