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Comment by karpierz | Hacker News Reader

How exactly does the Spanish bank get the USD that the American bank sent without trusting a third party?

You don't need to trust when you can verify. The source code for the intermediary bank (smart contract) would be available for everyone to read.

I'm not talking about code.

The goal of the transaction is for the Spanish bank to have access to USD. In the example given, the Spanish bank would then have to take the crypto it got and trust an exchange to give it USD in exchange for the crypto.

How do you get USD to the Spanish bank without trusting a third party?

USD doesn't have smart contract abilities so yes you are correct about trusting a third party to exchange crypto to USD. You could use a stablecoin but that requires you to trust the stable coin backing.

There are many USD stablecoins they can use: https://www.coingecko.com/en/categories/stablecoins. The top two are the most liquid but are also centralized, many of the others are fully decentralized.

They may be willing to accept trusting the dollar-backed token issuer. In the case of USDC, it's Circle. But there's nothing stopping JPMorgan, BoA, Wells Fargo, Western Union, etc implementing their own dollar backed tokens, and I suspect we'll see more and more of that as regulatory clarity settles.

Maybe the Fed themselves will issue tokens in this way. It's also entirely possible to construct a permissioned, yet decentralized exchange of tokens among whitelisted parties.

Either way USD is never sent trustlessly.

Your first and last sentence contradict to each other. If you already have a third party which both sender and receiver of money can trust, what's the point of blockchain?

There are hundreds of use cases for it. We are discussing one in particular which is for international settlement of USD backed tokens with limited trust assumptions necessary. Because we are talking about USD and not BTC or ETH, there is ALWAYS an intermediary involved in any transaction that is not paper cash in hand.

The sender and receiver still benefit from a permissionless, automated, international, instant transfer of funds with a cryptographically certified audit trail. The blockchain runs 24/7 and has no downtime. A token can be fully programmed and fine tuned for whatever parameters need to be checked to authorize a transfer. Those rules are transparent and auditable to everyone involved.

The transfer goes through within seconds and the cost of the transfer does not scale with the value of the transfer.

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