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December 06, 2013, 04:58:44 AM |
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Banks today function with a very basic method for generating profit.
1. The customers profits off of storing their value in the bank, thus generating an interest. For the sake of argument, lets pretend this interest is 5% /year and the inflation of the $ is 3% /year), thus you profit 2% every year off of the amount you've kept in the bank
2. The bank profits off of insurances, where you as a consumer pay a certain amount. For the sake of argument, lets pretend the average customer pays $1000 every year for all insurances. Now, the bank bases their insurance prices off of the calculated statistics of how much an average customer costs the bank through person-based health injury/sickness and material-based injury. So if the average customer pays $1000 /year for insurances, the bank statistically knows they will pay ~$800 (again, for the sake of argument) to cover these insurances for the average Joe.
3. The bank profits off of loans, where you as a customer takes out a loan, and have to pay a certain percentage over your loaned amount. For the sake of argument, lets say this amount if 110% of your loaned amount.
The point here, is that banks follow a very basic formula for how they generate profit. They have to offer the customer advantages to storing their money (other than keeping them safe), otherwise someone else would be offering these services (another bank). - With bitcoin, the banks could not offer loans, as the currency is currently too volatile and unstable. This basically translated to the bank not wanting to hand out loans because of the high risk involved. When you remove the option for the bank to profit off of loans, you have to remove some of the customer profits, otherwise the banks would not make a profit. Very basic 2 -1 = 1 kind of math.
Basically, until bitcoin stabilizes (if ever) there is not safe potential for any bank to deal with bitcoins. The only option i could see for banks to profit off of bitcoin at the moment would be through storage.
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