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May 27, 2020

Banking and the Blockchain

ILCOIN Development team

For years now, ever since blockchain technology and cryptocurrency have gained traction, large corporations (particularly banks) have gone out of their way to become involved one way or another in this technology. Some larger companies have even gone as far as calling for banking infrastructure to be applied to blockchain systems as a method of incorporating blockchain technology into modern society. The issues surrounding this are of a major concern to anyone already involved in the sector.

Naturally, anyone in the know with regards to blockchain technology can tell you what a disastrous idea this would be. The last group of people we need at this time getting involved in blockchain circles is large corporations like banks. The issue comes from the original reason why the blockchain was developed to begin with; to create equity between individuals and remove the need for third parties. What has been suggested by bankers and CEOs is a centralized version of the system we know and love with greater surveillance into the transactions being made on a day to day basis.

These being the same people who have caused economic crises in recent years, led us astray through their predatory loaning practices and who keep people in third world areas disenfranchised. These are the people that the blockchain was created to counteract. The system of transactions and communication directly from peer-to-peer exists in its current form to bring greater equality among its users; whether you are a young investor from New York or a property owner in East Africa. Banking, for all its worth, does not add to this concept without its primary objective — regulation — being completely disregarded.

What is being suggested here is a system that recentralizes a project that has grown beyond their control. The idea of trading all cryptocurrency against the dollar is an immediate red flag in this sense and could continue the ongoing discrimination between those at the financial top and those below the poverty line. Is there an inherent need for stable crypto-based economies? Absolutely! Is there also the need for a system of lending and borrowing that works around crypto? For sure. However, there are far better solutions than involving institutions that have created so many issues already. We need to move forwards, not backwards.

A Stable Economy

When we talk about a stable economy in terms of blockchain technology, it would perhaps be better to say, “a blockchain that suits the needs of its users”. What this would require is a system that can deal with high volume interactions at a fast pace and at a low cost. Some people call the blockchain the next step in the development of the internet. For this to become true in the future, we will need a system that can cater to millions of users at any one time.

This is no easy feat, but even as you read this, developers around the world are utilizing their skills to create a system that will bring this into the everyday world. Despite this, it is not enough. The currency connected to this chain will need to be stable, accessible and affordable. Only under these circumstances will the system be able to incentivize wider use among people in the world; especially in poorer countries where access to the internet is limited.

Lending and Borrowing on the Blockchain

Realistically, we are closer to this aspect of blockchain use than we are to the stable economy. That being said, this will be one of the final steps towards an actual move away from banking in the mainstream sense. The system that we currently use on the blockchain is automated and takes out the issues of trust from the equation. This is how we maintain the decentralized aspect of the blockchain. Smart contracts will also play a huge part in creating an atmosphere for safe and fair lending practices on-chain. This is because the nature of smart contracts makes terms of agreement immutable and completes automatically upon the conclusion of the specifics defined in each smart contract. With further development in the field of smart contracts and a fair lending practices system, we could quickly see the potential of lending systems coming to full force within the next couple years. This will create an atmosphere on-chain that can replace banking altogether and give us all the processes currently available from non-blockchain means; removing the third party and allowing us more freedom.

So, from what we have seen, there is no need for banking infrastructure to become involved in blockchain technology. The foundation for a functional and practical system is already in the making. Rather than considering what is being offered from banks, we simply need for the technology itself to evolve to the next step. Many projects across the world are showing great promise for a future which moves closer and closer to equality. However, impetuousness is not the solution, time is.

The whole reason that the blockchain was developed was for this purpose. Common men and women needed a solution to the banking and loaning systems that were taking advantage of a society which was stacked against ordinary people in the first place. Now, we have a solution and people can rest easy knowing that, in just a short time, breakthroughs in peer-to-peer systems will lead the way for a better world. Won’t that be better for everyone? We don’t need bankers and CEOs getting involved and making statements about ‘knowing what’s best’. When they were given the opportunity to show what they knew what was best, and they messed it up for the greater majority of us. It’s the developers’ turns to show us their vision.

Blockchain technology is a multifaceted, complicated and intricate system that gives freedom to its users through innovative technological networks. It is far from perfect, but it is still a very new technology. Soon, there will come a time that will show us the real potential of this technology, and that day will change the world forever.

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