How Cryptocurrencies Took On Traditional Banks And Financial Institutions

Introduction

For the longest time in human history, central banks working hand-in-hand with national governments have controlled our financial beings. They have enforced financial codes and always ensured that everything is in their control. This is a major way that they have forced citizens to do what they want us to do.

The nature and extent of the powers of banks and financial institutions had become so huge that they imagined that they could do anything and get away with it. Think about the 2007-08 Financial Crisis and the infamous role that was played by investment companies, banks, and governmental authorities. They brought the world crumbling down.

In 2008, Satoshi Nakamoto analyzing the role of banks realized that overwhelming financial control should be countered with a secure, strong, stable, and decentralized financial currency that was free from any form of third-party interference. Hence Bitcoin or BTC was born. The open-source crypto was expected to take on the established financial system.

Understanding Cryptocurrencies

Let us start by stating that the easiest definition of cryptocurrencies is internet money or digital coin that is created by solving a series of complex mathematical problems using high-power computer systems. It follows the finite model, meaning that there is only a limited number in circulation, as far as Bitcoin is concerned.

Some of the main features of Cryptocurrencies are-

1. It uses a peer-to-peer network to process payments
2. The transactions done using Blockchain are safe
3. The network runs on a completely decentralized framework
4. Access is restricted to digital mediums and internet technologies
5. Encryption secures payments at either end of the transaction
6. All transactions have a permanent record on the Blockchain
7. The identity of the parties is private and anonymous
8. Transactions can only happen when funds are available with the other party
9. There are no chargebacks and funds transferred cannot be returned
10. No third party is a witness or can control crypto transactions

It was as though Satoshi Nakamoto was closely looking at and scrutinizing the drawbacks of traditional banks and financial systems and then coming up with an answer.

Cryptocurrencies are designed to help enable financial inclusion in developing and underdeveloped economies. Accessing traditional banks and doing a ton of paperwork is not possible for people in the low-income bracket.

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Problems of Banks and Traditional Financial Institutions

What happens to someone that is in a monopolistic position of power? The answer is simple- they don’t care what is happening around them. Or, they are never looking to improve where they are at. Since there is no alternative, why bother?

In this section, we are going to list down the five major problems of banks and other traditional financial institutions-

1. Access– Banks are not available to us on a 24×7 basis. While you have online banking and apps, a lot of the work, the more important ones require you to step inside a physical bank, process a ton of paperwork, and get done what you are looking for after a week!
2. Fees- Being a monopoly means that banks feel that they can charge whatever they want to and the consumer will be forced to pay the same. This has resulted in them charging exorbitant levels of transaction fees every time you look to process a payment.
3. Security– Banks are not the securest of places. In fact, there are so many scams that have come to light where banking officials have worked with cybercriminals and siphoned off unsuspecting individuals for millions of dollars.
4. Biased– Banks are run by human beings that carry their own set of biases. They might not be fair when it comes to dealing with people from different races, backgrounds, sexuality, gender, and other social differences. This can prevent access to banking.
5. Slow– Banking systems are notorious for being slow in processing payments. They are so many clearances that need to be taken to process an international payment that the delay can lead to a cash flow problem for your business.

The Bottom Line

Cryptocurrencies and the Blockchain network are better than traditional financial institutions in every respect. They are decentralized, do not allow for snooping, and are fast. This is why they are perceived as a threat by banks who stand to lose everything that they have built over centuries in a matter of a few decades. Do you think crypto jobs and blockchain will be able to replace banks in the future? Let us know your answers in the comments section below.