LeoGlossary: Intermediaries (Financial)

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Institutions that match borrowers and lenders. They are also known as "middlemen" and "rent seekers".

Intermediaries facilitate transactions between those with excess money and those with the need for it. In exchange for providing this service, they take a fee.

We also see the term applied to money transmittal services who access financial infrastructure to move currency around the world.

Banks are the most well known intermediaries. The services they provide can be stripped down to directing capital and money to where it is needed.

One of the promises of cryptocurrency, through the use of blockchain, is to remove intermediaries from the process. Here the blockchain provides the same service. Individuals can send money in the form of coins or tokens, via a peer-to-peer system, without the use of a third party. The network allows individuals to send money from one wallet directly to another.

Since blockchains are global, there is no recognition of cross-border payments since all transactions are really just ledger entries. This is actually similar to what the established system does. Once major difference is the control of the ledger. With Distributed Ledger Technology (DLT), which blockchain utilizes, the all entries are housed on hundreds, if not thousands, of unrelated computers around the world.

This is why the ledgers are called decentralized.


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