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Bitcoin has a great potential to promote financial inclusion in the areas where traditional banking fails. It allows an inexpensive and safe way for peer-to-peer transactions. Despite all this, the major advantage that people see in bitcoin is its operability with the blockchain, which has been renowned over the years. Traditional banks are not ready to accept this currency as they are more concerned about the inherent risks rather than the benefits.
As the world is digitized and financial industries are transforming, Bitcoin has captured the imagination of investors worldwide. While traditional banking has served the economic systems, it comes with its limitations. In this article, let’s focus on the points that show how Bitcoin is an alternative to traditional banking.
There are many encrypted digital currencies, such as Bitcoin, Dash, Litecoin, etc. These currencies are decentralized and, unlike traditional ones, cannot be regulated by a third party. Crypto owners operate these coins or funds through digital wallets. The ledger is responsible for ensuring the wallet displays an accurate amount. Also, the transactions get double-checked to confirm that the owner has used its funds.
These currencies are finite, and to create new ones, miners solve a complex mathematical challenge to confirm the transfers and add new ones to the ledger. There are certain currencies like Bitcoin that have a predefined limit of 21 million. All of these are produced once when founded. Miners receive rewards when they confirm a transaction; many currencies have seen their value rise in recent months due to increased awareness around this.
People can also access their cryptocurrency through ATMs, where, with your ordinary currency and phone number, you get a purchase receipt, and the balanced amount is shown in your wallet.
From blockchain to AI, Bitcoin is trending in every manner where the financial market is considered. It is getting this boost when substantial changes are driving the economic hikes. Coming out as a future currency, people are leaning more toward it, but what differences make such a massive shift from traditional banking to Bitcoin?
| Bitcoin-based finance | Traditional banking |
| No intermediaries are involved at any phase of payment. | Banks or financial institutions facilitate all the transactions. |
| Their algorithm determines the Supply of coins and is stored for years to come. | The central bank of respective countries determines supply and can change according to the debt issued. |
| Cross-border payments can be done in a few minutes. | Cross-border payments may take up to a week to get completed. |
| There is no compulsion of KYC/AML for peer-to-peer transactions. | Have to clear a KYC/AML for utilizing banking services. |
| In some cross-border transactions, the charges are a few cents per transfer. | Some banks charge a fixed percent for every transaction and these charges can exceed for international transfers. |
| End-to-end is secured on a blockchain and no one can act as an intermediary as it operates on a pear-to-pear basis. | Traditional banks are prone to security breaches, as third parties are included in the majority of the transactions. |
| Everything is done and completed online, physical presence or storage is not required. | The physical presence of a person who holds the account is compulsory. There are storage requirements too, to hold the currencies. |
| The owner has all the rights to the currency and no one can seize or deny your access to it. | In case of any data alteration, banks hold the right to deny you from your account and seize all the funds. |
Some non-traditional features and inclusivity that crypto provides is the need of the future. It is bridging the gaps where traditional banking services are unavailable. With Bitcoin, everyone can access the financial assistance they are left out of. From market specialists to the common person, everyone is considering Bitcoin a better alternative to traditional banks for specific reasons, such as,
When it comes to Bitcoin, there are easy-to-meet requirements for entry, like a smartphone and the internet. This implies that people who don’t have access to traditional banking services due to financial or geographical constraints can still use crypto to conduct payments. This is useful for people living in remote places like villages where there are no such bank branches, and the people can still use Bitcoin to send and receive funds without traveling a further distance.
Unlike banks, individuals don’t need to keep any minimum balance to operate their wallets. With a Speed wallet, you can transfer from the lowest to the highest amount of your choice. There are no authoritative guidelines to utilize any such Bitcoin wallet; hence, everyone can manage their finances.
Any central authority does not control Bitcoin; it is independent in nature. Its decentralized nature keeps it free from following any of the rules designated for financial institutions. For instance, if a country has a weak economy and unreliable banking system with a history of corruption, then they can opt for Bitcoin to transfer and store the funds.
They will be free from following the government protocol and, without relying on them, can conserve their money and invest it whenever needed. The primary benefit of this is that despite the geographical impact on the economy, people can save their hard-earned money by converting it to digital crypto assets on a global level.
This borderless currency is very advanced and helpful for people who want to send money to their friends and family in a different country and also want to reduce the cost of transactions, making it affordable for low-income individuals and small-scale businesses. Traditional payment operators often charge higher fees for international transactions, which act as a barrier for people living in developing countries.
However, Bitcoin is considered the future of cross-border payments. It does not bind you with such boundaries and facilitates fund transfer at minimal costs, allowing them to send and receive money on global levels. To see as an example, suppose you live in the USA and want to send a payment to your friend in the UK; Bitcoin is way faster and affordable than any wire or money transfer.
In parts of the world where traditional banks are inadequate or non-existent, people face problems with essential financial services like loans, savings accounts, and insurance. You can access these services through decentralized applications(dApps) operating on blockchain networks. With dApps, users can earn interest on their holdings or borrow in fiat using the crypto they own as collateral without needing any traditional medium.
From staking to borrowing, Bitcoin is an asset that assures you have access to credits at any time. Despite the absence or minimal presence of financial institutions, crypto is always reliable for managing your funds and timely access to the same.
Bitcoin is a medium that powers the unbanked citizens to control their money. There are many remote places where banking services have yet to be available. In such conditions, Bitcoin allows you to access your own money. According to a report published by the World Bank around 1.4 billion people don’t have access to essential banking services; they have to transact in cash or choose any illicit transaction method.
With crypto, these people can store and manage their money using a digital wallet through the internet. Without any traditional bank or institution, Bitcoin provides almost all the facilities that you need to simplify your daily operations with funds. One can send, receive, or even trade using this cryptocurrency.
Countries struggling with high inflation rates or unstable economies are not able to provide safe storage of funds owned by their people. Hence, crypto can store fund value for you; these currencies are not bound by any government or financial institution. Their valuation is determined by the supply and demand in the market. This implies that in unstable economic crises, when the market is volatile, Bitcoin will protect the values and savings from inflation.
Bitcoin and other cryptocurrencies are volatile, but their valuation is not affected by the economic turmoil. In hard financial conditions, people can still conduct transactions, and their currency’s value will remain uptight.
Bitcoin promote financial inclusion by providing all the advantages that are lagging with a traditional banking system. However, it is seen as an alternative to conventional banking; to reach its full perspective, government, and financial institutions must work together for a regulatory framework. This will ensure the protection of customers, prevent money laundering, and promote new schemes of innovation. With the right policies and being a part of regulatory measures, Bitcoin will be a more equitable financial system.
Bitcoin allows you to own your funds at lower transaction costs and provides faster settlement than a traditional bank. Along with this, Bitcoin is decentralized, giving you great anonymity, trust, and security.
Bitcoin offers a number of advantages over traditional banking, but there are certain limitations and risks associated with it; hence, it will be hard to predict whether or not it will replace the traditional banking system.
There is no need for any ID verification to operate the funds, and every individual can access the financial services without going through a centralized authority.
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