Fintech and the Technological Model for Trading Cryptocurrencies.
At the beginning of 2022, according to CoinMarketCap.com, the amount of money invested in cryptocurrencies was 1.94 trillion USD (millions of millions of USD) and the trading or volume was located at 90,000 million USD every 24 hours. In this article we will illustrate how a financial institution can participate and form part of this monumental market.
To facilitate the explanation of the technological model, I will call the financial institution MyFinance and its clients, the users (they can be individuals or legal entities).
MyFinance can communicate with its users in three ways:
Web application: is a computer program that uses a web browser to perform a specific function, to communicate with MyFinance server or host computer with the user's terminal or PC.
Mobile application: It is a software designed to run on a mobile device, it can be a phone or a tablet, they manage to provide users with quality services and experiences.
Web API: API stands for Application Programming Interface. This set of functions will allow developers to acquire some specific features or data from an application. It is a framework that helps to create and develop services based on protocols (http) and various programming languages. It facilitates the client or user side to connect to the web application without the need for a web server or web browser details.
Blockchain module
The Fiwork team has developed a special blockchain module, which allows the Myfinance application that works for all financial institutions to access highly qualified digital and cryptographic service providers. The blockchain module consists of:
Fiwork Middleware: It is software that facilitates the exchange of information between the applications that make up the blockchain module. In general, middleware handles the tasks of data management, application services, messaging, authentication, and API management.
Logging: It is a logging or digital platform access software that enables scalable logging, to manage any volume of records from any source with intuitive and flexible tools. It makes it easy for you to centrally manage and maximize the value of all your records.
DB: It is a database or structured collection of data from the blockchain module, generally controlled by a database management system (DBMS).
Third party provider or external service provider is a person, company or entity that will provide specialized services to MyFinance in exchange for payment. Among those required for the blockchain module are:
Cryptocurrency Exchange: these are platforms that allow trading cryptocurrencies, buying, selling or exchanging. There are decentralized exchanges (DEX) and centralized exchanges (CEX), here I will present the CEX, which are based on trusted third parties (usually a company or corporation), which mediate in the negotiations of the platform users.
To access these platforms, it is necessary to pass KYC and AML controllers. In addition, they share information with the treasury of different countries. The best known are: Binance, Kraken and Coinbase.
KYC is the acronym for Know Your Customer. It involves knowing the identity of users, their financial activities and the risks they may represent.
Anti-money laundering (AML) practices focus on carrying out procedures that deter and prevent potential criminals from committing fraud or money laundering related offenses. In this way, criminals cannot hide the illicit origin of money in any type of transaction.
KYT knows your transaction; it allows you to identify blockchain transactions involving cryptocurrency addresses or accounts associated with illicit activities. There are providers of these services such as Chainalysis that facilitate this compliance, and other providers facilitate KYC and AML compliance.
Fiat On / Off Ramp: finally, we have fiat and cryptocurrency on and off ramps, it is a service that allows the exchange of fiat currencies (USD, Euros, national currency of other countries) for cryptocurrencies (Bitcoin, Ethereum and others). It ensures that users are not limited to a single cryptocurrency and can buy and sell at any time.