Introduction:
Using the bitcoin token, and the bitcoin blockchain allows immediate and final settlement of financial transactions between two parties.
What is final settlement?
Settlement :
In money transfer systems, final settlement is the stage where funds are irrevocably transferred from the payer's account to the payee's, marking the completion of the transaction and discharge of obligations.
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Body
Immediate Settlement via the internet or electronic digital payments
One thing which makes bitcoin more advanced and in one way better then the current electroic payments systems is it's immediate settlement.
When you go to a store to buy soimething with bitcoin, the seller shows you a QR code representing their bitcoin wallet.
You scan it and type in to a space how much bitcoin you are paying the seller, then confirm with the seller the address and amount are correct, then presss send.
The seller watches his wallet, and when it updates your bitcoin has been deposited in his wallet.
He hands you the item you just bought.
The transaction was settled immediately. Niether you or the seller have to do anything else and the sale is final.
This is called immediate and final settlement.
Bitcoin can do this, and cash can do this, but all other electronic systems of moving non-digital money electronically cannot do this, and that's why their settlement isn't immediate, it's delayed, and that's why the settlement isn't final, it's preliminary.
In terms of financial transactions, the best example of immediate settlement is a cash transaction. You agree to pay Bob 100 dollars for a tire. You meet Bob at the appointed spot and pay him 100 dollars cash, he hands you the tire, and then the transaction is settled. You have your tire, Bob has his 100 dollars. That is immediate settlement, and it is also considered final, you don't have to do anything else and Bob doesn't have to do anything else.
However the challenge for a paper money or even gold or silver system how do you pay debts over a distance.
If the buyer is in New York and the seller is in San Francisco, how do you get money from point A to Point B.
Technically you can't get money from point A to point B via the internet, because only virtual or digital currency can travel over the internet, so the current system of electronic payments which includes bank transfers, credit cards, and checks are not sending money, they are vsending messages, and the messages are promises to pay.
So in a way, the modern or current electronic payment system doesn't send actual cash, or payments for that matter, it sends a message, and the message is a promise to pay.
So now you see that this system requires trust. If I want you to sell me something in a store in New York, but the owner is in San Francisco, if I use a bank transfer, a check or a credit card, the seller accepts the electronic message, which states I promise to pay them what is owed.
And now the seller has to trust that this system of delayed cash movement and payment will actually work.
So we come to the first hurdle, cash can't be sent electronically, only a promise to send cash by some other means. S
ettlement isn't immediate or final, as the seller has to now wait to get paid.
Now in reality, there is a third party between the seller and the buyer, and this third party establishes that the buyer is trustworthy, so the seller can trust him, and allow him to leave the store with the merhandise.
So anytime the buyer can't hand the seller cash, because of distances involved, the buyer sends the seller an electronic message, stating a promise to pay, and the third party reassures the seller that the buyer is trustworthy, and the seller must be patient and await a delayed final settlement of the transaction.
The seller is actually waiting for for the third party to transfer the cash to his account, from the buyers account, via the banking system.
This settlement takes hours, days or weeks, depending on the type of payment system used and the banks involved.
So now you see the clear winner in this system of who has immediate, final settlement. It's Bitcoin.
End
Last Words
Modern cash transfers are not actual cash, but are promises to pay.
Modern cash transfers require a lot of personal information about the parties to establish trustwprthyness and there fore expose sensitive personal identity information to theft and transacting parties to financial ruin.
Bitcoin allows final, near immediate settlement of transactions across the world.
The transaction is final and irreversible.
The transaction doesn't allow chargebacks
The transaction doesn't require trust like a transaction which is actually a promise to pay, and therefore doesn't need to disclose sensiitive information about the parties.
Bitcoin is pseudoanonymous, your name isn't on the bitcoins, or your wallet.
Bitcoin can be traded for fiat currencies all over the world, so it can be a global medium of exchange, unaffected by politics.
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