Why the foundations of Banking system is in pain?

Shubham Chauhan
Aug 27, 2017 · 2 min read

Latest developments/promotions of technology have created an aura of sci-fi world for everyone. Be it Blockchain or AI or advanced robotics, my first thought is why do we need to disrupt the existing societal system. Societal system defines our ways of being social. Is it that bad in the first place that we can’t even wait for our governments, the villain in the eyes of deep web world, to put some policies on it.

This made me study Fiat currencies and their distributions. Fiat system is interesting on its own. It works with power and violence to maintain its entirety. But the way fiat currency is created is plain magic.

What is Fiat currency?
Investopedia definition : Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of.

Currently, all national currencies are fiat ones. Wiki page of last non-fiat currency is here

How money is created?
Federal bank creates money out of thin air and grants rights to the needy government to print it on loan basis. This money trickles down from the high authorities to the public. To get money, public sells hours of their life and creates value. Banks and other public-ally held institutions regulate + operate the financial markets which results in mediation charges.

What has changed with cryptocurrencies?
Cryptocurrencies have changed the playground of money.

Figure 1 : Crude Comparison

Such decentralised system has rendered the banks and institutions out of the financial equation. Banks are adopting the tech to ensure their existence in next decade. It will be amazing to witness the series of decision by govt, banks, crypto & blockchain communities which will change the course of our society.

Please add more information/opinions in comment section.

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