Blockchain Innovators Introduce Peer-to-Peer Debt Clearing System to Bypass Banks

A new initiative from Informal Systems, a blockchain infrastructure firm with roots in the Cosmos Network, is set to challenge traditional financial systems by enabling direct peer-to-peer debt clearing.

This initiatie introduces a peer-to-peer system aimed that allows individuals to settle debts without relying on intermediaries like banks or clearinghouses. The system, named Cycles, is designed to offer a decentralized alternative to traditional clearing methods, which are vital for secure payment transfers and liability settlements in traditional finance.

Ethan Buchman, CEO of Informal Systems, highlighted that while blockchain technology has focused on assets, the liabilities side has been largely overlooked. Cycles aims to address this by using atomic multilateral settlement, which can clear debts more efficiently and with lower costs.

The system is designed to support multiple currencies, enabling users to benefit from the clearing process even if they don’t use the same currency.

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In the system, users can transfer assets like Bitcoin through bridges such as Nomic to the Cycles network, facilitating the clearing process. Buchman emphasized that, unlike traditional bank clearing systems, which benefit from liquidity savings, Cycles could offer these advantages to individuals and businesses, reducing cash flow stress and working capital costs. The first version of Cycles is expected to launch in 2025.

Kostadin Dimitrov