Bitcoin and blockchain have the power to dramatically alter the way we deal with money. They function on principles that differ radically from what the traditional finance industry is used to. They work so differently, in fact, that many predict that Bitcoin and the blockchain technology it works on are to be the downfall of traditional banking.
But is there any truth to these claims?
Well, they probably won’t end banks as much as they will change them. The most likely scenario would be that banks incorporate the positive Bitcoin and blockchain characteristics into their infrastructure. In theory, there’s a series of benefits banks can enjoy by doing this, the chief of which would have to be the decrease in time and cost and increase in security.
An important note: the following will mostly discuss blockchain, but since Bitcoin is simply a practical application of blockchain, the concepts can apply to both.
Time And Cost
Blockchain’s decentralized system can greatly cut costs and shave time off many tasks. Faster payments with lower fees, for instance, would be made possible.
Money as we know it today moves from one place to another rather slowly, and the service of transferring said money must be paid for. Under blockchain technology cash can be transferred quickly without the need for intermediaries to do the moving.
Smart contracts will also play a major role in improving efficiency in banking. In broad strokes, smart contracts are virtual protocols that operate like self-defining, self-enforcing, and self-terminating contracts. This means that there would be no hassle of signing and updating contracts manually, and no need to pay the people who handle the paperwork.
Loans and credit would be far safer affairs too. Since the intermediary entities normally responsible for issuing loans and credit are particularly vulnerable to theft and fraud, a system that relies on decentralization would circumnavigate this issue by eliminating this weak link. Security could also be bolstered by the use of crypto tokens, which would protect bonds or stocks through encryption of private data.
Seeing that all information on a blockchain gets stored throughout its network rather than in one central location, the risks of major cyber attacks causing massive damage are greatly reduced. The advantage of this becomes clear once you recall the Equifax hack of 2017, which leaked well over 145 million Americans’ credit information. An attack on that scale would be nigh impossible against a blockchain, because the hacker attempting it would have to tamper with all data blocks within the network.
The advantages of Bitcoin and blockchain-based banking shine brightly, and quite a few banks are already planning to turn to cryptocurrency (XRP in this case) in 2019. Though the process of change to this kind of system will be slow due to apprehension about this nascent technology, odds are that it will become a norm over time.
Seeing how relevant Bitcoin and blockchain promise to become in the future, getting to know more about them is more important now than ever. If you are new to this topic and are worried about it being hard to understand, don’t worry, there is an easy introduction - the amazing infographic from Bitcoinfy you’ll find below!
This guide will serve as a great starting point on your endeavour to learn more about Bitcoin and blockchain. It lays out all the vital info you need, all the while keeping it easy to follow and understand, because of its unique, reader-friendly visual presentation.