Crypto vs. Banking: Which Is a Better Choice? Cryptocurrencies should go beyond what traditional banking institutions offer.
By Tanveer Zafar Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
The past few years have seen the launch and blossoming of blockchain technology. This technology also harbors other innovations like cryptocurrencies, DeFi, NFTs, and other digital assets. These innovations are mostly solving the concurrent problems caused by centralized monetary systems.
Blockchain technology dates back to the 2007 economic decline that saw the world suffer from poor central banks management. Many banks were already in debt, and they were also minting excess fiat currency that raised inflation rates in the world. Satoshi Nakamoto made a digital currency, BTC, as a remedy. This currency has a design to solve this issue and avoid such mistakes since it is fully decentralized. Nakamoto also made his source code an open resource for other developers to make similar innovations and solve the banking issues.
As a result, Cryptocurrencies were born, and now they function more efficiently than the banking systems. They also offer even better financial systems than banks. Currently the biggest drawback of cryptocurrencies is its volatility, as seen in the crypto fear and greed index. This makes cryptocurrency unable to be used in daily day to day transactions. This issue is widely expected to be resolved once cryptocurrency gains widespread popularity. Read on to learn why cryptocurrencies should strive beyond what banks can offer in the financial scope.
Cryptos Vs. Banking Systems
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Cryptocurrencies are digital assets that function like traditional money and can serve as means of exchange. They are usually bought through crypto exchange platforms and stored in safe crypto wallets. These digital currencies are decentralized, and they operate in a very secure way with minimal human interactions. As a result, many now classify them as the future of the finance sector.
Banks are the current financial systems in the world. They offer financial support like loans, savings, and other transactions. However, unlike cryptos, they have many setbacks since they are centralized and subject to biases. They are also relatively slower than cryptos, and some charge too high interests on loans and some transactions.
What Are The Main Drawbacks Of Banking Systems?
Related: 8 Ways Digital Banking Will Evolve Over the Next 5 Years
Below are some of the main drawbacks of banking systems that cripple the financial system.
Accessibility
The banks are usually not available during the weekend. Therefore, people usually encounter many problems when expecting to complete essential transactions on weekends and holidays. The banks also require people's physical appearance to complete huge transactions, which takes up too much time.
Financial Inclusion
The traditional banking systems use different techniques to market their work. They set aside some projects for select groups of people which cannot be available to the others. These groups get some favors like soft loans, prolonged payment durations, and lower interest rates. As a result, the systems end up being unfair and devoid of financial inclusion.
Security Issues
Skilled technicians can hack many mobile banking apps. As a result, some people end up losing large sums of cash fom their accounts. The systems are also prone to fraud and money embezzlement. These occurrences may result in loss of hard-earned money.
Extra Fees and Slow Transactions
Banks come with extra fees and taxes during transaction periods. For example, the sending and receiving banks usually impose very high transaction fees and taxes during international remittances. Due to slow protocols, these transactions also take a long time, especially for large sums of cash.
Can Be Biased
Since bank transactions and financial services depend on account numbers and names, they are open to biases. In case of a feud with the officials of a certain bank, the financial service issuing officer can deliberately delay the transactions.
How Cryptocurrencies Can Offer More than Banking Systems
Related: Five Challenges Blockchain Companies Face While Working With Banks
Cryptocurrencies came to solve the issues within the current banking systems. Therefore, they should do better in creating a more effective financial ecosystem in the world. Below are some of the ways how cryptocurrencies can offer better financial services than banks.
Decentralized Nature
Cryptocurrencies are completely free of the control of third parties, unlike banks. This decentralized nature minimizes human interactions, which makes them free from biases. They are more secure and reliable since it is hard to tamper with them because they use anonymous ID numbers in transactions.
Security Concerns
The biggest issue surrounding financial systems is security concerns. Cryptocurrencies run on blockchain technology which is highly intact and free from major security threats like hacking.
It is also free from fraudulent activities since the system automatically processes the transactions with minimal human interactions. Therefore, if cryptos innovate more ways to deal with security concerns, they can remain better than banks.
Smart Contracts
Related: What is a 'smart contract' and what is it for?
Cryptocurrencies can also have smart contracts running in their blockchain networks. These smart contracts have a design to give computer instructions and process them with minimal human interactions. Therefore, they can serve excellently in doing away with fraudulent activities and corruption, which is a challenge to banks.
Many crypto platforms also encourage investors to take a positive initiative to buidl and ensure the growth of coins. In turn, users and holders can actively contribute to the boom of not only their tokens, but also other tokens at large; hence, securing a brighter future for crypto adoption and spreading crypto's diversification. One buidling tactic is leveraging smart contracts during transactions.
Financial Inclusion
Cryptocurrencies have minimal entry barriers. As a result, they are easily accessible to everyone regardless of their status. This feature is encouraging since they may help improve the economy wholesomely as everyone gets equal chances.
Accessibility
Unlike banks, cryptocurrencies use automatic systems that do not require too many human interactions. Therefore, they are accessible every time of the day, including the weekend and holidays.
As a result, their incorporation into financial systems may make them better than banking systems due to better uptime.
Instant Remittances
Cryptocurrencies have very fast transaction speed, unlike the traditional financial system with queues and protocols to follow. As a result, more transactions can be done in a day through cryptocurrencies than in banking systems. This functionality gives them a notch above the banks since they would give the economy a better chance at quick growth.
Diversification
Related: Ingenious Blockchain Solutions To Enterprises Through Smart Contracts
Unlike banking systems which offer almost uniform financial services, cryptocurrencies are many and have different features. Therefore they are more diverse than banks. Such diversity is a cut above the traditional services since crypto investments can grow in more than one way simultaneously.
ADACash is one such platform offering simpler and better earning opportunities from your ADA holdings. To increase incentives, the platform gives you more Cardano (ADA) reflections with the more ADACash tokens you have on your wallet.
Such staking options like ADACash can give additional income and serve as a diversification tool even on the bearish market. With staking as an option investors are increasingly opting for holding ADA that has halved in price over the past two months. Despite the market fall, Cardano's total transaction volume has outperformed that of Ethereum this month.
Conclusion
To sum up all of the above, it is good to mention that cryptocurrencies have advantages that outdo the banks. However, more needs to be done to ensure that they remain in power for long. They need to provide the world with more practical solutions to problems caused by the banks.
Luckily enough, they are already doing it. Cryptos have very intact security systems that are encouraging to investors. They also offer reliable transactions at better speeds than the traditional features. As a result, they are proving to be vital in ushering a better and cashless financial age. However, there is still more that cryptocurrencies need to do to fill all loopholes from traditional banking systems.
