Blockchain technology is handing over power to the people. One of the biggest advantages of this technology making its way into the mainstream is the very fact that banks have no control over it – at least not for now. So where does Blockchain technology leave the banks and can they coexist?
There are constant debates over whether the banks getting involved in Blockchain technology is a good idea or not. On the one hand, the technology is open source, so there’s nothing stopping the big banks from getting involved and their involvement will add a huge amount of legitimacy to cryptocurrencies but their thirst for making as much money as they can through our financial transactions goes against everything Blockchain technology stands for.
So, why should the banks be worried about Blockchain technology?
Less Control – when the technology is available to everyone, it means that the power is taken away from the big players. No longer do the banks have a monopoly over the way that our financial transactions operate. Without control, the banks stand to lose their clients, their chances at gaining extra profit and in general, their hold on our money.
Less Fees – everyone knows what it’s like to get slammed with foreign transaction fees, high account fees or even a human teller fee. Blockchain technology and the cryptocurrencies that operate through the technology have very few fees and if there are fees, they are substantially lower than those the banks try to hit you with.
Less opportunities for lending – Blockchain actually opens up more of an opportunity for crowdsourcing funds and many people are taking up these opportunities to finally make their business plans a reality. Bancor crowdsourced $153 million in less than three hours. Clearly, the ground is ripe for start-ups to get the boost they need but this is not in favour of the banks! Instead of getting loans from a financial institution and having to pay back the money in installments with interest, they cut out those fees – also cutting out the opportunity for banks to profit.
Despite all this, the banks have one big leg-up over Blockchain technology:
The average person is still far more likely to choose a bank instead of bitcoin or some other cryptocurrency to keep their money safe. The patterns within the technology have the potential to stabilise but with no centralised power, they do fluctuate and the worth of a bitcoin depends on how much the people decide they’d like to pay for it. In years gone by, individuals have payed 10,000 bitcoin for 2 pieces of pizza – by the end of October 2017, those bitcoins would have had a value of over $80 million AUD. It just goes to show that the currencies themselves rely heavily on the demand.
For now, banks have the advantage of being a little more reliable but they also have the disadvantage of being distrusted by the general public. For too long, they have been the only option for the safekeeping of money and they’ve used that monopoly to get as much money as they can from us all.
It’s likely that Blockchain technology and the banks can coexist with each other but it’s unlikely they will remain unchanged by each other in the future.