The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of ARYZE.
When you arrive at the airport of a new country, customs will conduct identification and visa checks. The information you have in your own country in regard to your personal identification is not known by another country. Therefore, there’s a need to input your passport information every time you arrive at a new destination. Simply put, this is non-interoperability.
Similarly, in the blockchain world, information and digital assets reside in different blockchain systems and therefore remain isolated. They cannot communicate and share across platforms. Interoperability refers to the ability of different systems to share, communicate, integrate and collaborate in a coordinative manner, regardless of geographical borders.
There are two major different demands in the blockchain field.
1. The interoperability between blockchain systems and legacy systems.
As an emerging technology, blockchain revolutionizes and disrupts many traditional sectors, such as payments, international remittances, and supply chain management. As a product of blockchain, cryptocurrency has its own benefit of facilitating faster and cheaper transactions for unbanked people. However, there are huge barriers to mass adoption for blockchain solutions. One of them is the incompatibility between blockchain and traditional systems. Moreover, the high switching costs for the general public causes resistance towards pursuing new blockchain-based solutions that have yet to stand the trial of time and volume.
2. The interoperability between different blockchain platforms.
There are dozens of new blockchain projects born every year competing with each other, such as Bitcoin, Ethereum, Stella, Cosmos, NEOs, EOS — you name it. The information on the Bitcoin blockchain, for example, is not known to the Ethereum blockchain. Those different projects entail different consensus methods, algorithms, and applications. As a result, the lack of interoperability slows the innovation process and creates unnecessary intermediaries for interexchange of information between different blockchains.
What is the current interoperability problem of the banking system?
For the current banking system, the transfer of money from one account to another account is relatively easy and fast if the banks of the account are within the same network of correspondents. However, when it comes to international payments, the process can be expensive and slow. That is because banks in different countries use different systems; oftentimes, two systems are not interoperable with each other. The information and assets have to go through the third party, say a correspondent bank, to facilitate the transaction.
There are three main problems caused by the non-interoperability of different financial systems. First, high transaction costs. When we conduct international payments, transaction fees are charged both to the sender and to the receiver. For senders, the percentage of transaction fees usually ranges from 0.1%-1%, but for small value transfers, the transaction fee can reach a whopping 7–16%. In the middle of the transaction, intermediary banks also charge expenses. The receivers often pay some proportion of the transaction as an international wire transfer fee.
Second, information asymmetry. With multiple intermediary banks and various financial networks, the information for banks are only available to the institutions that are connected to their own network. The issuing bank can only confirm that money has been sent out, and receiving banks can only know of the payment when they receive the money. Therefore, if the transaction has any issues in the middle of the process, none of the banks involved have immediate knowledge about what has happened. The information is delayed and siloed. The customers of the banks are not able to acquire timely and transparent information regarding their own transactions.
Third, inefficiency. Non-compatible systems create lots of manual and time-consuming processes. Usually, international payments are received within 3–8 days. The process requires several working days of the bank to process the transaction. The involvement of multiple intermediary banks also prevents transactions from being faster and efficient. In addition, if the issuing bank wants to receive transaction information from the receiving bank side, it is required to write an application to the counterparty and request the information, and vice versa. These complicated procedures are primarily caused by the lack of interoperability of different banking networks.
How does ARYZE approach interoperability?
One of the biggest concerns for cryptocurrency and blockchain-based solutions is the lack of interoperability between “the old” and “the new” mechanisms.
Due to the high degree of value volatility in the market, businesses are not willing to accept or employ cryptocurrency as a primary payment method. Even for stablecoins pegged to one or multiple fiat currencies, for people who live in territories that do not use those pegged fiat currencies, high exchange risks still exist.
Meanwhile, the majority of people are not informed as to how different cryptocurrency payments work.
ARYZE aims at bridging the missing links between legacy systems and blockchain-based payment platforms to provide trustworthy, transparent and convenient financial services. ARYZE creates an efficient, flexible, and compliant payment ecosystem where ‘Cash-as-a-Service’ is offered for third parties to integrate with. On RYZEnet, money becomes programmable, allowing innovators to build solutions with a digital version of central bank-issued cash.
Businesses and individuals are welcome to join RYZEnet. On RYZEnet, users neither need to change their behaviors nor need to be exposed to exchange risks and credit risks. ARYZE allows users to transact in local fiat currency domestically and to enjoy the best exchange rates internationally within RYZEnet.
ARYZE has a roadmap to build secure and transparent banking infrastructure in different regions, which ensure that payments can be localized. Payments can be completed, almost in real-time, with zero transaction fees.
Apart from that, ARYZE adopts a full-reserve banking model, directly putting deposits in central-bank accounts with 1:1 custodial service. ARYZE will provide businesses and individuals with high-quality financial services.
What is the future of interoperability with ARYZE?
In the future, the barriers between legacy systems and blockchain-based systems will be removed by ARYZE. People from more than 16 countries will be able to transfer money based on traditional banking and sovereign currencies, however, without suffering the high costs, delays and lack of information in legacy systems.
With ARYZE, users can fully enjoy the benefit of cryptocurrency and blockchain mechanism, which usually refers to fast, cheap and transparent services, without exchanging fiat currency into a specific cryptocurrency.
If you are a student studying abroad, your parents can send living expenses to you instantly by using your native fiat currency. If you come from a remote area, where banks are not willing to offer you an account, you can create an account through ARYZE online, and start your financial journey.
If you are a business customer, you can hold accounts in multiple currencies, send and receive money around the world, and get access to third-party services by installing additional application modules to integrate with your Digital Cash wallet, as well as being able to exchange currencies 24/7.