Can Bitcoin and Cryptocurrency Really Replace Banks?

Bitcoin is still in a bear market, trading at $7,564 with a 24-hour high of $7,689 at time of press, according to WorldCoinIndex. Recent media coverage of the world’s most popular cryptocurrency continues to highlight its volatility, its rate of adoption and its impact on the perception of cryptocurrencies at large.

Bitcoin is in the early adoption phase with a limited number of merchants accepting it as a form of payment. It has several main rivals: Ethereum, a cryptocurrency that is also a platform for smart contracts on the blockchain; Bitcoin Cash, a fork of Bitcoin with a larger block size designed for greater scalability; Ripple, a blockchain payment solution platform with a native cryptocurrency (XRP), which several banks are test piloting; and many other cryptocurrencies that behave like Bitcoin but with lower fees and faster transaction speeds.

Cryptocurrencies have different consensus protocols for verifying transactions but all of them provide enough functionality, either discretely or in concert with one another, to perform banking functions.

As cryptocurrencies emerge into the mainstream, crossing over into e-commerce platforms, donation centers, loyalty points programs, political campaigns and wages, a hybrid system is developing. Banks and multinational corporations are integrating more blockchain technologies, but these developments fundamentally differ from the core mission of the thousands of cryptocurrency projects that are designed to eliminate centralized bodies, giving control of big data and personal data, and ownership of money, back to the people.

Digital currencies developed by banks will flow through private, centralized networks as opposed to a network like Bitcoin, which is public and decentralized. Banks will either use digital ledger technology, like blockchain, to build highly centralized networks to compete vigorously with decentralized networks or die with their slow legacy systems.

They will also focus on security and champion blockchain to create trusted, frictionless environments where disparate parties can confidently come together and use smart contracts to verify identities, confirm payments, manage receipts, vet documents and execute agreements.

But will the banking model best the decentralized model? Will the Millennials who are driving the cryptocurrency movement want to remain cradled in the arms of banks, or will they want to forge their own decentralized paths?

As for cryptocurrencies replacing banks, the technology is there. It is also expanding and improving as developers work to address the needs of future customers who prefer a decentralized future.

Here is a list of banking services and their cryptocurrency counterparts.