Because Crypto-Banking will surpass traditional banking activities
Several groups of individuals are attracted to cryptocurrencies for various reasons. Their censorship-resistant nature, as well as the non-inflationary nature of truly decentralized cryptocurrencies, have led to their embrace by many. The absence of these characteristics in the traditional banking sector has made the truly decentralized cryptocurrencies even more popular and most of the year 2017 has been spent reflecting on how blockchain and cryptocurrency would have raised the traditional banking sector.
Central banks hold inflationary fluctuating currencies and operate largely in secrecy clouds. Even worse is the fact that banks, which are often the cause of the economic crisis in many countries, tend to receive government bailouts at the expense of taxpayers when they are in crisis, but in times of economic prosperity they keep profits for themselves. As the popular saying goes, "they privatize profits and nationalize losses".
Banks have long been considered the safest place to deposit funds because customers can protect their funds from theft and gain some interest. Central banks also offer various forms of deposit insurance to safeguard depositors' funds. However, in recent times, there have been concerns regarding the safety of banks as places to keep funds.
The key tools of the banking system such as fractional banking reserve and deposit insurance are often criticized for being in the worst case unfair and fraudulent in the worst case. Fractional reserve, which is practically the core of the existing banking system create new money from nothing and often exhausts the purchasing power of currencies. The central banks that guarantee deposits also tend to encourage risky and improper practices by the banks.
The analysis of the recurring collapse of banks en masse in various countries clearly shows cracks in the existing financial system and most of these cases in the course of history have been caused by poor governance by banks and inadequate monetary policies and by the regulatory supervision by central banks. The Cypriot financial crisis of 2013, the Greek debt crisis and hyperinflation in Zimbabwe and Venezuela are relatively recent examples of situations in which depositors found themselves to be desired and realized the "illusion of" security "that is believed to come from central banks that guarantee deposits.
Consumers, as well as the general public, suffer more in the terrible economic conditions caused by the repeated failures of the banking sector. Furthermore, they almost always have the cost of rebuilding and reactivating financial systems. It is therefore not surprising that people start noticing problems with the traditional banking sector. This phenomenon, combined with the emergence of quality cryptocurrency products, could lead to crypto-banking growth in the future.
Transparency is the key
The lack of transparency in the traditional banking sector can generate recurrent embezzlement. For example, before the collapse of the US real estate market and the subsequent global economic crisis, a complete lack of transparency in the market prevented market participants from knowing that their funds were at risk. The real state of the real estate market only became known when it was already too late.
Not surprisingly, a number of key players in the traditional banking sector believe that transparency is the key when it comes to financial stability. During a 2011 speech handed over to the London School of Economics, US economist and former vice president of the US Federal Reserve Board, Donald Kohn, explained how greater transparency in the banking sector could lead to financial stability.
"Although better market discipline may not be sufficient for financial stability, it is essential, and better transparency is a necessary condition for better market discipline." – Donald Kohn.
Regulations are good but transparent systems would be better
Improvements addressing transparency issues could start with better stakeholder training and the application of greater government control over the application of existing disclosure policies and regulations. These steps would do much to achieve greater transparency in the banking sector.
However, the concept of crypto-banking as an alternative to the traditional bank is promising that the products offered by the banking cryptography sector are built on intrinsically transparent systems. The unencrypted blockchains on which the cryptocurrencies are based are designed to be open and there is no need for further regulation as unlicensed blockchain transactions are visible to all. Thus, auditing and control by negligence can be done in real time by any inquisitive interested party. The point is that construction of financial products on a transparent system is more effective than the application of policies formulated to ensure greater transparency in the traditional system.
Security is more than a password and 2FA
Cryptocurrent Influencers like Peter Todd is Jackson Palmer they often emphasize the importance of financial sovereignty and the control of private keys on their cryptocurrency. The common saying is "not your keys, not your bitcoins. "This serves as a reminder to cryptocurrency owners that funds held with third-party companies are not secure and may be lost due to theft, fraud or seizure.
Unfortunately, with traditional banks, it is impossible to have full control of your bank account as the funds can be easily frozen or seized at any time. There are examples of the real world of ordinary citizens who have their life savings frozen on the basis of simple suspicions. For people who understand the importance of financial sovereignty, this is one of the main disadvantages of the traditional banking sector.
On the other hand, decentralized cryptocurrency solutions allow users to maintain control over their digital assets by taking advantage of services that previously required funds to be transferred to third-party companies. This is made possible by the use of smart contracts on integrated services in internal ecosystems. The internal light ecosystem, for example, keeps users under control by hosting embedded banking services as a payment and exchange system.
In order to provide customers with internet banking services, almost all banks today have websites and mobile apps for the use of their customers. However, it has been discovered that most of these apps expose users to potential hacks and theft of funds and personal data. A recent study of AppKnox, a security company for mobile apps, revealed that about 85% of Internet banking apps used in the Asia-Pacific region did not meet basic security standards.
During the study, ethical hackers managed to circumvent the two-factor authorization and also succeeded in gaining access to passwords for a long time setting up accounts on some of the tested app. It was also possible to make payments without actually spending funds on some of the portfolios.
The release of Firefox 51.0 and Google Chrome a year ago, exposed several banks that ran unprotected websites. Santander, Diamond Bank and Eagle Bank were some of the banks with poor web security.
Reports such as those shown above show that institutions responsible for safeguarding client funds are in no way 100% secure. In addition to the potential loss of funds, the personal data of the customers are also displayed. These problems can be avoided by using decentralized cryptocurrency solutions that use blockchain technology to provide secure networks.
Blockchain and Crypto are a Redi-Made solution
In addition to being secure and open, truly decentralized blockchain-based systems have other advantages over the traditional banking system.
While it takes days to transfer money via the SWIFT payment network into the traditional banking system, blockchains can facilitate near-instant transactions.
The minimum transaction cost associated with cryptocurrencies is another reason why the cryptocurrency is increasing. Improvements in blockchain technology such as the Lightning network have led to ever smaller and insignificant transaction costs.
Although they have been set up to act as a trusted third-party in the financial system, banks are currently more of a necessary evil as customers have learned through experience not to trust financial institutions. New banking solutions like Revolut, Polybius, is FOTONon the other hand, allow participants in the financial system to make transactions on safer platforms and networks while maintaining very low rates. There are no stocks of cryptocurrency projects with the goal of creating the banks of the future. Among the creators of truly decentralized banking solutions are Polybius, FOTON, Crypterium, Zodiaq, is Mycryptobank.
The products developed by the various entities range from a few tools that allow people to control their own funds to complete ecosystems of platforms, applications and businesses.
While some projects focus on a couple of features such as transaction speed and custody of funds, others provide complete ecosystems in which businesses can experiment to address the problems facing the banking sector. Other technologies such as artificial intelligence (AI) and the Internet of Technologies (IoT) are used together with the blockchain for advanced products. Polybius, for example, allows users to control their finances using its transparent and fast platform for managing multiple currencies.
Crypto-Banking could Bridge Fiat to Crypto and Vice Versa
In a slightly different way, Crypterium uses blockchain technology to provide custom banking services for cryptocurrency users. The difference between this type of cryptocurrency and that of conventional banks is the speed and security of the network. Moreover, it bridges the gap between the world of cryptic money and that of legal currency, facilitating instantaneous exchanges and payments with both the fiat and the cryptocurrencies.
These all-encompassing ecosystems and platforms meet the needs of financial institutions, small and medium-sized enterprises and individuals. The ability of blockchain products to integrate into the existing software infrastructure of a customer allows the grafting without interruption of client applications to new custody, exchange and regulation solutions. For example, a project called ZODIAQ provides a cryptographic bank that allows transfers between cryptocurrency portfolios and bank accounts. To cover all the financial needs of customers, the bank has a hedge fund, a cryptocurrency exchange and a payment system. In addition, the exchange and payment system allows customers to use their cryptographic assets for payments or exchange them with a range of digital assets and legal currencies.
Using smart blockchain contracts, cryptobanks like FOTON offer banking, exchange and payment functions on a single decentralized platform. Basically, what consumers want from their banks is a one stop shop for all their banking needs. Cryptographic and blockchain-based banks could save users money as there are fewer commissions required for each of the services.
In 2019, banks will have to go beyond the standard set of subpar services they provide to account holders. Rather than returning to the drawing board to fabricate new regulations and oversee controls, the use of digital assets, smart contracts and blockchain technology could provide solutions to many of the problems facing the traditional banking sector. The secure, transparent and reliable nature of blockchain could create an attractive banking system for customers. Otherwise, unsatisfied account holders of traditional banks could become loyal customers to the growing number of new cryptobanks. If traditional banks wish to maintain their hegemony over the financial system, they will have to adopt new technologies that provide an efficient, secure and transparent budget for all users.