Will blockchain's success eliminate the need for banks?
Banks act as mediator for validating any transactions that occur in the financial sector. They maintain the ledgers (records of all the transactions) on a centralized platform with which each transaction gets validated before processing. Since the introduction of banks in the world, everyone started trusting it and made banks to play an indispensable role in any financial transactions. Since then banking sector has become the most stabilized one on earth.
The invention of blockchain technology has revolutionized the way humans trust someone. Blockchain acts as the platform with which Bitcoin or any other cryptocurrencies operate. It made peer to peer transactions to be possible without the intervention of middlemen (who authorizes the transactions e.g. banks).
Unlike banks, blockchain maintains the ledgers in a decentralized format. All nodes which voluntarily participates in the blockchain network owns its own copy of the ledger. Each node can validate the transaction with the help of its ledger. These ledgers are immutable, highly synchronous and secured using cryptographic security mechanisms.
Average Nerds on the street versus Bankers
With blockchain technology, any one can become a part of the blockchain and help in processing the transactions. If a node is able to successfully validate and process a transaction (mining) then that node gets rewards in terms of digital currencies like bitcoins. Blockchain technology eases the process of transaction by maintain multiple copies of immutable virtual ledgers in each node rather than maintaining a centralized ledgers.
The need for banks in processing a transaction becomes a question mark after the introduction of cryptocurrencies. With the help of blockchain, an average nerd who owns a computer can compete with the large banks.
To Fear or not to Fear : Blockchain
It is now proven that breaking a blockchain is almost impossible for anyone in this world. Blockchain introduces new level of security and trust to humans for transacting any digital assets. During the initial stages of bitcoin, many people did not trust the way in which it operated. Bitcoins enabled peer to peer financial transactions without the necessity of banks to authorize the transaction.
The success of blockchain ensured that digital currency will eventually be adopted by the mainstream. Bankers will have no role to play in the decentralized blockchain architecture. Many US bankers are already afraid of their future and started exploring the ways to sustain in the financial market. Some banks have gone on to the next level by directly investing in the blockchain technology and providing services to their clients supported by the blockchain.
At the end, it all comes to the choice which people are to make. There are two choices now:
Trusting the banks to authorize any financial transactions.
or
Adopting to the blockchain technology (more simpler, highly secured compared to banks).
If I had to choose from the above two, I would definitely go with blockchain technology. It is this choice which makes the blockchain technology to be the banking sector's nightmare.
Let us know your views in the comments section...
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TECHOSlovia
TECHOSlovia