First released as a form of open-source software in 2009, Bitcoin was the first cryptocurrency to hit the markets. Now, as of March 2024, there are 13,217 different cryptocurrencies in the history of the industry, but only around 9,000 are currently operating in world markets – a whole lot of them have died, so to speak.
The industry has grown so dramatically in recent years that many people, including industry experts, have asserted that they believe that blockchain technology and cryptocurrency are becoming so popular and widely used that eventually, the technology is going to completely replace traditional banks altogether.
But, is that really going to happen? Are ordinary, traditional banks really at risk of being completely replaced by blockchain technology, or is cryptocurrency just a fad that’s going to be gone with the wind within a few years?
What is Blockchain Technology?
Blockchain technology is a ledger of centralised data, and it’s designed in such a way that data can be shared safely and securely by collective groups of participants. The technology’s cloud services allow it to effectively and efficiently collect transactional data from multiple different sources, as well as integrate it and share it too.
The term “blockchain” comes from the fact that the process effectively breaks the data up into different parts – that is, shared blocks. They’re chained together by means of unique identifiers that come in the form of cryptographic hashes.
Advantages of Using Blockchain Technology
The core benefit of blockchain technology is that it provides unrivalled security. Blockchain provides data integrity with just one source of truth which effectively eliminates the possibility of data being duplicated, hence the increased security.
In the most basic sense, the reason that blockchain technology ends up being so secure is that data can’t be accessed or tampered with without gaining permission from a plethora of different parties. The information can be shared with others, but that’s not the same as it being altered.
In fact, if any unauthorised individual so much as tries to alter data, all participants will receive a notification.
Enhanced security is probably the most significant advantage of using crypto and blockchain technology, but there are plenty of other factors that make blockchain tech enticing.
- Trust: Better security means that business partners are able to trust each other far more freely and easily.
- Transparency: Normally, organisations need to keep separate databases, but because blockchain technology makes use of a distributed ledger, transactions and data are recorded in the same way in more than one location. All participants have access to the same info simultaneously.
- Traceability: Everything is also recorded, so anyone can go back and trace all records, making it virtually impossible to commit fraud (or at least, to commit fraud and get away with it).
- Efficient: Blockchain technology is way more efficient than old-school paper-heavy processes that are time-consuming and have the potential to introduce human error. Blockchain means you ca complete transactions faster and way more efficiently.
- Automated Services: Blockchain provides an opportunity for transactions to be automated. All you need to do is set specific conditions and as soon as they’re met, the transaction will go ahead as programmed.
Blockchain Vs. Banks: A Direct Comparison
As always, with new, innovative technology on the scene, the question everyone’s asking is, will blockchain end up replacing traditional banks?
It’s hard to give a straight answer because it’s dependent on a few important factors, so the best thing to do is break it down. These are the main differences between blockchain technology and traditional banking processes:
- Transaction Speeds: Blockchain allows for way faster transactions which is particularly advantageous for international deals. The difference can mean a shift from seconds to days.
- Transaction Costs: Transactions tend to be cheaper by means of blockchain tech.
- Security: Ultimately, the way that blockchain technology functions allows it to be far more secure than traditional banking methods, as it’s significantly more difficult for outsiders to gain access to data, there are more checks and balances and everything’s recorded.
- Transparency: Blockchain processes are more open and transparent, meaning that there’s automatically less chance of fraud.
- Regulation: Since the technology is fairly new, authorities and regulatory boards are still struggling with how to deal with blockchain technology, meaning that in many cases, it’s being overregulated.
- Scalability: A big concern with blockchain technology is whether or not it’ll be able to handle really large volumes of clientele. It’s good for what it does currently, but growing to the point of taking over all business from banks may be too much for systems to handle.
So, Is Blockchain Going to Replace Banks?
Answering this question is all about weighing up the potential of blockchain technology and its actual capabilities. There’s no doubt about the fact that as it stands, it has the potential to be significantly more secure than the services offered by traditional banks, but that’s on a fairly small scale.
The idea of crypto and blockchain tech totally taking over all business from banks is a whole different story. With regulatory issues as they stand, it seems like it would be difficult for this to happen.
But, what about a hybrid option – something that fits in somewhere in the middle, achieving the best of both worlds?
Ultimately, the most likely outcome seems to be that the traditional banking system will be completely transformed to fit with the times. Rather than blockchain tech and crypto replacing banks altogether, it seems more likely that banks will start introducing blockchain tech in one way or another, forming a hybrid model.
