Blockchain & Money: Session 14: Blockchain Payments, Part 2 by M.I.T. Sloan School of Management with Professor Gary Gensler

Session 14: Payments, Part 2

• Session 14 Study Questions:
  • What lessons can be drawn from the challenges for blockchain related payment applications? Might Layer 2 solutions, such as Lightening, resolve these challenges?
  • What are the opportunities in cross-border payments? In domestic P2P or P2B payments?
  • What are tradeoffs of utilizing permissioned vs. permissionless payment applications?

• Session 14 Readings:
  • ‘How Blockchain Can Finally Fulfill its Promise in global payments’, CoinDesk.
  • ‘Extending the World of Payments to Blockchain’, ACI Worldwide.
  • ‘The Payment Industry is About to be Struck by Lightning: Expert Take’, Coin Telegraph.
  • ‘Why Stripe Gave up on Bitcoin and Blockchain Payments’, Fortune.
  • ‘How XRP Fits into Ripple’s Payment Products Explained”, CoinDesk.

Overview: 10 Years and Counting–Happy Anniversary; Payment Systems and ‘Pain Points’; Payment System & Blockchain Technology; Blockchain Payment Companies; Conclusions.

• Bitcoin Anniversary (2018):
  • On October 31, 2008: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
  • Now…
  • Price: $6300
  • Market Capitalization: $110 Billion
  • Outstanding Supply: 17,352,000
  • Blocks: 548,300
  • Blockchain Size: 189 GB
  • Transactions per day: 250,000
  • Hash Rate: 50 Exahash (10¹⁸)/Sec
  • Difficulty: 7.2 Trillion
  • Unique Addresses: 500,000

Bitcoin Network: 10,000 Nodes

• Payment System ‘Pain Points’
  • Costs
  • Delayed Settlement
  • Chargebacks
  • Fraud
  • Privacy
  • Financial Inclusion
  • Cross Border Payments
  • Centralization of Ledgers
  • Complexity

• Payment System & Blockchain Technology
  • Possible Suitability
    • Payment Systems use Ledgers to Store and Move Value
    • Multiple Parties Read and Write to these Ledgers
    • Verification and Networking critical to Payment Systems
    • Tokens Store Value
    • Peer to Peer Capabilities
    • Micro Payments

• Payment System and Blockchain Technology?
  • Challenges
    • Performance, Scalability, & Latency
    • Security, Custody, & Privacy
    • Regulatory Compliance
    • Customer User Interface
    • Adoption
    • Token Volatility

• Blockchain Technology Payment Companies
  • Crypto–Start-Ups
    • BitPay
    • CoinBase
  • Fiat–Start-Ups
    • Chain
    • Interbank Information Network (built on Qurom)
    • R3
    • Ripple
  • Incumbents
    • ICE’s start-up Bakkt
    • MasterCard Patent for Crypto Fractional Banking
    • Visa B2B Connect

• Possible Use of Bridge Crypto for Payments:
  • Fiat –> Crypto –> Fiat

• Conclusions:
  • Payment Systems Amend and Record Ledgers for Money
  • Technology is Rapidly Changing Payment Systems around the Globe
  • Payment Systems have many ‘Pain Points’
  • Blockchain Technology may provide new methods to make payments
  • Due to challenges, though, no widely used blockchain payment apps
  • In assessing potential use cases the devil will be in the details.

Biblio:

• Gary Gensler. 15.S12 Blockchain and Money. Fall 2018. Massachusetts Institute of Technology: MIT OpenCourseWare, https://ocw.mit.edu. License: Creative Commons BY-NC-SA.

Video Link: Session 14: Payments, Part 2.