The banking system is an age-old institution that has been there in societies throughout the world. It came into existence as an evolution of the barter system when people needed a common means of carrying out transactions. These means have values of their own and are unique to every country in the world. This is grossly how the concept of currency came into being.
Before getting into how blockchain could affect the popularity of the traditional banking system, let us briefly know what blockchain technology is:
- Blockchain is a niche-like network that stores information in small blocks, and are chained together.
- The storage is structured in a way that it is extremely difficult to hack or change data in the system.
- In essence, blockchain is a distributed digital ledger that is open to users for verifying, transacting, and managing data.
Traditional Banking System
A bank is governed by a main central force. This can be governments directly or central banks who share their ledger with smaller banks to maintain an economic parity in the system. A lot of people are employed in the banking sector and most of the operations are done manually.
The fiat currencies are an intricate part of the banking sector, in the sense that these currencies are minted by central banks. However, these institutions often depend on the physical form of databases and have an increased chance of getting affected in times of depression due to their strict central laws.
Drawbacks of the banking system
- The world is slowly shifting to digital and in these times, there is rather no good use of so many physical branches of banks.
- The huge number of people associated with banking is on one hand offering employment but on the other, making the entire business a costly affair.
- Banks have high service fees for any kind of work that you need to do there.
- Transaction fees are a lot higher in traditional banks.
- They are completely centralised which means some higher authority is always interfering in your transactions.
- The safety of your fiat currency is always in question if we are dealing with physical or electronic banks.
What does Blockchain Technology offer?
- The entire system runs on a peer-to-peer network which means it is decentralised and gives ample amount of financial freedom.
- Transaction fees are pretty less and the community is revenue-based i.e, it is incentivised.
- The asset market gives new opportunities with the help of blockchain technology by eliminating all the middlemen involved in the banking sector.
- Blockchain provides round the year service. This means you can participate in transactions 24*7, 365 days.
- As it is difficult for nodes to change data or modify them, information stored in blockchains is free from easy thefts or malware.
- It provides financial security to people who aren’t employed or where there is too much government interference with banking.
These are some of the major evident incentives that you are offered if you are planning to shift from a traditional banking system to Blockchain technology.
Stock markets also have competition, with the advent of cryptocurrency trading that runs solely on Blockchain Networks. If you simply open an account in any of the online trading softwares and invest a bare minimum amount, you are good to go. You can check out one such software by clicking on this visit website.
With growing competition, most of the banking companies are thinking of welcoming Blockchain Technology into their stream of work. On the other hand, cryptocurrencies and Blockchain technology also have to adapt to new rules and regulations that are brought in by governments. Nonetheless, the pros are heavier than cons if Blockchain is adopted in the banking sector. With better settlements and clearance schemes, fast payments, a better scope of loans, improved auditing-accounting and better safety, Blockchain Technology will open a new window for financial-technology companies.
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