The future of banks

[vlago]

Hello everyone,

I just want to point out that I am really excited about bitcoin’s logic. The thing that really sparked my interest was the fact that the banks are finally bypassed. But then taking things a little further I came to a disappointing realization. Let’s just say that Bitcoin reaches its 21M coin limit and it becomes the dominant currency. Since no more money is being created, obviously some people are going to end up with more money than others. But, even more will not have enough money to buy expensive necessities such as cars and houses. This automatically means that the notion of borrowing from those who have more is inevitable. And of course, they will probably lend it out with a small interest for incentive. And why stop there and not promise people a small interest if only they would trust their money to that person/company? (Profit = Loan Interest - Savings Interest). What do we have?…. a new bank!
What I’m trying to say is, why are we putting banks and current fiat currency in the same category? All banks have to do is buy up enough bitcoins and they will continue to do the exact same parasitic job as they did before, but now with bitcoins. Yes, I agree that we won’t have the booms and busts that we see today, but the banks will still be in the picture, correct? 

I’m really hoping for a profound answer to the above or a link in this forum which answers the above scenario.

Thank you.

[vlago]

Anyone... 

[ChazM]

The way I see it, if a bank wants to deal with Bitcoin, it can do so and continue to deal out its $10K loans and 2% interest. Nothing in Bitcoin is stopping banks or governments from putting regulations (you still need to pay taxes to your government with Bitcoin) or rules on how they do business. But the main point I see in Bitcoin is that the money itself can be controlled by you. If you need $10K in Bitcoin to start a business, there will always be someone offering such a service, because in the short term you may not be able to get the capital. A bank ideally is just supposed to be a collection of people(whom you trust) holding your money for you. What difference does it make if it's banks or Joe Blow dealing out the interest?

What Bitcoin would accomplish well in terms of banking is personal finances. With Bitcoin, I wouldn't have to pay the bank $14 every month to do all my transactions off of my debit card, plus the 1.50 - 2 dollar service charge for every ATM/interac machine. I could instead use my phone with data (which I'm already paying for) and control all my money through my personal wallets. With Bitcoin, my money can never be frozen by a bank. I choose how my money works, not my bank.

I'm just not all up on why people think Bitcoin is a bank killer. Banks will still exist in the future, they can still hand out loans and mortgages and other services. but with the advent of decentralized digital money, I can hold $1,000,000 in my pocket if I wanted to and remain inconspicuous. I don't have to pay a bank to hold my duffel bags of paper money that probably doesn't exist until I want it. And when I go to get it, they say "Sorry, but we don't have it right now, there's a 5-day waiting period on orders over $5000" (I went and picked an arbitrary number because why not, it's a bank and they make their own rules.)

[murraypaul]

What Bitcoin would accomplish well in terms of banking is personal finances. With Bitcoin, I wouldn't have to pay the bank $14 every month to do all my transactions off of my debit card, plus the 1.50 - 2 dollar service charge for every ATM/interac machine.

Is that typical for US banks?
In the UK, I don't pay any monthly charges to operate my account, or pay for cash withdrawals.
Sounds like what you need isn't a new form of currency, but a more competitive banking sector.

[ChazM]

Is that typical for US banks?
In the UK, I don't pay any monthly charges to operate my account, or pay for cash withdrawals.
Sounds like what you need isn't a new form of currency, but a more competitive banking sector.

In Canada, I suppose it depends on what banking you're doing and what services you sign up for. I have Overdraft protection at $4 a month, and got my monthly fee lowered to $4. As far as cash withdrawals, I think I have 5 a month (from their ATMs) before I start paying extra for them (of course I could pay a little less for more). I haven't looked at other banks, but I think it's pretty standard around here.

[vlago]

Thank you ChazM for your answer.

I don't have to pay a bank to hold my duffel bags of paper money that probably doesn't exist until I want it. And when I go to get it, they say "Sorry, but we don't have it right now,

I agree that the main reason why they tell you this is due the actual ‘fractional reserve’ mechanics involved which explains why the money is not there. Logically, this will not happen in a Bitcoin world since all the money has to actually exist in order for the money to be loaned out, which is a positive thing to me. But, in your quote:

With Bitcoin, my money can never be frozen by a bank. I choose how my money works, not my bank.

Unfortunately, the moment you trust a bank, THEY ultimately have the final say on what happens to your money. Take the recent example on what happened to Cyprus. The people thought it was their money also until they got robbed a hefty percentage just because the banks decided to. So what guarantees me that this will not happen with bitcoins as well?

As a final stand point and what I was trying to convey in my initial post is that I do not agree with the current model that the banks adopt, since it inherently makes the rich richer and the poor poorer. At the moment, Bitcoin with so many advantages still does not rule out this stratification scenario. My question is, wouldn’t be wise if the community and the developers of bitcoin take this into consideration and come up with a solution to this serious problem, in order to have a more just system in the long run?

[ChazM]

There is no solution to this question. Banks are a service, and they aim to make money just like our friend Joe Blow selling fruits on the roadside. The model that the current banks use is completely out of proportion to their consumers, but there is no way someone can operate a money holding service and not make some kind of profit off of it. It kind of defeats the whole purpose of running a business.

There would be no way to not charge people if you're holding onto their money for them unless you were running this as a side business for free. There would be server charges and the like. The best we can do is minimize those charges (see Bitcoin "service charge").

As far as what seems to be a distributed banking system that you're suggesting, which I'm using to describe some way to allow a business to not have control of your money while also having control of it, the closest thing I can think of is encrypted wallets. Have a server run a wallet service where all the wallets are encrypted all of the time.

But then, one company still has control of all your assets, even if they can't use them.

Bitcoin is a currency, it can't make people rich. Only people's business models can do that. You must figure out which ones will lose you the least money. You are your own free bank. That is what Bitcoin has accomplished. You've got encrypted wallets, use them.

In the end it all boils down to trust. There can be no trust built into Bitcoin, you must do that yourself. If you have an encrypted wallet, no one can spend your bitcoins on you without knowing the password. And if you can't trust yourself, can't trust your bank, who can you trust? The answer is no one.