UnionBank, one of the largest banks in the Philippines, announced a partnership with the American blockchain startup ConsenSys Ethereum co-founder Joseph Lubin. The aim of the project is to help local financial institutions in the integration of Ethereum and blockchain platforms.
Features of economic system
The financial infrastructure of the Philippines is specific. The banks know that the banking services in the country available only to the wealthy, companies and members of the higher class. The majority of the population, including legal entity, financial transactions rely on local money transfer network, for example, M Lhuillier, Cebuana Lhuillier, Palawan and LBO. They provide services both domestically and internationally.
The point of departure and receipts common in rural areas and provinces, especially in those areas where it is unprofitable for banks to open branches and provide a full range of services. And in large cities (e.g., Cebu) such facilities are available literally on every corner, sometimes 10 meters from each other.
The main reason of inaccessibility of banking services and the difficulty of opening a Bank account in the country associated with the requested size of the underlying Deposit. For example, in UnionBank on the client’s account shall be filed not less than $ 2,000. If the balance falls below this amount, the customer may be assessed a fine.
In a country like the Philippines where the movement of financial streams is carried out mainly through the payment system, any technology capable of ensuring transparency, safety, reliability and efficiency of the transactions is of great importance. According to representatives of the ConsenSys and UnionBank, the introduction of blockchain technology will significantly improve the financial infrastructure and ecosystem of the Philippines.
According to UnionBank Chairman Justo Ortiz, competent implementation and commercialization of blockchain technology “will make financial services available to the public.”
In the coming months, the company ConsenSys will work closely with UnionBank for the introduction of blockchain solutions Kaleido, developed based on the Ethereum Protocol. New technology will allow to ensure the safety and transparency of information processing and transactions.
According to Alai Garcia, representative ConsenSys in the Asia-Pacific region, UnionBank became their first Bank client in the Philippines. In his opinion, this country could become one of the few that will be able to derive maximum advantages from using the blockchain technology because the idea of its implementation in existing systems, with readiness was supported by the representatives of both the public and private sector.
“Our thirst for experimentation prepares the country for a significant transformation of the financial system for future generations,” said Garcia.
Comparison of costs when using a blockchain platform Vitalik Buterin and centralized systems
In the past year, Ethereum founder Vitalik Buterin continued to actively explore innovative solutions to the problem of scaling network, such as sharding and Plasma. The blockchain conference Deconomy 2018 in Seoul, he said that the cost of processing information in the blockchain is significantly higher than in centralized systems, such as Amazon Web Servers.
“The blockchain is much less effective as a tool for computing and database technologies that exist for 40 years. If we talk about the development of the blockchain, the simple efficiency of resource use is not the answer. The cost of the services Amazon EC2 is around 0.04 dollars per hour.
How much services will cost the global computer Ethereum? New units in Ethereum are generated every 14 seconds on average to process each block on my laptop it takes about 200 milliseconds. The block contains one million units of gas. Let’s say that the average price for gas is 4 GWEI. Then the cost of the processing unit in Ethereum will amount to 13.4 per dollar for every 200 mlsec”.
Buterin also stressed that the cost overhead in Ethereum will be a million times higher than Amazon.
Therefore, UnionBank and five provincial banks in the Philippines if you plan to conduct transactions through the blockchain, should be aware that this technology is not always the most efficient for information processing. It is important to choose the right scenario and application of blockchain technology to justify the overhead and other costs use the blockchain instead of centralized systems.