It's Not a Choice Between Banks and Crypto

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Avatar for dave_gutteridge
1 year ago

Bitcoin Cash is going to bring down banks and free people from centralized fractional reserve based currencies and help the world become a better place.

... is the kind of thing you hear, or read, a lot of when you enter the world of crypto.

And it's just wrong. It's binary thinking that just doesn't reflect reality.

It's not just that the financial world will adapt and change the same way telecoms and media adapted and changed in response to the advent of the internet. If crypto becomes a viable currency, then banks will almost certainly offer crypto services. But, more importantly, consumers do not have to make the stark choice that every crypto enthusiast seems to want them to make.

I currently have about half a dozen bank accounts. Each one has a different purpose, but let me focus on two. One is a huge traditional bank with brick and mortar locations everywhere in Japan, where I live. The other is a strictly online banking service.

The huge bank charges higher fees, but, when I have an issue, or some complicated business operation I want to do, it's nice to be able to go down to a physical branch in person and walk through it with a teller. The online bank leaves me to fend for myself for most interactions, with fairly scant online support. But, its cheap, so, in most cases where I only need to do simple things, it saves me money.

It would be nice to have one bank that is both cheap and has robust customer service, but, that's like hoping for ice that's both warm and solid. Customer service is expensive to run, which is why the costs get passed down to me.

So in order to to get the best balance to meet all my needs, I have set up a situation for myself with an array of options. And that's actually what I do now with my crypto assets. I have hot wallets and cold wallets, and different crypto assets earmarked for different purposes, and they exist alongside my fiat options.

As crypto becomes a more viable form of actual currency, I'm not going to shut down all my bank accounts. I'm going to continue to make my crypto accounts just another set of options, to meet whatever specific needs I have in any one particular context.

I was thinking one time about the possibility of buying or selling some Bitcoin Cash in person to someone I connected to through a service like Let's say I meet the person at a cafe, and they'll hand me cash, and I'll transfer some BCH to them. What's to stop the person from literally physically grabbing the cash back off the table and running out the room once the BCH transfer completes? Or vice versa, what's stopping me from running with the cash as soon as it's handed to me, before pressing send on the screen of my phone?

We'll be reduced to silly games of schoolyard levels of trust and ritual, which is a problem solved by having third party intermediaries. Like banks. It doesn't have to be banks. But it could be.

Or, consider online purchases. If I buy something online, my transaction record is public and secure, recorded on the blockchain for all time. But that does nothing to help me if the company I bought from doesn't send me the goods I ordered. In the worse case scenario of outright fraud, the Sats I sent are shuffled and untraceable, the website changes domains, and is off to scam new people. If I bought by credit card, I'd have insurance to compensate me. But, with BCH, that money is just gone.

What if a bank were to step in and offer payment insurance for crypto purchases? Would I spend, say, an extra couple bucks as a one time fee for a particular purchase if I was a little unsure about the store? What about banks offering certification for stores, and the merchant pays a little for that certification in order to bolster consumer confidence?

There are a lot of ways banks could work with crypto in order to provide new services, and develop new revenue streams.

There are areas that banks might have to concede entirely to crypto. Just like telecoms, so far as I know, got decimated in the long distance calling market. Does anyone pay for a long distance phone call anymore? I think everyone, even in, or especially in, low income areas of the world, hops on a wifi network and does a voice chat using one of a million free apps. But maybe there's still some place where long distance calling exists.

One area that crypto is likely to potentially steal all or most of the business from banks is in overseas remittances. An international BCH transaction costs less than a cent, but an international transaction through a bank can cost tens of dollars. I think the last time I did one it cost about forty dollars US.

But again, this doesn't mean that banks will die, they'll just let that branch fall from the tree. Telecoms shifted into building cellular networks and providing data services. What will be the banking equivalent? I don't know, but I know that the financial services industry is nothing if not creative about coming up with new ways to move money around for a price.

Bitcoin Cash, and crypto in general, will absolutely effect the banking system. It will create pressure to lower fees and shift services. Overall, I think the net effect will be positive. Just like the internet has made communication more free than what it was under the previous regime of telecoms, banks will have to bow to pressure for more efficient and effective services.

But be wiped out? I don't see that happening anytime in any of our lifetimes.

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Avatar for dave_gutteridge
1 year ago


As much as I'm a bit of a critic when someone says "BCH will fail" in some form or another, there are really still many reasons right now to keep a bank account and follow through with a few KYC regulations.

One of the main reasons is that everyone is using fiat currencies, not cryptocurrencies. As much as the actual users of crypto are cypherpunks and crypto-anarchists, there's not really much usage when everyone doesn't agree on the same value on a certain coin and all.

If we trace back the lineage of Bitcoin and the whole market, it really started because the 2008 Market Crash happened. If we trace that back to why it happened, there are many reasons but most of them are from side effects due to the abandonment of the gold standard.

Bitcoin, at its core, is a peer-to-peer electronic cash system. It's a payment system that requires computational time instead of the central banks to validate and secure transactions.

If the banks stop trying to turn Bitcoin into some sort of settlement layer, that is.

There's a reason BTC and BCH split in 2017, and that's due to the unwillingness of certain groups to move on and turn Bitcoin into a worldwide system of independent users. The stubbornness by Blockstream, which controlled Bitcoin Core and the major sites that talked about Bitcoin, created Bitcoin Cash and removed years of progress down the line, destroying Bitcoin Cash's reputation as well.

Sure, Bitcoin Cashers say that BCH will take down banks and financial solutions, but you're also right that it will most likely lessen the grasp of the banks, and therefore the rich, on many parts of our lives.

The fact that the banks are doing hell and out trying to regulate things that are built to be unregulatable using cryptography

There are already cities (like Townsville, North Queensland) that are getting more merchant adoption due to BCH and the merchants actually don't turn them to fiat.

There's a reason that Bitcoin Cash's intended users are those who don't have bank accounts because they can't, and the people who can't buy anything because it's expensive to even get a single dollar.

It's because of the banks and the fact that the rich use these banks to grow richer.

tl;dr: banks are controlled by the elite, this is a chicken-egg situation as many people still use banks, and unless bitcoin cash cities grow, they'll gonna do their thing and prevent adoption to make people use bitcoin cash. until BCH grows large that it pushes away banks from the top spots of everyday finance, you're right.

$ 0.01
1 year ago

You've spoken well. Very soon everyone will prefer cryptocurrencies to saving in banks. That is when the world will understand what is going on.

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1 year ago