Top 5 Reasons Why Banks Should Be Nervous

Lex Sheehan
Nov 19, 2018 · 8 min read

Let’s start by questioning the status quo.

Why do we accept bank fees as a given?

Why do banks get to hold on to our money for 7 days? Why do banks get to earn interest on that money of ours, charging me NSF fees even though we have plenty of money. “See! I deposited it 6 days ago; only you [bank] won’t credit my account until it’s done ‘processing’. Arggggh!”

Why is it okay for our deposits to be “processed” only during “business work days”?

Do banks use only bank employees, i.e., humans, that don’t work weekends and frequently take vacations to process our transactions?

No. Of course not.

So, why do we accept that it’s okay for banks to make money by holding our money in the banks’ prolonged and flawed clearing process?

Why does it take the banks’ computers a week to confirm that a check that we deposit into our bank account is “good”? (And why do some cleared checks wind up being “bad”?)

Homer gets charged $35 per NSF and says, “It’s not my fault. My bank’s mobile app said I had the money in my account when I bought that beer.”

Read my Venditor Emptor article for an example of a much more costly set of banking fees where the bank gets rich from an Craigslist scam.

This article will hopefully enlighten the average guy by providing clarity into the ugly world of commercial banking….and provide a better solution.


Banks want you you spend more money than you have.

Why do you think they frequently fail to show your pending transactions and/or show deposits that look “good”, but are sometimes removed from your account?

Why Banks Want You to Over Spend

Banks make a profits on your mistakes. The more mistakes you make the more money the banks make, e.g, NSF fees.

If you need cash quickly, you’ll likely run to an ATM and pay ATM fees.Banks come up with all sorts of “products” designed to charge you interest, fees or both.

It’s all about getting you to live above your income.

One definition of debt:

Evidence that you had more fun than you should have.

Q: Why is the U.S. in such bad financial shape?

A: Deficit Spending

Banks understand that we’ve been conditioned into thinking that spending money we don’t have is okay. The U.S. Congress sets a terrible example for the rest of us and banks profit from our flawed thinking and bad habits.

Credit Card Interest

Did you know that if you have a typical credit (21% interest) and a balance of $20,000 that you’ll pay about $4,000 in interest per year?

In 5 years, you would have paid $20,000 to your bank and you will still owe $20,000.

Stop Burning Your Money

Cryptocurrency wallets verify that you have the funds to make a payment. If you do not have the funds to make a payment, it won’t happen. You can’t spend money you don’t have. Simple.

Bitcoin miners validate that each transaction is correct. Each miner adds up all the credits (incoming transaction amounts) and debits (outgoing transaction amounts) to verify that everything adds up correctly.

There are no hidden fees or charges. There are no invisible checks that are “processing” only to show up a few days later to cause your balance to dip under $0.00.

Granted, a transaction fee typically accompanies most cryptocurrency transactions, but that fee typically ranges from fractions of a penny to 20¢ and you can set how much you’re willing to pay.


The Chain of Transactions

Cryptocurrency transactions build a linked chain of transactions (Alice paid Bob, Bob paid Cindy, etc.) that moves value from owner to owner.

Miners validate those transactions and build the transaction chain, i.e., the distributed ledger.

Compute power and encryption ensures security and provides a verifiable means of trust in a distributed environment without the need of a costly, centralized, commercial banking system.

Instead of paying banks to process our transactions (and all those banking fees), we pay cryptocurrency miners a small fee to validate and add our transactions to the distributed ledger.

How much, exactly, are miner fees?

“It Depends” (TM).

The highest fee for processing a Bitcoin transaction was close to $55.

Currently, the Bitcoin processing fee is $0.13. If you’re a merchant, that means that if you sell anything that costs more than $55 you’ll be saving money and you’ll won’t need to worry about any extra hidden banking fees.

Which Coins have the Lowest Transaction Fees?

What if we want to do micro payments? How can we use cryptocurrency to handle that business model?

Here’re some cryptocurrencies with low transaction fees*

Dash: $0.363
Ethereum (ETH): $0.347
Litecoin (LTC): $0.198
Bitcoin Cash (BTC): $0.097
EOS: $0.0105
Ripple (XRP): $0.0037
TRON (TRX): $0.0000901

* as of 3/30/2018

Heard of The Lightning Network (LN)? As of October 2018, the median base fee for a LN transaction is $0.000064443. That makes LN good for micro transactions and many Internet of Things (IOT) use cases.


What This Article Did Not Discuss

This article is focused on how we can use a cryptocurrency like Bitcoin to keep our costs low.

We did not consider other lower-cost, higher-speed cryptocurrency alternatives.

For example, there’s another network layer called the “Lightning Network” that allows us to make micro payments for very cheap. So small in fact some of the transactions are free and did I say fast?

The Lightning Network is a “second layer” payment protocol that operates on top of a blockchain, e.g., Bitcoin. It enables fast transactions between participating nodes and is a solution to the bitcoin scalability problem.

Other cryptocurrencies with faster processing times

Here’re some of the fastest ones:

Another metric of interest is the total number of transactions the cryptocurrency network can handle per second.

Here’re the fastest cryptocurrencies:

Total transactions per second

  1. Bitcoin/Lightning Network: 60,000
  2. Visa: 24,000
  3. Ripple (XRP): 1,500
  4. PayPal: 193
  5. Bitcoin Cash (BCH): 60
  6. Litecoin ( LTC): 56
  7. Dash (DASH): 48
  8. Ethereum (ETH): 20
  9. Bitcoin (BTC): 7

Top 5 Reasons Why Banks and Should Be Nervous

Cryptocurrency payments are:

  1. Cheaper
  2. Faster
  3. Safer

than banks’ checking and credit cards… and have:

4. No NSF Fees

5. No Interest Charges

Additionally, cryptocurrency funded Visa cards are now available.

When you use cryptocurrencies, you won’t have to worry about losing money after accepting a bad check and won’t have to pay interest rates or NSF fees ever again!

Banks that don’t embrace this new blockchain technology will lose a lot of checking and credit card processing business. My guess is that many will get on board and fund payment channel hubs (Later, I might write another article about how the Lightning Network works), but banks and credit card companies will face new, stiff competition. Hopefully, the days of predatory interest rates and golden parachutes for greedy bank executives that approve impossible loans and regularly gouge their customers will soon be over.

Hey Banks! One Last Message From Your Customers:

U.S. Banks and the Fed operate above the law. Our U.S. Congress is worse. They knowingly approve bad loans, spend money they don’t have, get is us in wars for bogus reasons and nearly throw our country into the next great depression and nobody is ever held accountable. That pisses off a lot of hard working citizens.

We have to tighten our belts when our bank balances get low. Why does the U.S. Congress get to kick the can down the street? And why do the banks profit regardless of what happens?

As long as people need to borrow money, there will always be banks. Hopefully, now and going forward more people will turn away from credit cards and typical bank checking accounts and will turn toward cryptocurrencies (which are more like debit cards). The more we all live within our means the better it will be for all of us.

The Main Reason Why Banks Hate Cryptocurrency

Cryptocurrency provides an alternative, i.e., competition; that drives down profits for banks.

Furthermore, decentralized cryptocurrency reduces the control government has over its people.

And The Rest of the Story…

With most things in life, the devil is in the details.

Do you want to understand the theory and mechanics behind cryptocurrencies?

How does decentralized currency work? What are the risks?

The greatest cryptocurrency hacks explained.

Would you like to be able to discern blockchain hype from substance?

Want to create your own cryptocurrency?

Do you want to take your career to the next level?

Don’t get left behind. Get ahead of the blockchain curve. Take my course:

Register now while there are still seats available!

Other articles you might be interested in:

Lex Sheehan

Written by

B.S. in Computer Science (minor: Business) from Auburn University

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