International Business Machines (NYSE: IBM) is using Bitcoin’s blockchain technology to create a digital cash and payment system for major fiat currencies, according to a source associated with the matter.
The proposed digital currency system will be built on the same lines as Bitcoin and will act in a similar way. The Bitcoin revolution has created a self-sustaining and unregulated economy parallel to the traditional, government-regulated economy. However, the new system will differ from Bitcoin in that it will be controlled by central banks, such as the Federal Reserve. Bitcoin users can transact at extremely low costs, and within seconds, unlike the traditional banks which take up to a couple of days to process international payments and even charge dearly.
The sole purpose of the new system will be to facilitate smooth and quick transfer of funds, without involving a third party, such as a bank, thus bringing down transfer costs. As the case is with the blockchain, where a ledger is maintained to keep a record of all the transactions, the new system will have a country-specific open ledger where the transactions recorded will be printed in national currencies, such as the dollar or euro, said a source on condition of anonymity.
The technology behind bitcoin allows its users to send money anonymously, since no personal details are required to create a Bitcoin wallet.
Another advantage of the blockchain innovation is, that even though the ledger is open and accessible to all the participants in the bitcoin network, i.e. the bitcoin miners, tampering with the sequence of transactions is nearly impossible.
That one of the world’s leading tech companies is looking to expand the use of Bitcoin should come as no surprise, given its reputation of an aggressive player in the market. In the past three years, the growth in the Bitcoin industry has dwarfed that of the rest of the world and attracted huge investments and immensely talented enthusiasts. With national governments now easing their stance and considering Bitcoin and other cryptocurrencies as potential reformative financial tools, it only seems apt that IBM took the plunge in the digital payments industry. Earlier in February, the Bank of England in its “One Bank” research report had linked the Bitcoin revolution to the Internet revolution.
The source revealed that the project is still in its nascent stage, and concerns regarding money laundering beahviors and funding of illegal activities are being examined carefully. Hence, the government and the financial authorities may also have a role to play.
According to IBM’s source:
“These coins will be part of the money supply, It’s the same money, just not a dollar bill with a serial number on it, but a token that sits on this blockchain.”
“We are at a tipping point right now. It’s making a lot more sense for some type of digital cash in the system, that not only saves our government money, but also is a lot more convenient and secure for individuals to use,”