Rodrigo on Nostr: Coincidence of Wants vs Coincidence of Banks In the past, people would exchange one ...
Coincidence of Wants vs Coincidence of Banks
In the past, people would exchange one good for another, such as wheat for salt. The problem with this extremely siloed transaction was that both parties had to run into the coincidence that they both needed what the other had at that precise moment in time. No intermediaries and no delays, it was an analog peer-to-peer transaction where commodities were the ultimate form of money.
Money has improved since then in terms of how it’s transacted and how it moves, but it’s not even close to what it could be. Today, in order for money to move faster and more efficiently, financial institutions come together to credit and debit money for their clients. The best coincidence to move money is when both parties work with the same bank. This however is not the norm, leading to intermediation, higher costs, delays and plenty of other inefficiencies that we all have come to accept as normal.
By leveraging the Bitcoin and Lightning Network protocols, institutions can remove these inefficiencies and transform the coincidence into certainty. An institution in Europe denominated in Euros would be able to interact with an institution in Latin America denominated in Pesos as if they were one and the same. Their end users would retain the traditional fiat experience they are used to but would benefit from a better, cheaper and instant service. Finally, credit risk would be removed from the system as every transaction would be sent and settled simultaneously and instantly.
In the past, people would exchange one good for another, such as wheat for salt. The problem with this extremely siloed transaction was that both parties had to run into the coincidence that they both needed what the other had at that precise moment in time. No intermediaries and no delays, it was an analog peer-to-peer transaction where commodities were the ultimate form of money.
Money has improved since then in terms of how it’s transacted and how it moves, but it’s not even close to what it could be. Today, in order for money to move faster and more efficiently, financial institutions come together to credit and debit money for their clients. The best coincidence to move money is when both parties work with the same bank. This however is not the norm, leading to intermediation, higher costs, delays and plenty of other inefficiencies that we all have come to accept as normal.
By leveraging the Bitcoin and Lightning Network protocols, institutions can remove these inefficiencies and transform the coincidence into certainty. An institution in Europe denominated in Euros would be able to interact with an institution in Latin America denominated in Pesos as if they were one and the same. Their end users would retain the traditional fiat experience they are used to but would benefit from a better, cheaper and instant service. Finally, credit risk would be removed from the system as every transaction would be sent and settled simultaneously and instantly.