Despite the massive fluctuations in the price of bitcoin and the volatility that the crypto market has, they are more popular than ever. Gradually, more people are accepting blockchain-based digital currencies. This also raises the question: are cryptocurrencies and blockchain prepared to replace established banking and financial systems?
The short answer is yes, decentralized finance (DeFi) can replace banks and conventional financial systems.
Cryptocurrency can easily replace cash as a store of wealth, medium of trade and unit of account. Decentralized blockchain-based solutions can replace banks by offering faster transactions, increased security, lower fees and smart contracts. We can currently lend or borrow money, raise money for projects and transfer funds through DeFi. And that’s just the beginning. Many believe that a more efficient and scalable decentralized economy can quickly replace banking and finance. Will it happen?
The current scenario of the traditional banking sector
The world’s most powerful institutions are banks and governments. It may be irrational to assume that they will sit back and watch bitcoin and blockchain take their place. Tax must be paid, and the state must get its share. At this stage, virtually every world power has explored issuing a digital version of their currency through their central banks, primarily to counter Bitcoin and crypto from gaining too much steam.
The new reality may be that centralized governments will use blockchain technology to stave off extinction. Nevertheless, many central banks are uncertain about what they can offer, but it is clear that they are diametrically opposed to Bitcoin’s basic idea of providing a decentralized and anonymous way of doing transactions.
Pass or join DeFi?
To compete with DeFi systems, central bank digital currencies will need to provide many of the same benefits as cryptocurrencies. It may be necessary for central banks to let commercial banks fight for themselves to see where they can stand.
Final thoughts
Corporate banks and financial institutions must evolve to provide customers with more value. The truth is that as the general public becomes more educated about cryptocurrency and decentralization, they see more benefits in the future of money and the internet.
To avoid being replaced, the alternative would be to ban crypto, although that is highly questionable. The public favors innovation, and major companies like PayPal have pioneered a potentially irreversible acceptance of the digital currency.
The general public is realizing that cryptocurrency extends far beyond Bitcoin and that blockchain and DeFi have many broader applications. The will of the public always prevails, and what people always want is greater ease and better solutions to their problems.
