Everyone in the world is aware of Visa and MasterCard, but some people are not really aware of what they do. Some people even think that they are banks. Visa and MasterCard are global payment processing companies. Their principal business is to process payments between the banks of merchants and the card issuing banks or credit unions of the purchasers who use the “Visa” or “MasterCard” brand debit, credit or prepaid cards.

Visa, which was originally know as “BankAmericard,” was founded in 1958, and MasterCard, which was originally known as “Interbank and MasterCharge” from 1966 to 1979, was founded in 1966. The companies came into existence when bank charge cards started getting popular in the 50’s. The story of how these companies came to be is pretty interesting.

In the 50’s, most American households were starting to get introduced to different merchant cards and this was burdensome because they had to carry a lot of cards and pay so many separate bills each month. This was clearly inefficient and inconvenient. There was a growing need for a unified financial instrument by the American financial services industry, but nobody knew how to pull this off. Bank of America launched BankAmericard and drop shipped 60,000 unsolicited actual working credit cards to it’s customers in Fresno, California. When this went smoothly, they replicated this in other cities in California and eventually 2 million cards were sent out and 20,000 merchants started accepting it.

This was also about the time that MasterCharge was formed by a group of banks to compete with BankAmericard. With the saturation of the market with “actual credit card,” issues with delinquencies and credit card frauds came up, and it became a PR nightmare for Bank of America. It went downhill pretty quickly from politicians going after Bank of America to the police launching multiple investigations. The pioneer of the idea had to resign and several management people were let go. Eventually, Bank of America executives realized that it was still salvageable so they imposed financial controls and sent apology letters to all the households. So the credit card revolution started.

Fast forward to this day, Visa and MasterCard do about global 4,000 transactions per second combined together.They have some of the most centralized networks with centralized servers. Because of this centralization, VisaNet which is the global network infrastructure for Visa is able to scale their transactions to 65,000 transactions per second. MasterCard global network is the global infrastructure for MasterCard. With these kinds of centralization, their networks are usually targeted frequently by hackers continuously. It is not a matter of if major hacks will be happen but when.

Also these credit card companies charge fees that are comprised of base costs and markups called merchant discounts. Merchants usually include these costs in the goods and services that most people pay for so merchants have to pass on these costs to consumers.

Now EOS network that came from the EOSIO open source software code does about 5,000 transactions per second which is more than what Visa and MasterCard already do combined together. With projects getting built on side chains, it will eventually be able to scale to millions of transactions. Telos will be a fork from the same EOSIO open software code. Telos network will using the Delegated Proof of Stake (DPoS) structure that will be a governance system with a distributed and decentralized network with Block Producers who validate the transactions on the network running nodes all over the world greatly reducing the risks that come from centralization of servers and networks.

There will be no transaction costs for any transactions done on the Telos network. I believe that fast transactions will be a big selling point for merchants using Telos, but free transactions will even be better because merchants and customers know that fees can build up pretty quickly making products and services more expensive. Since the merchants might not even want to hold the Telos tokens, because of how fast transactions settle on the network, Telos tokens can quickly be converted to fiat so that the risk of fluctuation experienced in cryptocurrency market price will not affect the conversion rate.

With all these things going for Telos, I don’t really see why the Telos network cannot be a big competitor to Visa and MasterCard. Maybe that is the reason we see them filing different patents for the blockchain. Decentralized networks are the future!

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