Why SWIFT is a PoS network and why a Blockchain system will replace it sooner than later

When you send money from New York to someone in say Argentina, it usually goes through what is called a SWIFT transfer.

SWIFT - Society for Worldwide Interbank Financial Telecommunications is the world's largest financial network that moves the world's money. Last year SWIFT moved an insane $5 Trillion per day or 1.25 quadrillion per year ???? - most of which is international payments.

How does it work? The simple basics.

When you enter the details of your Argentinian friend in your bank account and authorize a wire transfer, A whole bunch of banks called correspondent banks get involved to make this go around. Your bank sends these details to a larger 'correspondent' bank which then sends this to another larger bank which has (finally) a relationship with an Argentine bank.

Trust issues

Just the way you trust your bank to keep the funds safe, your bank trusts the larger correspondent bank to keep its funds safe during transit (which means this larger bank needs to keep a huge deposit safe with the federal reserve to maintain its credibility). In other words, they have to prove their network credibility by a huge stake of Dollars. A few big players are acting as kind of validators of worldwide interbank transactions. Since everyone needs to trust one another every step of the way, only select entities which have huge capital pledged with authorities can be part of this trust chain. As you can expect these trustworthy entities don't want to do the job for free, so they charge for this privilege (staking returns).

Even though transferring money in the modern world is simply moving numbers from one database to another, transfers between countries typically cost 5-10% (for most corridors) and take 1-5 days. That‘s ridiculously blatant.

The Blockchain Solution

As Blockchain decentralizes trust and makes payments instantaneous using a blockchain-based token like Bitcoin even stable coins like USDC bring down the costs drastically to a few cents and time taken to minutes.

Now imagine that your bank didn't have to send money to another bank which sends money to another bank which sends to another bank, you get the point - Instead, your bank could simply purchase bitcoin in its own country from an exchange and send this bitcoin through bitcoin lightning (at speed of light) which gets converted from bitcoin to that local currency to your friend (all of this can happen in less than 5 secs).

The powerful thing about bitcoin is it's the world's first digital bearer asset which doesn't need a trusted counterparty to move funds from bank to bank. Even though bitcoin is volatile in a window of months over a 5-second window that volatility won't affect you much. Using this route you can basically zap money around the world in seconds and cost l/1000 of typical SWIFT transfers.

Conclusions

• No one likes to wait 5 days for payment clearance if they don't have to
• No one likes paying 1-10% of money transfers as transaction fees
• No one likes giving up their privacy to agencies in countries that they are mostly not even aware of.
• SWIFT is already today a PoS (Proof of Stake) network with trusted parties
• Therefore it is the perfect use-case to be replaced by a more effecient trustless blockchain system

Source: - https://blog.valuete.io/will-bitcoin-kill-swift-wire-transfer/ - https://www.thebalancemoney.com/correspondent-bank-5198871 - https://youtu.be/BFKZoq2z39s