Central banks had a significant role in the financial crisis of 2008, and Bitcoin, a decentralized currency, provides one possible solution to the hegemony of the legacy banking system. Some argue that its peer-to-peer technology even has the potential to eliminate the banking system.

However, Bitcoin has several disadvantages, making 100 per cent adoption unlikely. With that, several altcoins aim to improve on what Bitcoin does, so it’s only a matter of time before cryptocurrency takes over.

Let’s take a look at what the future has in store.


How Can Bitcoin Impact Banks?

Banks affect the global financial system through various monetary policies, which allows them to regulate inflation and maintain economic stability. For example, a bank can increase or decrease the supply of currency circulating in the economy. More fiat money circulating means consumers are spending more cash and the economy grows as a result.

However, Bitcoin takes a different approach to currency. Instead, its capped supply will drive up its price as demand increases. Transfers are safe since it uses an advanced validating system called ‘mining’. Each transaction requires multiple validators that are done by computers solving complex calculations. After a validator has successfully solved an equation, they will receive some Bitcoin as a reward.

Furthermore, Bitcoin has the potential to revolutionise, or at least to neutralize the major problems within the financial system. Currently, central banks typically make policies that favour businesses. However, with Bitcoin, banks won’t have the ability to control your money. A decentralized financial system gives power back to the people, letting them decide the prices and overall direction of crypto.

How Does Bitcoin Increase Price?

Bitcoin is a decentralized digital currency that can be sent between users on the peer-to-peer bitcoin network without the need for intermediaries such as banks. Instead, trading the currency, among other factors, drives the price up or down.

In fact, nowadays crypto trading is largely automated by robots. These are automated programs that are more efficient than humans at making profitable orders. Bots work by using conditions set by the user and offer more efficiency, fewer errors, and emotionless trading. It’s estimated that algorithmic trading bots account for 70-80 per cent of the overall crypto trading volume.

The Advantages Of Bitcoin Over Banks

The idea behind Bitcoin was to eliminate centralized control of money from government agencies and ensure secure transactions. Bitcoin has many advantages over financial institutions:

  • User Autonomy

Conventional currencies have multiple risks attached. For example, some banks are vulnerable to bust cycles and even failure. Therefore, you are not fully in control of your money, especially if the system fails. Bitcoin promises user autonomy, which means crypto owners always have access to their funds.

  • Anonymity

Banks require your personal details such as a home address, name, and date of birth, among other things. On the other hand, under certain trading conditions, Bitcoin doesn’t require divulging personal information, which means anyone with an internet connection can own the currency. Complete anonymity can be difficult, though, since all transactions can be traced back to wallet addresses.

  • Transactions

Bitcoin uses a peer-to-peer payment system that lets users transfer funds from anywhere in the world. This means fees are much lower with crypto when sending money internationally. The only negative with Bitcoin is that there is a fixed minimum amount that you can send.

Also, transactions are secure, making it more difficult for thieves to steal your money. When the blockchain detects malicious activity, it splits and continues to process transactions on the legitimate chain.

  • Accessibility

Bitcoin users can send and receive coins anonymously from any device with a connection, providing a certain level of convenience as long as you have an internet connection. Also, purchases don’t require third-party systems like banks, meaning you’ll cut out the middle man and potentially save money on fees.

Disadvantages Of Bitcoin

When Bitcoin was first introduced in 2009, it was revolutionary. However, altcoins have emerged in the past few years, expanding the technology and taking it in new directions. While Bitcoin provides multiple advantages over banks, it does have multiple weaknesses.

  • Transactions Are Irreversible

Another negative of Bitcoin is that you can’t cancel transactions. Therefore, if you send Bitcoin to the wrong address, it’s lost forever. The transaction is irreversible, and no third-party institute can amend the situation.

  • Slow Transfer Speed

When Bitcoin was first released in 2009, it was a new and exciting technology. However, when compared to other coins today, the speed is comparatively slow. Therefore, Bitcoin is seen by some as a medium of exchange and store of value like gold instead of a legitimate currency since there are far better options currently.

  • Limited Use

Although the cryptocurrency market is growing at a fast rate, the use of Bitcoin is limited. Adoption is key for the success of Bitcoin, but financial institutes are actively trying to implement policies to prevent this from happening.

However, large companies accept Bitcoin as payment, such as Microsoft, PayPal, Whole Foods, and Newegg. These and other brands are leading the charge and making crypto more accessible for consumers.

Summary

To conclude, Bitcoin has been a hot topic in the financial world because it aims to disrupt the banking system.

Governments have become fearful of Bitcoin because it is decentralized, which means they won’t have control over the currency.

Bitcoin has huge potential and will grow year by year. Therefore investing in crypto may sound sensible, since we are still in the early days of Bitcoin.