Santander Bank plans to issue digital cash on the Ethereum public chain to improve the efficiency of currency use

Spanish banking giant Santander is working on a project to explore using the Ethereum public blockchain to digitize customer cash.

The news was announced by Roman Mandeleil, founder of Ether.camp and developer of the Ethereum Java client, at today’s Devcon2 discussion, and confirmed by a Santander representative. Santander said the goal of the project is to open up bank-issued funds to community innovators in order to make the bank more efficient.

Recently, the outside world is full of news about various proof-of-concept projects and blockchain alliances, and Santander's attempt to issue digital cash on a public blockchain can be said to be relatively unique worldwide. The Ethereum network has been running for more than a year, with a market value of more than $1 billion and an average of about 40,000 transactions per day.

In an interview, Mandeleil explained how the Santander project would work: Customers would be able to convert funds in their bank accounts into a tokenized online currency Cash ETH , which could be redeemed for paper money at any time.

Mandeleil told CoinDesk:

These tokens are backed by real money from Santander Bank. You can exchange them for US dollars anytime, anywhere.

In the demonstration, Mandeleil simulated a virtual customer using his prototype to create digital currency, which can be connected to a brain wallet with a mnemonic password, and then used to make online purchases. (Although brain wallets have had many problems in the past, he insisted that data showed that this version of the brain wallet is not easy to crack.)

Santander representatives said they are working with Ether.camp to try to find more banking industry partners to participate in the project, and they also plan to hold several hackathons to develop more micropayment use cases.

Essentially, the project aims to bring more new ideas and transaction services to bank account services. In addition, Mandeleil said that this project is the vision of his startup, hoping to use blockchain technology to bring more benefits to banks and consumers. He said:

This is more of a development than a reform.

However, he stressed that if the project is successful, it will be a qualitative leap in establishing connections between publicly traded financial companies and public chains.

(If the project is successful) you can start building more things, and you can also prove to regulators that 'blockchain is not scary at all.'

Mass Media

Mandeleil demonstrated a system in which Santander customers can choose between three functions linked to their traditional bank accounts — tokenization, transfers or refunds .

If users choose to tokenize their funds, the system will establish a payment channel with a fee as low as $0.01. A small fee will be incurred as a profit for Santander Bank, and the specific amount depends on how the user allocates the funds. During the demonstration, Mandeleil demonstrated a transfer of $350 to a test version of the Ethereum blockchain, of which $1 was used as gas fees, which is required for the Ethereum network to execute transactions.

After paying the gas fee in advance, users can preset the number of transactions in advance. If the number of transactions increases, the gas fee will also increase. Mandeleil sees Santander Bank's digital dollar as a strong competitor to PayPal.

This system allows for flexible use of funds. You just click to pay, then add your private key, and then you can check your balance and make reliable transactions.

To give us a clearer idea of ​​the project, Mandeleil showed CoinDesk a prototype of the technology that would allow users to subscribe to articles on the New York Times’ beta website using tokenized funds.

Mandeleil mentioned that these digitized funds can be withdrawn at Santander Bank, but users can also use them to trade with each other.

From this perspective, the project also helps expand the bank's user base and brings new sources of income to the bank.

Difficulties

According to Mandeleil, the project began seven months ago when a Santander representative contacted the Ether.camp team with the idea, but a lot of work was still needed to get the project off the ground.

While facing obstacles from regulators, Santander Bank is also making continuous efforts to develop the project.

For example, Mandeleil is discussing an important issue with Santander Bank: If a large number of banks follow suit and issue their own digital cash after the project is released, it will bring interoperability and settlement problems.

However, Mandeleil believes that the current blockchain market is definitely capable of solving similar problems. For example, he proposed a cryptocurrency conversion tool as one of the solutions to the above problems.

Mandeleil and Santander plan to look for more banking partners for their project, comparing it to the settlement coin project initiated by UBS, of which Santander is also a member.

Representatives of Santander Bank pointed out that a major obstacle to the development of the project is the lack of a legal framework, and they are currently studying whether they need to apply for some relevant licenses.