Banks have been around for hundreds of years

The banking system offers many services that include money storage, payment processing, loans etc. Since the economic crisis of 2007 and 2008, consumers have been skeptical of the traditional banking system. Many believed banks to be opaque and dishonest about their money assets and lost trust for a centralized place of storage. As a result, Bitcoin was developed in an attempt to act as a decentralized currency. Today many consumers are substituting away from traditional banks and prefer to use Bitcoin.

Blockchain technology

Although Bitcoin is far from perfect, it aims to solve real world problems via blockchain technology. The community as a whole must validate the transaction via hashing power. Each block or transaction, is updated and linked in a chain-like fashion. In order to hack the blockchain, each block would have to be hacked in order to reach the most updated block. Not only is the system secure, but each transaction is publicly recorded on an open ledger. This ensures transparency, safety, and allows consumers to have control of their funds.

Market capitalization and growth

Since inception, Bitcoin’s current market capitalization is a whopping 160 billion dollars and has been as high as 320 billion dollars. With its current market capitalization that puts it right next to big name companies like Disney, and International Business Machines Company. At bitcoins current price of just under $10,000, it has seen a price increase of 142,857% since inception. This poses a huge question, are consumers really substituting away from the traditional banking? And at what rate?

Banks fear Bitcoin

Evelyn Cheng, a staff writer for CNBC, said this in her article concerning Bitcoin and Bank of America’s 10-k annual filing. "Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies," Bank of America said in a regulatory filing. The company added that widespread adoption of new technologies in financial services, including cryptocurrencies, "could require substantial expenditures" in order to adapt to evolving industry standards and consumer preferences. The SEC filing also noted that digital currencies limit the bank's ability to track movement of funds and comply with laws such as anti-money laundering regulation.

Gaining attention

It is clear that Bitcoin and cryptocurrencies are becoming a global phenomenon and more widely accepted. Countries like the United States, China, South Korea, Japan, India, and many more are continually holding government meetings to try and understand the use cases of these cryptocurrencies. In a recent SEC meeting, for the U.S., the topic of fundraising was address. In 2017 alone, “New data from fintech analytics provider Autonomous NEXT shows the amount raised via initial coin offerings (ICOs) has surged above $4 billion for the first time.”

Conclusion

Although governments and political figures may have conflicting feelings towards cryptocurrencies such as Bitcoin, the rate at which consumers are adopting this new technology is astronomical. Traditional banking systems face competition from digital currency like Bitcoin, which offer faster international payments, transparency, decentralization, and more. Bitcoin has many developers continuously working on innovative solutions, whereas banks have failed to innovate in recent decades. Bitcoin is still in its infancy and must undergo further development in order to gain the trust of consumers as a currency, however; it is clear that consumers are substituting away from big banks as they adopt this new technology.

Sources

1. Cheng, Evelyn. “Bank of America is worried about the threat of cryptocurrency to its business.” CNBC, CNBC, 23 Feb. 2018, www.cnbc.com/2018/02/23/bank-of-america-worried-about-threat-of-cryptocurrency-to-its-business.html.

2. Chaparro, Frank. “ICO funding soars above $4 billion as US regulators crack down.” Business Insider, Business Insider, 13 Dec. 2017, www.businessinsider.com/ico-funding-soars-above-4-billion-as-us-regulators-crack-down-2017-12.