Despite the massive fluctuations in the price of bitcoin and the volatility that the crypto market features, they are more popular than ever. Gradually, more people are accepting blockchain-based digital currencies. This also raises the question: are cryptocurrencies and blockchain prepared to replace established banking and financial systems?
The short answer is yes, decentralized finance (DeFi) can replace banks and conventional financial systems.
Cryptocurrency may readily replace cash as a store of wealth, medium of trade, and unit of account. Decentralized blockchain-based solutions can replace banks by providing faster transactions, increased security, lower fees, and smart contracts. We can currently lend or borrow money, raise cash for projects, and transfer funds through DeFi. And it’s only the beginning. Many people believe that a more efficient and scalable decentralized economy may quickly replace banking and finance. Will it happen?
The Current Scenario of the Traditional Banking Sector
The world’s most powerful institutions are banks and governments. It may be irrational to assume they will sit back and watch as bitcoin and blockchain take their place. Taxes must be paid, and the state must receive its share. At this stage, practically all world powers have explored issuing a digital version of their currency through their central banks, primarily to discourage Bitcoin and crypto from getting too much steam.
The new reality may be that centralized authorities will use blockchain technology to avert extinction. Nonetheless, many central banks are uncertain as to what they can offer, but it’s clear that they are diametrically opposed to Bitcoin’s basic idea of providing a decentralized and anonymous way of doing transactions.
To Perish or Join DeFi?
To compete with DeFi systems, central bank digital currencies would need to provide many of the same benefits as cryptocurrencies. It may be necessary for central banks to let commercial banks battle for themselves to see where they can stand.
Corporate banks and financial institutions must evolve to give their customers more value. The truth is that as the general public grows more educated about cryptocurrency and decentralization, they see more advantages in the future of money and the internet.
To prevent being replaced, the option would be to outright ban crypto, although that is highly doubtful. The public favors innovation, and large corporations such as PayPal have pioneered a potentially irreversible acceptance of the digital currency.
The general public realizes that cryptocurrency extends far beyond Bitcoin and that blockchain and DeFi have many broader applications. The will of the public always triumphs, and what people always want is greater ease and better solutions to their issues.