Banking and blockchain are the topics of fierce debate within the financial sector these days. With the growing popularity of the blockchain, the experts are starting to wonder what will happen to the banking system.
If you are wondering this thing too, please continue reading this article. In the following passages, we will try to explain the complex relationship between the banking system and blockchain.
First, we should define blockchain. By its definition, it represents “the public transaction ledger for cryptocurrencies, whose most famous progeny is Bitcoin”. Bitcoin is, according to https://bitcoineras.com/, a “remarkable cryptographic achievement”. Furthermore, this technology relies on using cryptography and databases in order to memorize transactions.
One of the best things about blockchain is the fact that this ledger is decentralized and open. Moreover, it is reliable and efficient when it comes to keeping information about transactions. Perhaps one of the most important things about them is that apparently it cannot be hacked. Also, it can be treated as a single source of truth, since the digital ledger cannot be changed in any way.
Now that we have understood what blockchain refers to, it is time to think about its influence on the whole banking system.
Life nowadays is differing a lot from the past decades. Today, we live a very fast and dynamic lifestyle. Every information, activity, or notion is a click away. Therefore, modern transferring of money is considered to be rather time-consuming. Furthermore, very often, there is a financial intermediary necessary. What blockchain offers is a high level of security, as well as a reduction in the number of middlemen.
Another way in which blockchain can influence the banking system is by building much stronger trust relationships between trade partners. This happened because of the trustworthy and shared record of information blockchain provides. If we combine the trust between the partners, real-time transactions, we will get an increase in the velocity of money.
When it comes to the influence of the blockchain of the banking system we know today, one argument is related to the notion that it is, in fact, the end of the banking as a whole. More specifically, cryptocurrencies like Bitcoin represents a certain threat to the control of monetary policy by the bank. Also, through blockchain technology, corporations and individuals can, in fact, transact in a direct way. Therefore, bank accounts, legacy payment networks, or bank systems will not be needed.
In conclusion, the implementation of blockchain technology can cause some changes in the whole traditional banking system we know today. Those changes can be of smaller or bigger proportions. While some experts claim that this technology will do more harm than good, others support the idea of blockchain and think that the traditional banking system should be completely changed. The opinions on this topic are still divided, and it seems that time will be the one who will show which option was better.