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The last few years have seen the launch and flourishing of blockchain technology. This technology is also home to other innovations such as cryptocurrencies, DeFi, NFTs and other digital assets. These innovations mainly solve the concomitant problems caused by centralized monetary systems.
Blockchain technology dates back to the economic decline of 2007 which saw the world suffer from mismanagement by central banks. Many banks were already in debt and they were also creating excess fiat money which raised inflation rates around the world. Satoshi Nakamoto created a digital currency, BTC, as a cure. This currency has a design to solve this problem and avoid such mistakes as it is fully decentralized. Nakamoto has also made its source code an open resource for other developers to make similar innovations and solve banking problems.
As a result, cryptocurrencies were born and now operate more efficiently than banking systems. They also offer even better financial systems than banks. Currently, the biggest downside of cryptocurrencies is their volatility, as shown by the Fear and Greed Crypto Index. This makes the cryptocurrency impossible to use in daily transactions. This issue should be resolved once the cryptocurrency gains popularity. Read on to find out why cryptocurrencies should go beyond what banks can offer in the financial arena.
Cryptos vs. Banking systems
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Cryptocurrencies are digital assets that function like traditional money and can be used as a medium of exchange. They are usually purchased through crypto exchange platforms and stored in secure crypto wallets. These digital currencies are decentralized and operate very securely with minimal human interaction. As a result, many now classify them as the future of the financial sector.
Banks are the current financial systems in the world. They offer financial support like loans, savings and other transactions. However, unlike cryptos, they experience a lot of setbacks as they are centralized and prone to bias. They are also relatively slower than cryptos, and some charge too high interest on loans and some transactions.
What are the main drawbacks of banking systems?
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Below are some of the major drawbacks of banking systems that cripple the financial system.
Banks are generally not available on weekends. As a result, people usually face a lot of issues when they expect to make essential transactions on weekends and holidays. Banks also require the physical appearance of people to make huge transactions, which is too time consuming.
Traditional banking systems use different techniques to market their work. They set aside certain projects for selected groups of people that may not be available to others. These groups get favors like soft loans, extended payment terms, and lower interest rates. As a result, systems end up being unfair and lacking in financial inclusion.
There are many mobile banking applications that trained technicians can hack into. As a result, some people end up losing large amounts of money on their accounts. The systems are also prone to fraud and embezzlement. These events can result in a loss of hard earned money.
Additional fees and slow transactions
Banks come with additional fees and taxes during transaction periods. For example, sending and receiving banks typically charge very high transaction fees and taxes when sending international money. Due to slow protocols, these transactions also take a long time, especially for large sums of money.
May be biased
Because banking transactions and financial services depend on account numbers and names, they are subject to bias. In the event of a quarrel with the officials of a certain bank, the issuing agent of the financial service may deliberately delay transactions.
How cryptocurrencies can offer more than banking systems
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Cryptocurrencies have come to solve the problems of today’s banking systems. Therefore, they should do better to create a more efficient financial ecosystem in the world. Below are some of the ways that cryptocurrencies can offer better financial services than banks.
Cryptocurrencies are completely free from third party control, unlike banks. This decentralized nature minimizes human interactions, making them free from bias. They are more secure and reliable because it is difficult to tamper with them as they use anonymous ID numbers in transactions.
The biggest problem with financial systems is security. Cryptocurrencies run on blockchain technology which is very intact and free from major security threats like hacking.
It is also free from fraudulent activity since the system automatically processes transactions with minimal human interaction. Therefore, if cryptos innovate more to solve security concerns, they may remain better than banks.
Related: What is a ‘smart contract’ and what is it for?
Cryptocurrencies can also have smart contracts running in their blockchain networks. These smart contracts are designed to give computer instructions and process them with minimal human interaction. Therefore, they can be used very well to eliminate fraudulent activity and corruption, which is a challenge for banks.
Many crypto platforms also encourage investors to take a positive initiative to build and grow the coins. In turn, users and holders can actively contribute to the growth of not only their tokens, but also other tokens in general; hence, ensuring a better future for crypto adoption and spread of crypto diversification. One construction tactic is to take advantage of smart contracts when trading.
Cryptocurrencies have minimal barriers to entry. As a result, they are easily accessible to everyone, regardless of their status. This feature is encouraging because it can help improve the economy in a healthy way, because everyone has equal opportunities.
Unlike banks, cryptocurrencies use automatic systems that don’t require too much human interaction. Therefore, they are accessible at any time of the day, including weekends and holidays.
As a result, their integration into financial systems can make them better than banking systems due to better availability.
Cryptocurrencies have a very fast transaction speed unlike the traditional financial system with queues and protocols to follow. As a result, more transactions can be done in a day through cryptocurrencies than through banking systems. This feature gives them a cut above the banks as they would give the economy a better chance for rapid growth.
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Unlike banking systems which offer almost uniform financial services, cryptocurrencies are plentiful and have different characteristics. They are therefore more diversified than banks. Such diversity is a cut above traditional services since crypto investments can grow in several ways simultaneously.
ADACash is one of those platforms that provides easier and better income opportunities from your ADA holdings. To increase the incentives, the platform gives you more Cardano Reflections (ADA) with more ADACash tokens than you have on your wallet.
Such staking options like ADACash can provide additional income and serve as a diversification tool even in the bear market. With staking as an option, investors are increasingly opting to own ADA, which has halved in price over the past two months. Despite the market crash, Cardano’s total trading volume outperformed Ethereum’s this month.
To sum up all of the above, it’s good to mention that cryptocurrencies have some advantages that outperform banks. However, there is still a long way to go to ensure that they stay in power for a long time. They must provide the world with more practical solutions to the problems caused by banks.
Fortunately, they already do. Cryptos have very intact security systems which encourage investors. They also offer reliable transactions at better speeds than traditional features. As a result, they are essential to usher in a better, cashless financial era. However, cryptocurrencies still need to do more to fill all the gaps in traditional banking systems.