By Ishant Gupta
On the 27th of February, IndusInd bank announced that it will enter into collaboration with Ripple in order to strengthen its system of global payment transactions.
How is Ripple different?
Ripple is not a cryptocurrency but rather a payment settling system which is far more advanced than those used currently by the banks. Conventional settlement systems use the US dollar as the medium for international transactions.
For example, suppose an Indian citizen makes a transaction with a Japanese citizen. The Indian goes to the bank and pays INR, which is then converted into US dollars before being converted into Japanese Yen. This whole process takes around 2-3 days along with currency convergence charges. What Ripple does is to use the cryptocurrency XPR, which eliminates exchange charges and completes the transfer in mere seconds.
The motive behind the collaboration
IndusInd—which has a significant interest in cross-border transactions—plans to build a business that will transfer $65 billion to India annually. By collaborating with Ripple, the company is laying the foundation for this plan, according to Ramesh Ganesan, senior executive vice-president of IndusInd Bank.
This planned collaboration will create a win-win situation for both companies, as IndusInd will be able to exploit the market effectively and Ripple will be made easily available to citizens in the expanding Indian market. After the announcement, Ripple’s value rose 3.76% to $0.962384, while IndusInd rose by 0.22% to Rs 1695 on the BSE. This movement indicates a positive outlook on the part of investors.
Is blockchain safe?
Blockchain technology has already significantly reduced the time as well as the cost incurred in making financial transactions. However, a persistent question which has been troubling governments, businesses and institutions is whether this technology is safe.
From a purely technological point-of-view, Blockchain is considered to be hack-resistant. Blockchain technology is like an open ledger where each transaction represents a ‘block’, and after each transaction, the balance is carried forward. In order to hack a particular transaction, a hacker must hack all the transactions before it to maintain the same monetary balance. Even if a hacker attempted to do this, the computer processing power needed would be enormous and impractical. Furthermore, the ‘blocks’ are not scattered in one place but rather are spread out on computers and servers around the world. This makes it really hard to crack the system and the reward for doing so would be very small. Whereas conventional transactions offered by the bank are centralised, it is much easier to hack these systems and the reward for doing so is correspondingly greater.
Although blockchain has a lot of advantages it also has many regulatory problems, such as with its compliance with the legal system. The blockchain is still in its infancy. However, with time and ongoing development and the involvement of traditional financial institutions, these problems will likely be eliminated sooner than anticipated.
Featured Image Source: Flickr
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