Bitcoin has gained popularity as an alternative system to the dollar and it has been suggested that thanks to blockchain technology, banks are no longer necessary.
However, is it so simple to replace the traditional banking system with the support of Bitcoin? In this article, we will explore this issue and discuss whether self-custody is the only viable option.
The idea of self-custody as the only viable option
In a world in which all the citizens of the planet decided to use BTC as the only form of money, everything would be decentralized.
The Government would have no power over monetary policy, central banks would cease to exist and there would be no intermediaries of any kind. In this new world, every owner would be his own custodian. Self-custody would be the absolute winner.
However, being your own bank has its risks and limitations. Not everything is bad with banks, since having money in a bank also has its advantages.
What is the midpoint?
In the current system, self-custody is an option, but it is not the only one. Banks, despite being the bad guys in many narratives, play a fundamental role in the modern economy.
Since their creation, they have evolved and adapted their functions to become increasingly important institutions in today’s financial world.
Banks are places where those who need money and those who have it available meet. Thus, savers can benefit from being a bank’s customer, instead of leaving the money unused.
At the same time, people and companies can access resources to consume or invest. In this way, money moves and the economy grows.
Credit and its disadvantages
Credit is “active” and “passive” at the same time. It is active for the lender and at the same time it is passive for the borrower. If one person lends money to another, the risk of default is always present. And that risk exists in dollars, gold or BTC.
Idealizing self-custody or hard currencies is a deeply rooted custom among the most conservative political currents.
However, these currents, to a large extent, ignore, in the midst of ideological passions, many of the lessons learned from history.
Self-custody or hard currencies also have their great disadvantages. The financial panics of the late 19th century and early 20th century bear witness to these downsides.
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