Can Cryptocurrencies replace the Banking system

By | March 4, 2022

Cryptocurrencies like Bitcoins are traded over various trading platforms but this trading platform is based on artificial intelligence you can use it. Some of them hold a lot of value, owing to which investors are buying them and utilizing them as a store of value. The first cryptocurrency, the Bitcoin, was created as a response to the 2008 crisis, which was largely caused because of the policies made by banks. However, speculations are there that indicate the potential of cryptocurrencies taking the place of conventional banks. Let us delve deeper into this topic and understand if it is possible for cryptocurrencies to replace the Banking system or not.

Decentralized Finance as an alternative to the banking system

Decentralized Finance is very much capable of replacing the banking system. However, the chances of that happening are low. It can act as a store of value, as an exchange medium, and as a unit of transfer. There are several advantages that favor the adoption of Decentralized Finance over conventional banks, including faster transactions, lower transaction charges, and smart contracts that are capable of executing complex agreements. However, on the other hand, banks need to improve so much. Banks need to shorten their processing times and fees, which are often an inconvenience to the customers. In order to avoid this, banks can attempt to completely ban cryptocurrencies and transactions with crypto platforms. However, the public looks at cryptocurrencies with great support and has come out in support of the regulation of the same. Owing to public support, companies like PayPal have changed their stance and integrated crypto payments and trading. It is only a matter of time before banks realize that they cannot kill cryptocurrencies, and they join the bandwagon. Moreover, cryptocurrencies like Bitcoin also ensure that double spending does not occur, as all Bitcoins are unique.

Advantages of the cryptocurrencies over the banking system

There are several advantages of cryptocurrencies over the banking system. The first one is the security it offers. It is evident that hacking a blockchain and making changes to the data present on it is not practical at all. As all blocks record transactions, trying to modify data on one block would not have any effect on the data stored by all the other blocks, which ensures that upon cross-checking, modified data is not imprinted upon the blockchain. In case a hacker gets access to one node of the blockchain network of a cryptocurrency, the hacker would not be able to do much. However, on the other hand, a hacker would be able to steal money case they get access to the bank server. Thus, security is one of the biggest concerns related to banks and cryptocurrencies, which would lead to the adoption of cryptocurrencies over banks.

The fate of cryptocurrencies

The value and rarity of cryptocurrencies like Bitcoin have piqued the interest of investors around the world. Central banks have not completely ignored cryptocurrencies either. The mechanism of how central banks work puts a lot of power in the hand of one authority, while cryptocurrencies oppose this very idea. A factor that is acting against cryptocurrencies is the low adoption rate. The low adoption rate of cryptocurrencies and other factors testify against the feasibility of cryptocurrencies replacing banks. However, there is a possibility that banks might start releasing their own cryptocurrencies (CBFCs) or Central Bank Digital Currencies. Therefore, the chances of cryptocurrencies totally replacing centralized banks are low. However, the age of the internet has often proved that predictions are not objective, and they are often proven wrong. Therefore, just the opposite might happen.

The originators of Bitcoins are yet a mystery, and owing to the lack of transparency, a central authority is a reason behind the paranoia triggered within the minds of a large portion of the population, which holds back the number of people attracted to investing in cryptocurrencies and using it as a store of value, rather than a bank. Moreover, cryptocurrencies are readily available over the Bitcoin Trading Platform. However, one of the biggest factors that favor cryptocurrencies when compared to banks is their resistance to inflation. Its value is not tied to any fiat currency, which ensures that its price remains unaltered in case there is an incident in the economical scenario of the country. Thus, cryptocurrencies are resilient against inflation. Cash kept in banks, therefore, loses value because of inflation. However, investments made in cryptocurrencies do not lose value because of inflation. Thus, it is safe to say that although cryptocurrencies are going to be big, they will not replace banks completely and will continue to function along with cryptocurrencies.

Category: Crypto

About Safdarali Rizvi

Safdarali Rizvi the management graduate. Has been an avid book reader all his life so naturally loves playing with his words. His curiosity for discovering futuristic opportunities lead him to explore the world of cryptocurrencies. He has a real passion for calisthenics and sports. His management abilities and hunger for learning brings tremendous value to our team.

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