The simple answer to the question that blockchain technology can replace banking and finance is yes. But before going into the details of blockchain technology, bitcoin or other cryptocurrencies, the methods being used to transfer, then let us discuss currencies and banking history, difference between money and currency, and some other terms which are necessary to understand for blockchain technology. Finally, we will go through a survey whether blockchain technology will replace banking and finance systems or not.
Table of Contents
Difference Between Money And Currency:
In our daily life, there is no difference between money and currency. Neither a layman knows about it, nor does he see any difference between them. But when talking about economic terms, there is a bit difference. The money is anything that can be accepted as payment or settling debts or it can be an act as a store of value. Currency is the money in any form, for example, when money is in circulation and acting as a medium of exchange. We can say that currency is a system of money. It can be different with respect to countries.
Brief History Of Money:
In ancient times, there were no currencies. People were used to trading goods. Later on, the money system was launched for monetary purposes, and used a receipt of stored goods. Anciently shell-money e.g., sea shells or pieces of them were used for exchange goods. Before 800ad, we could find rice as a means of exchange, especially in Japan. In some other countries, grains were also used as money. The teeth of whales called Tambura were used as money in Australia and New Zealand.
There is also considerable evidence for the use of livestock as a means of payment. Bread was used as money around 1000ad in Baghdad. The use of currency notes was started first in China in 700ad. One cannot say something authentic about the launching of the coin system as money but it is obvious that it is an old method that is still in practice. These days, blockchain technology is in trend as a means of exchange.
Brief Introduction Of Banking System:
Since the use of currencies, banking systems have been around. The basic logic of banking systems was to handle the circulating money in a structured manner, so that the money can be as effective as it can. For example, to issue loans to citizens, supporting running businesses, to stabilize the markets, to protect the money of the people, etc. Romans can be called as the founders of banking systems, but then this system was evolved in the whole world. For the last two decades, digital banking has been replacing conventional banking systems.
Difference Between Banking And Finance:
Banking and finance should not be mixed with each other. Finance is a general term used for different businesses like accounting, insurances and different policies, but banking is used for the activities going on in a bank.
Blockchain Technology and Its Features:
Blockchain technology is a system on the basis of which all virtual currencies are running. This system links many computers with each other and allows them to share the data. There are different definitions of blockchain systems. According to Milani Swan, blockchain technology is a public platform for all bitcoin transactions. Florin Glazer says that blockchain technology represents authentic and valid transactions of users. In simple words, it is a public register, and people can reach it in a simple and easy way. All the transactions which have been done in it, remain saved.
According to a dissertation help firm, there are two types of keys that are used; its private key and public key. It is a database that is divided into bits. A copy of all the databases remains saved in every computer using blockchain technology. The data is stored in computers after dividing them into bits. The record in it is known as a block. Every block in the blockchain system has its own unique identity. Whenever a transaction occurs, a block is made and that block is visible to every computer linked to the network, and all other computers save this transaction automatically.
Now if someone deletes the transaction after making it to the other computers will falsify the transactions. In this manner, to make any fake or false transaction, it is necessary that it should be done from at least 51% of the users available on the network, and because of millions of users using this technology, it is impossible that they agree on some specific transaction to make it fake.
Reasons Of Dominance Of Blockchain Technology:
Bitcoin and other virtual currencies use the blockchain system. The primary benefit of this system is that the anonymity and purity remain intact in this system. It is pure because every computer on the network can watch every transaction being done. It is impossible to hide or to keep a secret of any transaction or any deal. On the other hand, there is a firm anonymity because every customer on the network appears in the form of code.
It is nearly impossible to know which code represents which person, and from where he or she is doing this transaction. Moreover, it is also nearly impossible to locate where the amount is sent. In case if a government wants to locate and identify the user, it is very difficult and can happen with the least possibility.
Blockchain technology is basically used for virtual currencies, but this system can be used for other purposes as well, such as making deals, sending messages and information sources. The unique benefit of a blockchain system is that all the users are interconnected with each other and the network does not depend on any user. That is why as long as just two of the users remain on the network, the network cannot be finished. The above mentioned factors enhance the chances that blockchain technology will replace banking and finance in the near future and will prove it more efficient.
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