Over the last few years, Blockchain technology has gained popularity. Cryptocurrencies, DeFi, NFTs, and other digital assets are all possible with this technology only. These inventions are primarily aimed at addressing the challenges that centralized monetary systems.
The history of blockchain technology may be traced all the way back to the global financial crisis of 2007 when the world’s central banks were mismanaged. Most importantly, many banks were already in debt, and they were printing too much fiat money, which pushed up global inflation rates.
Blockchain vs. Banking: Which is Better Choice?
Blockchains have been hailed as a game-changer in the financial sector, particularly in the areas of payments and banking. On the other hand, banks are not the same as decentralized blockchains.
In short, to observe how a bank varies from the blockchain, let’s compare the banking system to Bitcoin’s implementation of blockchain.
|Banks are open from 9:00 a.m. until 5:00 p.m. Some banks are open on weekends, but only for a short amount of time.||Open 24/7, 365 days a year.|
|This fee varies per card and is not paid directly by the user.||Bitcoin has variable transaction fees determined by miners and users.|
Know Your Customer Rules
|“Know Your Customer” (KYC) processes are required for bank accounts and other banking products. Therefore, this implies that banks are obligated by law to keep track of a customer’s identification before creating an account.||In principle, even an artificial intelligence-enabled entity may take part.|
Ease of Transfers
|The minimal requirements for digital transfers are a government-issued identity, a bank account, and a mobile phone.||An internet connection and a mobile phone are the minimum requirements.|
|Customer account information is saved on the bank servers. Certainly, the privacy of a bank account is just as safe as the bank’s servers and how effectively the individual user secures their personal information.||Bitcoin users may keep their transactions as secret as they like. Although every Bitcoin may be traced, it is hard to determine who owns Bitcoin if it was purchased anonymously. When Bitcoin is purchased through a KYC exchange, then the Bitcoin is directly linked to the holder of the KYC exchange account.|
|Assumes the customer uses strong internet security precautions such as utilizing secure passwords and two-factor authentication, a bank account’s information is only as safe as the bank’s server that contains client account information.||The Bitcoin network becomes more secure as it expands in size. Similarly, a Bitcoin owner can level up security with their own Bitcoin is totally up to them.|
|For a number of reasons, banks maintain the right to refuse transactions. Therefore, banks also maintain the right to put account freezes in place.||There is no special way to use Bitcoin. To sum up, Users can use Bitcoin how they want, but they must follow the rules of their nation or area.|
|Governments can easily track people’s bank accounts and take the assets contained within them due to KYC requirements.||Governments would have a difficult time tracking down and seizing the anonymous activity.|
Benefits of Blockchain
Blockchain increases trust, security, transparency, and the traceability of data shared across a business network and delivers cost savings with new efficiencies.
In the following image, you can see the top 5 benefits of Blockchain :
Drawbacks of Blockchain
Blockchain is improved beyond its infancy, however, it still has some drawbacks that must be addressed before it can be extensively utilized for everyday transactions.
In the following image, you can see some drawbacks of Blockchain :
To sum up, blockchain has benefits that outdo the banks. Similarly, they need to provide more realistic answers to the challenges generated by banks.
To clarify, Blockchain has very powerful security measures, which is appealing to investors. They also provide more secure transactions at greater speeds than traditional methods. As a result, they’re proving vital in ushering in a better, and cashless financial era. However, blockchain still has a long way to go until it can close all of the gaps left by traditional banking systems.