In a recent report titled “Instant revolution of payment?” Deutsche Bank sheds light on the quest for real time payments and discusses bitcoin and the underlying blockchain technology, CoinDesk reported.
Penned by Heike Mai, the report talks about ‘instant payment’, adding that to this day, cash is the only instant payment method of broad importance and with a pan-European reach in the euro area. Mai discusses various payment modes and systems including credit card payments, e-money transactions, open loop system, closed loop system, bitcoin and the blockchain technology.
The report explains that the blockchain technology allows the payer to pay the payee without using an intermediary, contrary to other electronic payment systems. Although the technology is still in the nascent stage, it might revolutionize the financial industry but one cannot ignore the fact that there are open questions regarding the “legal status” of distributed ledger payments.
“Today, Bitcoin is the most prominent example among several decentralized peer-to-peer networks using blockchain technology to transfer funds and to ensure trust between participants”, Mai added.
Regarding execution time, Mai pointed out that instant processing of bitcoin transactions is possible – it usually takes 10 minutes until validation and 1 hour to be considered final. He added that the Ripple network transfers value within seconds, i.e. in real time.
Mai makes an interesting observation –the original vision of Bitcoin i.e. to create a peer-to-peer scheme that is independent of intermediaries and central agents – “is to some degree being overhauled by real life.”
He pointed out that with a number of financial intermediaries, like wallet providers and exchanges, the bitcoin ecosystem shows a trend towards “concentration” and that Bitcoin trading volume is highly centralised in a handful of exchanges.
“Today’s extensive research and future technical developments will eventually show if and how blockchain technology can be geared towards processing high volumes in a peer-to-peer network at competitive marginal cost and with sufficient protection against fraud in record keeping and consensus finding”, Mai said.
He also spoke about Bitcoin’s negative image resulting from various scams and frauds (Mt Gox) and said that the digital currency has to overcome this bad reputation. He added that while progress in the legal framework and supervision will help P2P networks to gain trust and a higher market share among consumers and businesses, it will also add to the processing cost.