Twilight of the Financial System: Cryptocurrency Instead of Banks

The history of banks begins in the 7th century BC when some people in Babylon started giving gold or silver on trust at interest. These guys were called money lenders, and already then no one liked them. After all, the default of debt obligations inevitably led to unpleasant consequences in the form of encounters with the lender’s colleagues, who could literally beat the debts out of the debtor or cut off a few fingers as compensation.

At about the same time, the first substitutes for gold appeared in the form of bank notes. A little later, in ancient Rome, there were the mensarii and the argentarii, who dealt with the exchange of coins, the issuance of loans, raising funds and transfers between cities. For more than two thousand years, the system evolved, snowballing with intermediaries and state regulation. And then it eventually came to what we are seeing now. Applications for phones with the ability to pay for anything in a couple of clicks, offices with polite and smiling consultants, online credit applications, etc. But, in general, 50, 200, and even 1000 years ago, the system was about the same, except that it adjusted to the development of technologies. Judge for yourself.

· Interbank transfers are still executed within 3 working days. Yes, this is the maximum period, but in ancient Rome, a messenger with an order book could travel quite far in 3 working days.

· International bank transfers are a pain that requires confirmation from both parties, from the sender to confirm that you are not paying terrorists, and on the receiving end to prove the legality of the funds. And this is all applicable even if you transfer your own money between your bank accounts in different countries. The ancient Romans, of course, did not care about terrorists or funds legality, but they simply had other things to worry about.

· To get a loan, you still have to provide originals of documents about your income and expenses. Although the bank could write an email to your company and ask if you work there and receive as much as you said. Taking into consideration that it is not you who profits from the credit, but the bank, it would be nice if the bank took care of this issue. Again, in ancient Rome, the moneylender figured out this matter on his own just by looking at the lender’s complexion, their body weight, the cleanliness of their nails, and the shabbiness of their tunic.

· Personal presence is required for almost any action, and with it comes waiting for your turn, printing and filling a bundle of papers and placing a dozen signatures.

· Or try to do something with your money after 18:00 on workdays. Flying to the other end of the world is possible by then. But fulfilling a transaction is a problem.

· And banks can still be robbed! Would you believe it?! All this using the old methods of taking out a bag of cash from the head office, and modern ones with the help of hackers and the internet.

· Well, how could we forget, commissions! There are commissions for everything from transfers, cash withdrawal, cash depositing, currency conversion, you name it. They do have to somehow earn some money to pay the salaries of thousands of employees, half of whom could be replaced by chat-bots.

We could continue this list for long, but let’s talk about the good! We have been developing all these technologies for a reason, right? Now your bank can call you at 8 am, before you even drink your coffee, and offer a new loan, even better than the previous one because in addition to the increased rate, you will get a teapot as a gift! And then, even if you refuse, they will call you again or send an SMS with a request to evaluate the quality of service.

Security measures have become much more efficient, and that is why to confirm the transfer of $20 to your grandmother on Thanksgiving Day, you need to call the bank, provide an answer to your security question, passport details, prove that the grandmother is really yours, that you are sane, and really want to send her twenty bucks.

However, with the advent of blockchain, this market is in for some serious changes. There are already projects that aim to make you dream about the moment when a coffee shop next door will start accepting Bitcoin as payment. So, what can blockchain offer to counter the existing banking system? Actually, almost anything!

· Among the centralized payment systems, the highest transaction speeds now belong to VISA with up to 50,000 operations per second. Blockchains like EOS and NEUROPLATFORM are claiming that they can operate up to 100,000 transactions per second, and this is not the limit. And this is not just payments for coffee, it is valid to any transactions, including cross-border money transfers.

· Even the oldest blockchain of Bitcoin has a fixed commission for transactions, regardless of its volume. It does not matter if you want to send a dollar or a million dollars since the commission does not change, because the amount of work that needs to be done to send both a dollar and a million dollars is absolutely the same.

· The spread (the difference in rates) when exchanging one crypto for another is almost zero, in contrast to the exchange, for example, of the dollar for the euro, which is up to 5%. Have you ever wondered why this is so? Because no one has yet bothered to figure out how to earn on the fact that you need to change the assets of one company for the assets of another company, especially if there is a person who needs to perform a reverse operation.

· You do not need an armored van and a bunch of brave guys with machine guns to transfer cryptocurrencies! And their salaries are not included in the cost of servicing your wallet.

· And, of course, cryptos can confirm your rights to the created work, to receive goods or services, and also check the history of the possession of the goods. Did you make a pretty photo? No one can use it without your permission or pay you royalties for it. And all this takes place without long correspondence and contracts. And everything is fully automated.

· The same function is applicable to credit histories, for example. Data about a person verified through smart contracts is much less expensive to obtain, as it does not require energy waste and monetary expenses. Accordingly, it does not need to be included in the interest rate on the loan, thus making it possible to get cheaper loans. And cheap loans are one of the main indicators of economic growth, as they provide an influx of investments, new ideas and progress in general.

It is possible to list the advantages of cryptocurrencies for a long time, but I think you get the idea. And the only thing that hinders the arrival of the universal good is state regulation, which is still stagnating. In most countries, cryptocurrencies have no value and are not protected by law, which means that unscrupulous players will go unpunished. But this will change soon, as it is becoming impossible to ignore what has already become a part of our lives. And our role in this is very simple. The more people know what cryptocurrencies are, how they work and why they are needed, the closer the moment is when a state legalizes them and provides protection of cryptocurrency holders.

Viva la crypto! Viva the blockchain! Viva la progress!