All people except bankers consider banks a necessary evil. Simply put, these institutions are the best thing we have for managing finances and entire economies. But that will change very soon, as we’re on the brink of establishing an entirely new monetary system that is more secure, fair, and, above all, decentralized.
Of course, we’re talking about cryptocurrencies and blockchain, which are already reshaping the world as we know it and introducing an alternative to banks.
Let’s analyze the main issues with banks nowadays and figure out what could be their ultimate downfall.
Main Issues with Banks Nowadays
First, banks can be unreliable from time to time regarding their online services. Their apps are often down, making online banking unavailable, which means you have to visit your nearest ATM if you want to withdraw some cash. More importantly, complex banking procedures may require a trip to your bank, as they aren’t available online.
Moreover, banks are expensive. Their fees are much higher than decentralized finance institutions simply because banks act as intermediaries between two parties and provide infrastructure. They are particularly costly when it comes to cross-border payments.
With banks, there’s a lot of red tape, which can create a delay. Some transactions take an eternity to process, and the limits are often quite unfavorable.
Banks have a lot of information about us, with detailed insight into our spending habits, which can sometimes create a human bias and directly affect some accounts. For example, thousands of people have their accounts frozen by banking systems, often without any good reason.
Finally, banks aren’t known for their security. You can lose your funds instantly, and you definitely don’t want to be a victim of any bank robbery, physical or digital. Of course, it’s less stressful if your money is stolen without a gun pointing at you.
Code Is the Answer
With the introduction of the internet, instantaneous communication became possible — people’s demands for money transfers to be faster and more secure increased. Still, banks could not meet their clients’ needs within the current financial system.
With time, it became clear that code is the answer and that the financial system needs an update. However, it wasn’t until 2008 and the introduction of Bitcoin that it became feasible.
Blockchain provided what we needed for a long time — a way to send and receive money without an intermediary, making banks effectively redundant. However, this was only the first step, as plenty of banking services required banks to exist. The good news is that the DeFi sector is now flourishing, and we’re coming up with innovative decentralized solutions to replace traditional banking systems.
A great example of a DeFi solution is Blueshift. In addition to being a decentralized exchange (DEX), it is also an asset management protocol that utilizes liquidity portfolios to manage cryptocurrency assets. Automated Market Makers (AMMs) provide exchange price calculations, and control liquidity flows through the Blueshift protocol. On top of being a DEX, Blueshift is also an excellent platform for learning about DeFi in general. Dedicated professionals with extensive experience in DeFi created the platform.
Apart from providing a fairer and more secure infrastructure for banking, decentralized technologies also introduced the concept of transparency, as we can analyze the code governing the protocol and ensure it’s not rigged in any way. This can build more trust among users, unlike banks, which like to keep their internal protocols hidden from the public.
Will banks fall into oblivion in the future? Well, it’s tough to predict that, but their importance, influence, and overall power will likely diminish in the near future. If they want to survive, banks need to accept that the financial systems worldwide are evolving and shifting toward decentralized finance.
Moreover, banks must incorporate this view and reinvent their services by introducing and emphasizing decentralized finance. Even if that happens, one of the scenarios is that people will like DeFi so much that they will completely neglect anything remotely connected to traditional centralized systems.