2021-02-02 FT - Bitcoin cannot replace the banks

[acquafredda]

For several hours on Wednesday, the digital services the US Federal Reserve uses to clear transfers between banks were offline due to an “operational error”. Bitcoin holders crowed about the reliability of their payments network, distributed among all the computers mining coins. Zac Prince, chief executive of BlockFi, a crypto lending company, showed more restraint, pointing out on Twitter merely that payments over crypto “continue to operate normally”.

https://www.ft.com/content/1ce89fb7-f0f4-4dcc-994d-713745c4e16a

Bold one boy! Buckle up guys for this one!
I maybe agree though as it is true that Bitcoin cannot replace the banks! It cannot replace something that will be rendered useless moving forward! I cannot wait for the days when banks will have to open LN channels with their wealthy clients if they want to still do some business.

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[Kakmakr]

Bitcoin was never developed to "replace" Banks or Central Banks... it was developed to serve as an alternative payment network when Banks fail their clients. Let's be honest ...we know Central Banks and governments will never allow Crypto currencies to disrupt them.. but it can help to give people a second option when these other services fail them. 

Even if Crypto currencies become a trend, Central Banks will adapt and they will create their own centralized "GovCoin" to transfer the control from old "Fiat" systems to a government controlled Alt coin. (Something like Ripple) 

[acquafredda]

And in fact they are developing their so-called central bank digital currencies (CDBC) which have nothing to do with something like bitcoin. Not wanting to be disrupted they came up with these new concepts which I do not see very different form the electronic forms of money they let us use everyday.
One would argue that these new forms of money will let common people directly tap into central bank money but I do not believe it or commercial banks can cease to exist.

[Carlton Banks]

highly amusing

we've got past the "it's a scam" stage, and now we're onto the "...but banks are better" stage


the mere fact that any status holder feels the need to defend banks is simply evidence that Bitcoin is gaining traction. For cross-border payments from countries with weak/dying central bank currencies, Bitcoin has already replaced banks

[hv_]

It's like VoIP - it did not replace telecoms

it just makes payments cheaper in compliant way ( not btc )

[Argoo]

No matter how good the cryptocurrency will be, and the banks and the entire banking system will exist as long as the states themselves exist. Now banks will gradually transfer part of their fiat to blockchain technology and create their own digitalized currencies of central banks. Therefore, in the future, there will be fewer such failures in their work. After all, they do not deny that their previously used SWIFT method is outdated. Now the banks will be reorganized and strengthened.
As much as we want it to be different, cryptocurrency will always be with fiat, and not vice versa.

[dansus021]

Bitcoin was never developed to "replace" Banks or Central Banks... it was developed to serve as an alternative payment network when Banks fail their clients. Let's be honest ...we know Central Banks and governments will never allow Crypto currencies to disrupt them.. but it can help to give people a second option when these other services fail them. 

Even if Crypto currencies become a trend, Central Banks will adapt and they will create their own centralized "GovCoin" to transfer the control from old "Fiat" systems to a government controlled Alt coin. (Something like Ripple) 

Total Agreed,  cryptocurrency exist not to replace bank but for alternative payment network and also right now so many bank try work with blockchain system.

and about gov coin even my country  want implemented the crypto system (*indonesia)

[DooMAD]

We should keep things in perspective, though.  There is a small element of truth to the statement that Bitcoin cannot replace the banks.  At least not fully.  Bitcoin isn't debt-based and debt-based systems are ideal for things like mortgages and other sizeable loans.  I suspect that's an area where traditional finance is always going to find a natural advantage.

[Theb]

Need to find an alternative source for reading the article since you need to subscribed in FT in order to read it and I found this one.

One argument in favor of buying and holding bitcoins is that cryptocurrencies will eventually replace banks themselves, as their money transfer and storage services will no longer be needed.

I don't know why until now people are focusing on the storage and transferring segment part of the banks' operation as if this is where their main revenue is coming from when in fact this is just a small portion of their operations. Bank's aside from storing your money as well as transferring them to other bank accounts also do other services such as handing out loans may it be personal or commercial uses as well as do services such as underwriting companies which gives more profit to them compared to what they are doing to your money. Other businesses have competed with the storage/transfer part of the bank such as Paypal yet it didn't destroyed the business of any bank as they aren't really exactly competing to all the services done by a bank at all.

[mindrust]

Bitcoin doesn't go offline but when it gets crowded the fees shoot up. You don't get this with banking. Both have its advantages. People will use whatever that gets the job done. If banks don't allow you to send money overseas or ask too much paperwork, they will use bitcoin. If bitcoin gets too expensive or KYC becomes a problem, then they'll go back to the banks.

[acquafredda]

Bitcoin doesn't go offline but when it gets crowded the fees shoot up. You don't get this with banking. Both have its advantages. People will use whatever that gets the job done. If banks don't allow you to send money overseas or ask too much paperwork, they will use bitcoin. If bitcoin gets too expensive or KYC becomes a problem, then they'll go back to the banks.

https://mempool.space
Bitcoin transactions right now have never been so cheap in weeks. Turning your comment upside down I only want to point out that we all know that with Bitcoin we pay what we want when transacting. Pay as you go, working since 2009. With banks every day is a new different charge and we have to be careful about what we do with our own money.

[mindrust]

Bitcoin doesn't go offline but when it gets crowded the fees shoot up. You don't get this with banking. Both have its advantages. People will use whatever that gets the job done. If banks don't allow you to send money overseas or ask too much paperwork, they will use bitcoin. If bitcoin gets too expensive or KYC becomes a problem, then they'll go back to the banks.

https://mempool.space
Bitcoin transactions right now have never been so cheap in weeks. Turning your comment upside down I only want to point out that we all know that with Bitcoin we pay what we want when transacting. Pay as you go, working since 2009. With banks every day is a new different charge and we have to be careful about what we do with our own money.

I didn't say Bitcoin is always expensive. I said Bitcoin can get expensive when there is big load on the blockchain. Eth suffers from the same problem too. The system doesn't go down completely but you'll have to pay more. You can of course pay whatever you want but if you pay too low on the high season, you'll wait nearly for 10 days before you see your coins back in your wallet again. It happened to me before.

Thanks to bitcoin now banks will have to improve their service quality otherwise they'll lose customers.

[DapanasFruit]

Banks are centralized financial institutions and the government itself has its own central bank and these are very important for the functioning of the national economy where things are stabilized as much as possible. The volatility of Bitcoin is one factor why this is not supposed to be replacing banks. Yes, there are now many banking services that are slowly duplicated by many DeFi platforms and this is good though for now Bitcoin is not a big player in DeFi except for staking. In my view, Bitcoin is supposed to be the currency of the people while the fiat money is the currency of the government. There is no need to be replacing one another, and soon we can see these platforms and systems working hand in hand in a growing marketplace. Now, having said that, banks will be dealing with cryptocurrencies including Bitcoin too all because these banks are going where the money is and when they can sense a good level of demand they know how to make the supply available.

[acquafredda]

Bitcoin doesn't go offline but when it gets crowded the fees shoot up. You don't get this with banking. Both have its advantages. People will use whatever that gets the job done. If banks don't allow you to send money overseas or ask too much paperwork, they will use bitcoin. If bitcoin gets too expensive or KYC becomes a problem, then they'll go back to the banks.

https://mempool.space
Bitcoin transactions right now have never been so cheap in weeks. Turning your comment upside down I only want to point out that we all know that with Bitcoin we pay what we want when transacting. Pay as you go, working since 2009. With banks every day is a new different charge and we have to be careful about what we do with our own money.

I didn't say Bitcoin is always expensive. I said Bitcoin can get expensive when there is big load on the blockchain. Eth suffers from the same problem too. The system doesn't go down completely but you'll have to pay more. You can of course pay whatever you want but if you pay too low on the high season, you'll wait nearly for 10 days before you see your coins back in your wallet again. It happened to me before.

Thanks to bitcoin now banks will have to improve their service quality otherwise they'll lose customers.

Ok.
Thing is that it is about also knowing how to manage UTXOs properly. I noticed huge savings since I switched my UTXOs to segwit native bech32 addresses: I am talking about an average of 45% lower fees on similar transactions with legacy addresses.
The other day I moved something like 350000 sats for a tiny 356sats fee.

[Harlot]

Banks are centralized financial institutions and the government itself has its own central bank and these are very important for the functioning of the national economy where things are stabilized as much as possible. The volatility of Bitcoin is one factor why this is not supposed to be replacing banks. Yes, there are now many banking services that are slowly duplicated by many DeFi platforms and this is good though for now Bitcoin is not a big player in DeFi except for staking. In my view, Bitcoin is supposed to be the currency of the people while the fiat money is the currency of the government. There is no need to be replacing one another, and soon we can see these platforms and systems working hand in hand in a growing marketplace. Now, having said that, banks will be dealing with cryptocurrencies including Bitcoin too all because these banks are going where the money is and when they can sense a good level of demand they know how to make the supply available.

I don't think you need to worry about Bitcoin replacing Banks entirely since it can't literally do so. People are only talking about Bitcoin as a replacement for banks in terms of storing your wealth as well as transferring your money which if ever Bitcoin overtakes the Banks' function on this matter it won't really affect the businesses as well as your own central bank. Remember that banks have other functions as well and I doubt Bitcoin is even competing in these matter, functions such as printing money from the central banks and loans from commercial banks which Bitcoin obviously cannot do.

[bustabitsboy]

The most defining reason that bitcoin will not replace banks is that the world is not ready to move to digital money, and also inconsistency has been noticed in digital finance.

[CR_Anders]

highly amusing

we've got past the "it's a scam" stage, and now we're onto the "...but banks are better" stage


the mere fact that any status holder feels the need to defend banks is simply evidence that Bitcoin is gaining traction. For cross-border payments from countries with weak/dying central bank currencies, Bitcoin has already replaced banks

 Sure, there's transaction efficiencies/benefits etc, but banks' main purpose is borrowing and lending.  How will that be replaced?

[DooMAD]

Sure, there's transaction efficiencies/benefits etc, but banks' main purpose is borrowing and lending.  How will that be replaced?

I'm thinking it's probably going to take another 15 - 20 years before we get a good answer to that one.  Bitcoin has the potential to do many things, but that's not one of its greatest strengths at the moment.  Maybe in future we'll get a new "layer" or sidechain or whatever specialising in that area.  I could be wrong, but I don't see it ever being a function of the base protocol.

[CR_Anders]

Sure, there's transaction efficiencies/benefits etc, but banks' main purpose is borrowing and lending.  How will that be replaced?

I'm thinking it's probably going to take another 15 - 20 years before we get a good answer to that one.  Bitcoin has the potential to do many things, but that's not one of its greatest strengths at the moment.  Maybe in future we'll get a new "layer" or sidechain or whatever specialising in that area.  I could be wrong, but I don't see it ever being a function of the base protocol.

Blockchain technology will be increasingly embedded in a banks way doing business.  Lower costs, increased transparency, better security etc. but in the end, there will still be a bank involved in the process, otherwise how will the housing market operate?

[DooMAD]

Blockchain technology will be increasingly embedded in a banks way doing business.  Lower costs, increased transparency, better security etc.

That remains to be seen.  Assuming they do opt to incorporate blockchain tech into their infrastructure, it's the way in which they implement it that will determine what level of security it offers.  It's not a case of just saying "blockchain is more secure", throwing it into the mix and expecting it to work.  Different blockchains have vastly differing standards of security.  If they're not careful, the banks might even manage to build something less secure than what they currently have.