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Cryptocurrencies are analogous to banking systems but incur decentralization, unlike traditional banks. Both monetary systems have pros and cons, and we can obtain an ideal banking system only if crypto and banks co-exist. On the other hand, if you are looking for a good trading platform, go for bitiq as it is secure and reliable.
Already crypto has enticed numerous banking authorities with its underlying technology, abbreviated as DLT (Distributed Ledger Technology). As a result, regulators have understood the significance of crypto in creating an alternative economy and have updated the banking system’s legal framework to adopt this innovation.
The banking sector has evolved from a simple recordkeeping practice by banks in medieval times to the modern banking system people see today. The banking sector was primarily centralized, leading to various problems, including fractional reserves, bank runs, and bank failures.
- Development of Banking System and Cryptocurrencies
Development of Banking System and Cryptocurrencies
Everyone saw development in the form of the central bank during the 17th century, which was considered an advancement over simple deposit-taking institutions. Central banks here intend to prevent banking panics and provide financial stability to the economy. As DLT, Banks can utilize this technology for data sharing and interconnectivity between all banks.
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Cryptocurrencies are within the domain of the banking system as they are used to store money, send or receive payments, or exchange them with each other. However, cryptocurrencies have gained significant popularity among people because of their decentralized nature, eliminating any authority or middleman to oversee transactions between two parties.
In addition, no third party is involved in the verification process leading to the fastest and cheapest transaction fee charged by cryptocurrencies, thus making it a more reliable alternative than the banking system.
Crypto can make transactions fast and costless
The platform of DLT enables transactions of digital currencies to be carried out in a costless and fast manner. In addition, banks can implement this technology for instant settlement of transactions between two parties located a long distance from each other.
Also, cryptocurrencies can be used by both consumers and merchants to transact directly without any involvement of third parties such as go-between banks or credit card companies. Even though no intermediary is involved in this process, the good thing is that all payments are recorded on the blockchain ledger, which cannot have manipulated.
Blockchain can act as a database for banks
Blockchain technology can be used as a database for banks. Only DLT can make the process of recording data and storing information fast, secure and efficient. Banks or other financial institutions will use this advanced technology to record transactions of their customers in their database. It would enable a faster and better customer support system as customers can quickly get information such as debits, credits, etc., without a third party such as correspondent banks or credit card companies.
The blockchain ledger will provide an in-depth view of the customer’s account
The blockchain ledger has made it possible to store all the records linked with financial institutions’ business. In addition, blockchain technology is famous for its scalability and intelligent contract technology, providing an in-depth view of customers’ accounts. With this technology, financial institutions can offer better customer support systems and more secure transactions.
Blockchain can prevent hacking and fraud
Cryptocurrencies are famous for their security as it is not feasible for hackers to carry out hacking attacks. A blockchain ledger can have a use case to store all the transactions within a network without altering the original data, making it impossible for hackers to alter it. Furthermore, a blockchain ledger ensures the immutability of information and stores the same permanently, thus making the recorded information hack-proof.
Smart contracts are the future
Smart contracts are capable of self-execution and fulfillment in the absence of third-party interference. As a result, it helps in storing information permanently and creates a transparent environment for all platform users. Banks can use smart contracts to offer their customers various services, including lending, buying or selling property, etc.
Cryptocurrency provides more transparency and security
Crypto transactions are usually carried out using blockchain technology. This technology makes transactions transparent and thus eliminates any chances of fraud and corruption related to transactions, as every transaction is recorded on the ledger with its timestamp. Also, blockchains are protected with cryptographic code, making them impenetrable to any third party.
DLT can ensure transparency in the banking system by making all transactions and customer details available on the ledger, which cannot be modified or deleted. Blockchain has already proved its worth in various industries, including healthcare, business, education, etc. . As it provides efficiency and immutability of stored data.
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