Hawala / Bitcoin / Classic banking: principles and differences

  Hawala / Bitcoin / Classic banking: principles and differences

The word "hawala" in Arabic means a bill or parcel. The peculiarity of the hawala system is the fact that all financial transactions (transfer of money, jewelry or gold from the country to the country) are carried out without any documentary evidence - the work is built on the trust of the participants in the process.

The main participants in hawala are brokers. It is they who organize transfers between countries. At the same time, the money does not leave the state borders physically: the sender simply gives money to the broker in one country, receives from him a secret code (for example, figures from one of the bills), which the recipient in another country should then name the second broker to get the equivalent of the initial amount in local currency.

Hawala is not the only informal money transfer system. In India, under the same scheme in due time used Hundi, in China, "flying money" and so on.

For all the seeming archaism of Hawala, after asking any seller of small grocery stores in Brooklyn, New York, you can find out that this is how most of them send money to their native Yemen.

As we know, Bitcoin is a decentralized currency for the transfer of value.

Using P2P technology, Bitcoin operates without any supervisory authority or central bank. Electronic payment between the two parties is irreversible - there is no mechanism for canceling a confirmed operation or forcible withdrawal.

Existing exchange exchanges allow the Sender and the Recipient not to interact directly with Bitcoin.
Now let's compare Hawal and Bitcoin with the classical banking system
Will the advantages of decentralized payment systems ever allow them to outstrip classical banking? Can they scale quickly enough to satisfy the required volume of transactions? Do we need a single winner in this race, or can classical banking evolve in parallel with the development of decentralized payment systems, adopting the best of each other? Given the speed of development of payment systems, the answers to many of these questions will be clear soon.


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