Satoshi

Bitcoin

Cosmos

Informal Systems, a leading blockchain infrastructure company co-founded by a pioneer of the <a href="https://yellow.com/asset/atom">Cosmos</a> network, is introducing a transformative peer-to-peer clearing mechanism designed to facilitate debt settlements without the need for intermediaries, such as clearinghouses or banks. 
This innovative system, detailed in a white paper <a href="https://cointelegraph.com/news/cosmos-founder-pitches-peer-to-peer-clearing-system">shared</a> with Cointelegraph, seeks to establish a decentralized clearing process as a crucial counterpart to <a href="https://yellow.com/asset/btc/tutorial/who-is-satoshi-nakamoto-10-craziest-theories-on-bitcoins-enigmatic-creator">Satoshi Nakamoto</a>’s seminal concept of a peer-to-peer electronic cash system, as articulated in the Bitcoin white paper. The initiative addresses an often overlooked aspect of financial transactions: the liabilities side. 
Ethan Buchman, CEO of Informal Systems and one of Cosmos Network's founding figures, asserts that the financial industry's current focus is skewed towards assets, neglecting the potential of decentralized liability management. Aiming for an initial release in 2025, Informal Systems plans to leverage "atomic multilateral settlement," a blockchain-enabled process that promises to optimize debt clearing with minimal financial input. The system is envisioned to integrate diverse currency types within a single framework, thereby extending its benefits to a broader user base, including those not reliant on traditional currencies. 
Historically, banks have dominated the debt settlement domain through exclusive clearing clubs, managing substantial volumes of debt liquidity-efficiently. This exclusivity bars non-bank entities from enjoying similar liquidity savings, a gap that Cycles aims to bridge. By facilitating access to this peer-to-peer clearing system, individuals and businesses stand to gain significant liquidity advantages, alleviating cash flow pressures and reducing working capital dependencies. 
Beyond debt clearing, Cycles anticipates extending its functionalities to cover auto-repayment loans, funding for small and medium-sized enterprises, and stablecoin lending. This multifunctional platform promises a seamless experience for managing assets, executing payments, and engaging in novel credit protocols. 
However, Buchman acknowledges potential hurdles, notably the integration of existing accounting systems with Cycles and ensuring that batch-clearing procedures are intuitive and accessible. 
Cycles enters a competitive market alongside entrants like Yellow Network, which recently secured a $10 million investment spearheaded by Ripple. With the stakes high, following the mixed success of other blockchain initiatives like the ASX’s failed CHESS system upgrade, the future of Cycles will be closely observed. This development reaffirms the transformative potential of blockchain technology in redefining financial systems and opening pathways previously closed to traditional methods.

Cosmos Co-Founder Proposes P2P Clearing System, Eliminating Banks and Intermediaries

Yellow News

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