Published by FrankNez Team.
Blockchain technology has blossomed over the past few years. With its launch comes other innovations such as DeFi, cryptocurrencies, digital assets, and NFTs. The offshoots of this technology mainly existed to solve the existing problems caused by centralised monetary systems.
It was 2007 that saw the launch of blockchain technology as a result of the economic depression brought about by the mismanagement of central banks. Several banks were heavy in debt; thus, fiat currency was minted excessively, which increased global inflation rates.
Satoshi Nakamoto created a digital currency called Bitcoin to provide a global remedy. This digital asset was created to solve this problem and do away with such concerns because it has a decentralized feature. In addition, the bitcoin creator made his code open source to be followed by other developers to create innovations similar to bitcoin and help solve banking problems.
This resulted in the creation of cryptocurrencies that work more efficiently than the banking systems. Moreover, crypto also provides better financial setups than banks. One of the present most significant disadvantages of crypto is volatility, as determined in the greed index and crypto fear. Thus, crypto cannot be used daily with various transactions.
Many experts believe this issue will be resolved as cryptocurrency becomes more popular in the financial market. This article will share the reasons why cryptocurrencies should work on providing more than what traditional institutions can offer in the financial industry.
Related: How to invest in Crypto for Beginners
Dissecting Crypto and Banking Systems
Cryptocurrencies are virtual assets that work like traditional money and can function as a method of exchange.
These are decentralized digital currencies that work securely without third-party mediators.
In addition, crypto wallets store these currencies and can be purchased through crypto exchange platforms.
Financial experts consider crypto as the future of the financial sector.
For those seeking to break away from the central banking system and invest in crypto, most digital finance experts recommend a reliable platform that keeps your money safe such as Binance, Kucoin, and Bitcoin Loophole app.
Currently, banks rule the world’s financial systems.
These provide financial support like savings, loans, and other transactions.
Contrary to cryptocurrency, banks have drawbacks because they are centralized and are vulnerable to biases.
In addition, banks work slower than crypto and may charge loans and other transactions with too high-interest rates.
Related: List of 4 Best Crypto Exchanges for Beginners
Disadvantages of Banking Systems
Financial Inclusion
Traditional banking systems employ different techniques to reach their target clientele.
There are projects specific for select groups of people that exclude other individuals.
An example would be that these select groups of individuals can gain access to lower interest rates, soft loans, and extended payment durations.
Thus, the system becomes biased and unfair as it fails to include everyone.
Accessibility
Banks only operate during weekdays and not weekends.
Thus, individuals face problems during weekends or holidays when they try to finish important banking transactions.
Furthermore, people need to appear physically in banks to complete huge transactions that could consume too much time.
Additional Fees and Slow Transactions
Bank transactions come with additional fees and taxes.
For instance, banks that send and receive money during international remittances charge exorbitant transaction fees and taxes.
Furthermore, it takes a long time to process these transactions because of slow protocols that involve large sums of money.
Security Concerns
Fraudsters can easily hack different mobile banking apps.
This tends to be humongous amounts of money lost from accounts of various individuals.
In addition, banking systems are vulnerable to money embezzlement and fraud that may result in huge losses of money acquired through hard work.Â
Can Be Biased
Account numbers and names control different financial services and bank transactions which may result in biases.
Bank officials can deliberately delay transactions with the bank in case of disputes.
Advantages of Cryptocurrencies
Crypto was launched to solve problems within the present banking systems.
Here are some advantages of cryptocurrencies over banks in offering better financial services.
Decentralized Feature
There is no need for third-party involvement with cryptocurrencies, unlike banks.
Crypto’s decentralized feature diminishes the need for human interaction that removes biases.
Crypto is more dependable, reliable, and secure because of the difficulty in tampering with them due to the use of anonymous ID numbers in transactions.
Security Issues
Security issues are the number one issue that cripples financial systems.
Cryptocurrencies operate through blockchain technology that is difficult for fraudsters to hack the system.
Moreover, the automated processes of cryptocurrencies diminish their vulnerability to fraudulent activities because there is no need for third-party mediators.
Thus, the innovativeness of cryptocurrencies with security issues makes them appealing compared to banks.
Smart Contracts
Smart contracts operate in the blockchain systems of cryptocurrencies.
These smart contracts are programmed to provide instructions to the computer and process them with less human interaction.
With the removal of mediators, crypto can remove fraud and corruption, which is challenging to banks.
Accessibility
The automated process that governs cryptocurrencies diminishes the need to have human interactions.
Thus, crypto is accessible 24 hours a day, seven days a week, including weekends and holidays.
The crypto integration within financial systems makes them better than banking systems because of their availability.
Financial Inclusion
Cryptocurrencies do not have stringent requirements for entry.
This makes everyone gain access to crypto regardless of their financial status.
In addition, financial inclusion may help improve the economy as everyone gets equal chances.
Diversification
Cryptocurrencies have different financial service features, unlike the uniform banking systems provide.
Thus, crypto has more diversity compared to banks.
This diversification makes crypto a level higher than traditional services, as crypto investments have the potential to grow more in diverse ways.
Instant Remittances
Crypto allows more daily transactions than banking systems that follow slow queues and protocols.
Conclusion
Crypto has numerous advantages that go above that of banking systems.
However, much is needed to be done to ensure the stability and sustainability of crypto in the financial market.
Take note that cryptocurrency is very volatile, and research must be done before engaging in this industry.
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