Is Blockchain the Answer to Banking System Issues?
It is evident that the banking system in its current state is flawed. The banking system relies too heavily on multiple third-party verification's as well as transferring services for each transaction. The jumble of the third-party services needs to be ironed out, and the best way to do that is through blockchain technology.
By using blockchain technology within the banking system, third-party organizations can be sidestepped. Not only is the blockchain technology useful in smaller banking systems, but it is also helpful for the most prominent and well-known financial institutions. The blockchain is transforming businesses globally by offering to perform various transactions securely in a peer-to-peer manner, cutting out the middleman altogether.
Due to the shabby current state of global banking, we've witnessed multiple government bailouts. These government bailouts are what has spawned the birth of cryptocurrencies. Even in the beginning, when Bitcoin first came on the scene the creator Satoshi, left a reference to the bailout from the London Times in BTC's genesis block, making it abundantly clear that this was his motivation for creating the cryptocurrency.
The First Bank: A Brief History
In order to understand how vital blockchain technology is over the current banking system, you need to understand a brief history of banking. You see in the beginning banks were used as a mean to store gold securely. In fact, the first bank was nothing more than a gold depository. Wealthy individuals would drop the gold off and be issued a receipt. This receipt would then be used around town to purchase items. When the banker of this institution realizes that people never came to collect their gold at the same time, he began to lend out other people's gold with an interest rate.
When the townspeople began to get suspicious of the banker and the wealth that he accumulated, they demanded to see the vault. To their surprise not only was everyone's gold within the vault, but the banker had also collected extra because of the interest that he was charging. After seeing the amount of interest that the banker had made, the wealthy individuals wanted in on the action as well. To this day banks now have to pay you a small interest on your holdings. However not much as changed since the birth of that first bank. It is still considered a third-party institution which makes a profit off of holding your funds.
A New Way
Of course, none of these steps are necessary any more thanks to blockchain technology. Because technology has changed and advanced so much over the last decade, it surprising that the banking system hasn't followed suit. It is apparent that the world cannot continue to bail out fraudulent bankers. Nor can we afford to run on a fiat-based financial system. If we incorporate blockchain technology, we could eliminate many of the banking problems that we see today.
The idea of peer to peer has no use with the banking system that relies heavily on a combination of verification's and other monitoring platforms to ensure your funds are sent. Did you know that each time you swipe your debit card, there is, are 30 different third-party institutions in place to complete that single transaction? Now multiply that with all the various shops you go to in the course of the day. A coffee at Starbucks, gas at the pump, takeout dinner, and paying the bills. Every transaction where your debit card is swiped goes through the same process.
First, your bank must check the balance to verify that you have the funds to spend. Next, the bank must verify the account where you are sending funds to ensure that it is correct. Once that is done, it has to interact with the merchant processing firms and check Visa or MC, and the list goes on just to make a single purchase. This explains why you can swipe your debit card at any given time, but when it comes to refunds, it can take weeks or even months to process.
The Transparency of Blockchain Technology
The beautiful thing about cryptocurrencies is that it eliminates the middleman. No longer do you have to jump through hoops or wait for third-party verification. Blockchain technology is transparent, which is why it makes it ideally suited for all financial services. There is never a question when it comes to blockchain technology due to its transparency. Anyone at any time can check a wallet on the blockchain. And if the funds are present, they are sent immediately to the individual or company that is involved with the transaction.
Sending Money Internationally
When it comes to sending large amounts of money internationally going through traditional routes of the banking institutions can take days and even weeks to complete. During that holding period, the money is inaccessible to both parties. It is common in the banking world for funds to be on hold for over a week.
However, with the use of blockchain technology, there is no waiting time. Funds are sent automatically regardless of the amount. The ability to send substantial funds through blockchain technology is a considerable advantage compared to the current banking system.
Imagine how much easier it would be if you are a large international company trying to send millions of dollars in capital internationally. With blockchain technology, you would be able to accomplish this task quickly and efficiently without the additional delays. The funds would be transferred more securely, and you would be able to avoid the losses that accumulate when converting your funds. After all, 1 million BTC and China is 1 million BTC in the United States.
Records and Tracking
Another beautiful thing about blockchain technology is that the funds are traceable and immutable. Hacking of the data is unheard of, yet it's easy to search for a single transaction within the chain. If the banking system integrated blockchain based technology issues like identity theft or disputed transactions would be swiftly dealt with in a timely fashion. There are some banks that are starting to see the advantages of this technology. So don't be surprised in the near future when many more banks will follow suit as the technology continues to advance.
Farewell to Credit Bureaus
By incorporating a blockchain based system credit bureaus would be rendered useless due to the transparency of the technology. Anyone using the blockchain technology searching for a loan will easily be able to bring up their financial history and prove their ability to repay their loans.
Imagine being able to see your credit report anytime you want. As of right now, credit companies are only obligated to provide a free single yearly report. The credit bureaus thrive off the technology that is no longer required or needed.
When it comes to security, blockchain technology is light years ahead of the game. With an unhackable system and the redundant nature of the protocol, your funds are safe, secure, and at your fingertips.
A Blockchain Future
For the first time in history, a decentralized global economy is a reality. With the advantages of the blockchain technology, the central banking system will soon be put out to pasture. This explains why the financial institutions have been so vocal in their opposition towards cryptocurrencies. The people no longer want the long waiting periods for sending funds, nor the third-parties to be involved with their finances. A new day is dawning, and the financial institutions know their time is running short and efficiency will win in the end.