The big news out of the commercial bitcoin space this week is that computing and hardware giant, IBM, is employing blockchain technology to facilitate cross-border payments. The platform is early stage but it’s a great example of how public and private blockchains can combine to support real world functionality and – concurrently – reinforce the argument for mainstream adoption and acceptance.
As per reports, IBM has teamed up with cryptocurrency startup (well, relatively) Stellar, which has its own blockchain and a currency running on said chain called Lumen, to implement the system that’s in focus here.
The idea is pretty simple: the company wants to make cross border payments quicker, easier and – most importantly – cheaper. One way to do this, and the method that’s being employed as part of the system, is to use a cryptocurrency to serve as a sort of intermediary token.
The way it works is that the fiat is never actually transferred across a border. Instead, it’s exchanged for crypto (in this instance, Lumen) before the funds are transferred and the Lumen is the token that’s representative of value as the capital crosses the border. On receipt of the Lumen, the party that’s being sent the funds exchange the Lumen back into fiat (whatever domestic fiat is representative of the country in question).
How this sort of collaboration will play out going forward remains to be seen but there are wider implications of this move outside of those for IBM, Stellar and cross border payments. The speed of mainstream adoption of cryptocurrency and – additionally – the technology that underpins it is going to be boosted by use cases like this and when you’ve got a behemoth like IBM deciding to incorporate the technology into its operations others are going to sit up and take notice.
We’ll keep an eye on things as they develop.
Image courtesy of Leonid Mamchenkov via Flickr