Why Blockchains Of The Banks Won't Take Over
Now that blockchain technology is catching fire and looking to revolutionize technology as we know it, we wonder what actions will be taken to control the growing cryptocurrency industry. Will the governments seek to ban cryptocurrencies or regulate them? If they do choose to regulate, how much regulation will they put in place? These are interesting questions that we simply know.
What about the banking industry who is threatened by the technology? Well, they shit on Bitcoin and praise blockchain, so they'll probably be creating their own blockchains. Unfortunately for them they fail to understand the revolutionary aspects of the technology.
The Big Bankers think they can replicate the success of Bitcoin by adopting the blockchain
The Problem of Control
If we take a look at the blockchain, through the lenses of a computer scientist, we see a very inefficient database. You are basically storing the entire history of all transactions on multiple computers and wasting electricity to verify a new set of transactions. If we are just using the blockchain to store information like in a database, then you are doing a pretty terrible job.
But the blockchain is simple more than just a database. It is decentralized. Thus, you have a network of computers racing to verify the next set of transactions making it very hard to outside parties to corrupt your database. In terms of security, this improves upon a simple database in lots of ways.
But where is that improvement found? It is found in the decentralization provided in the blockchain structure. Because no one person can manipulate the transactions due to the immensity of the network, the system is transparent and anti-corrupt. There is safety in the sheer lack of control.
But banks need and want control to function. With control they can manipulate the rules within a specific currency to correct their mistakes and to retain the power and leverage over their customers. They benefit from being non-transparent and corrupt. When they played with fire and got burned in 2008, they were bailed out with taxpayer dollars because they had control.
So, they will try to take the blockchain from us, but it won't work because they cannot control it. But let's imagine ways they could try it.
Attempts To Dethrone Cryptocurrency
1. Centralized Blockchain
This is essentially a shitty database for the reasons described above. Even if they don't use proof of work, it is still a shitty database that store values. They have total control of this database and since they are the only ones verifying transactions you could barely call this a blockchain (Sure there would be a chain of blocks, but for what point?). If the bank controls of the nodes doing the verification, you are doing basically the same thing you are doing today, but wasting everyone's time and money.
2. Bank-Controlled Network
How about we create a network between different institutions and create Fiatcoin? Each bank will have their nodes running code and the responsibility is distributed across the network. The first issue with this solution is that it would require massive cooperation between banking institutions which could happen if they feel threatened enough by cryptocurrency stealing customers. But we still lack transparency and while less corruptible, the system is still controlled by a small number of individuals.
But aren't things like Bitcoin controlled by a small number of massive miners? Yes, that is true. But those miners are accountable to their users. The users are free to move to other coins if changes or pushes are made to alter the coin or the blockchain. So miners don't risk it and changes are only ever made when almost everyone agrees to the changes and the changes are available to the public.
Does anybody know how the current banking system works? The whole thing is so opaque that the bankers lost track of their bad moves and crashed the economy of the entire world. Even if we assume that bankers act in good faith, bankers will be able to make changes whenever they please as they control the network. Thus, they lose the transparency aspect of the blockchain that makes it so valuable.
3. Bank Creates Open Blockchain
So, let's say a bank creates it own Altcoin to compete in the market and tries to compete against the other cryptocurrencies in the space. They will obviously pre-mine the coin so they built their value through the coin through selling and marketing it as the "safe and government friendly alternative." They will even make it transparent by making the whole project open-source and allowing new users to set up their own nodes to verify the network.
Unfortunately for the banks, there are a few problems with such thinking. Over time, they will begin to lose control over the network as more and more users join their network
Good list and I agree that there are reasons that traditional banks are reluctant to start using blockchains. But for a good discussion I don't think we need to call them corrupt, there are other reasons that the banks are slow. Many industries have problems adapting to new technology, look at the music industry or automotive. I think the banks know that they need to change but they didn't understand the impact of blockchains and they haven't seen technology as their business, their competence was in understanding the traditional financial system. Know they need new competence.
I didn't mean to call banks corrupt, the point I was trying to make is that banks are corruptible because they are controlled by a small group of people where blockchains as we know them are inherently anti-corrupt as the power over the network is decentralized. It is very hard to corrupt a blockchain where it is comparably much easier to corrupt any institution that utilizes a centralized hierarchical structure--think government, banks, corporations.
Another issue for the banks is that their function is replaceable by blockchain technology. The problem is not that they don't understand the blockchain. I'm sure that each organization has several smart and intelligent people who know how the technology works. It is that the blockchain provides a mechanism that removes the necessity of even needing a bank. I'm sure they will find ways to adapt, but they are in a tough spot.
Couldn't have said it better myself. And @rawdawg knows his shit! 😀👍
I cant believe how slow the banks have been to act... They are sitting and watching a tidal wave coming their way.
By the time they mobilize for war it will be too late.
They could have tried to kill Bitcoin in its infancy, but there is not a lot they can do, but grab some crypto on the cheap and hope that people still use banks even though they won't be entirely necessary anymore.