As Bitcoin’s pseudonymous creator Satoshi Nakamoto developed this digital currency, he had nothing but one aim to remove the need for trusted third parties such as banks involved in the transactions.
Amid the economic downturn in 2009, the drawbacks of contemporary banks are visible. Due to its centralisation, banks are unreliable, subject to human manipulation, bias, security threats, and high fees. These ongoing issues in the global financial institutions are why cryptocurrencies will usher in the future’s more positive banking and payment experience.
Traditional centralised banks are untrustworthy. If you utilise mobile banking and their systems are down, you cannot access your funds unless you visit a nearby ATM and withdraw cash. The obstacle here is that ATMs may also be unavailable, particularly problematic for persons living in impoverished nations.
Consider the inconvenience that would entail when you’re in a time-sensitive scenario and in dire need of money, but your bank’s mobile app is unavailable due to maintenance. It’s unexpected, yet it causes concern for many individuals. Ironically, you lay your trust in banks with your money, and they become your money’s gatekeepers.
By contrast, it is out of the question for cryptocurrencies to go out of service since their software or blockchain technology is designed to avoid excessive human involvement or interference. As a result, they are open 24 hours a day, including weekends and holidays.
Nowadays, cryptocurrencies are often purchased through crypto exchange platforms such as Coinspot or Binance and held in secure crypto wallets such as Ledger or Metamask. These decentralised digital currencies work with high security. All you need is a computer or a smartphone and an internet connection.
CoinSpot is one of the prominent crypto exchange platforms. Source: Coinspot
The federal Consumer Financial Protection Bureau stated that banks earn more than $15 billion in overdraft fees yearly. That’s $15 billion of money transferred from people’s pockets to banks’. Overdraft fees should be prohibited at this point. Overdraft fees may increase the cost of a Coca-Cola bottle from $2 to $20.
That is not the only fee to be concerned about; fees come in various forms, including late penalties, returns, non-network fees, money transfers, inactivity, and foreign remittances fees.
When clients need customer service, they can be charged a fee just for seeking support from a real person. On the other side, cryptocurrency transactions do not incur that many fees.
The most frequent cost associated with cryptocurrency transactions is termed a gas fee, which is essentially an incentive paid to bitcoin miners who solve complex mathematical puzzles to validate transactions on the blockchain.
Long Transaction Time
Transactions with centralised banks can take a long time, depending on the kind of transaction. It may take up to a week or more for considerable sums of cash or overseas transfers. This seems OK at first glance, but what if you find yourself amid a conflict like the Ukraine-Russia war? You don’t have a week; you just have a few minutes.
Compared to typical banking systems, which rely on queues and protocols, Bitcoin transactions are lightning quick. Cryptocurrency systems operate 24/7 and can process more transactions per day than conventional banking systems. Henceforth, cryptocurrencies facilitate the transition to a post-banking, post-cash financial era.
Bank transactions and financial services are subject to prejudice since they rely on account numbers and personal information. In the event of a disagreement with bank authorities, the bank staff can purposefully delay transactions or freeze your funds in the worst-case scenario.
Worse still, modern centralised banks have access to your demographic information, financial history, and spending habits. Believe it or not, how these banks treat customers is sometimes decided by these data. It might be worse as banks could have their clients arrested.
Joe Morrow, a 23-year-old man claiming that US Bank refused to cash his check after profiling him ethnically and stating the paycheck was a forgery, was arrested in late 2021. Of course, Morrow got his justice and received a settlement, but it does not negate that centralised banks may be swayed by ordinary human bias to make poor decisions.
Cryptocurrencies are entirely independent of third-party control. Due to the system’s decentralisation, human interactions are minimised, making them bias-free. Cryptocurrencies do not make judgments or create profiles about their users as centralised institutions do.
Today, a large number of platforms do share your data with other parties. However, it is one thing for a social networking site to acquire your data and quite another thing for a bank to collect sensitive information such as your passport or identification information, your address, employment status, and SSN.
These data are necessary for banks since they operate on a trust-based model or need specialised mechanisms to react to certain threat profiles.
Rather than being enraged with Facebook or Tiktok for mishandling or selling your data, the true villains in this case are centralised banks. Purchases reveal your location, your preferences, and much more. Centralized banks can disclose your personal and sensitive information with affiliates, partners, and third-party buyers.
Banks can defraud you of your money, and they also profit from you. How can you trust banks if you cannot trust them with your personal information or money?
Cryptocurrency transactions are more secure. Source: CoinCulture
According to a study conducted by Accenture, banks face an average of 85 attempted major cyber assaults every year, with one-third being successful. Skilled hackers and engineers can hack numerous online portals and mobile banking applications. Consequently, some individuals lose significant money from their accounts or are defrauded.
Additionally, the systems are susceptible to fraud and, more specifically, money embezzlement, leading to a loss of hard-earned money. Now, with the decentralised structure of the cryptocurrency, such threats are less likely to occur since there is no central source of authority.
Rather than depending on a single central source of power, crypto depends on a globally dispersed network of computers. Cryptocurrency transactions are safer and more trustworthy since they are tamper-resistant via anonymous ID numbers.
There are always some potential frauds or security threats, regardless of whether the system is centralised or decentralised. However, when handling people’s wallets, privacy, and data, consumers prefer robots over humans.
People no longer have to suffer from the shortcomings of the current financial systems, thanks to the power of cryptocurrencies. Although cryptocurrency as a whole is still in its infancy, millions of people are now reaping the benefits of cryptocurrencies and blockchain technology.