How Blockchains Like Hive Are Replacing The Banking System

in #hive-1679222 years ago

The banks are under attack. This is something they realize and are trying to adapt. Unfortunately, the utility they provide is starting to be duplicated.

In this article we will delve into how blockchains like Hive are starting to make the banks completely obsolete.

Most people take for granted what is in front of them. They rarely look below the surface to understand what is really taking place. For this reason, they miss what is happening, even as it start to unfold.

Nowhere is this more accurate than with banking. When it comes to money, we simply take things as they are. It is presumed that what we believe is true while the entities that were always there are necessary.

As we will show, the introduction of Bitcoin change a lot of things. Since that time, technological evolution has made it even more clear: the banks are cooked.

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Money

What is money? We think we know what it is but do we really?

Certainly, we can head to the Internet and get a bunch of definitions. These will come from economists, financial wizards, or agenda on Twitter. Either way, most miss the point.

Before getting to money, it is best to uncover what the monetary system is. Here again, few think about something they utilize daily and what it is.

In short the monetary system is the combination of accounting and communications. We have a global communications network that is utilized to send money all over the world. This is done because money resides on ledgers. Thus, transferring is really altering the different account balances.

This is what banks do.

Consider when you log onto your account. There is where you see the money. What happens when you pay a bill? Obviously there are a lot of steps involved but the bottom line is the money moves from your account to that of another.

In other words, the ledger is altered.

Hence, money is also not what most think. It is not currency as such. Instead, it is a ledger system made up of balance sheets.

Here again, this is where banks come in. Not only do the commercial banks create most of the national currency through lending, they also generate a vast amount of "shadow" money.

It got so bad that people like Alan Greenspan, as Chair of the Fed, admitted in an FOMC meeting that it could not even find money anymore.

The problem is that we cannot extract from our statistical database what is true
money conceptually, either in the transactions mode or the store-of-value mode. One of the reasons, obviously, is that the proliferation of products has been so extraordinary that the true underlying mix of money in our money and near money data is continuously changing. As a consequence, while of necessity it must be the case at the end of the day that inflation has to be a monetary phenomenon, a decision to base policy on measures of money presupposes that we can locate money. And that has become an increasingly dubious proposition.

[June 2000 FOMC Meeting P. 82]

The reason why the Fed, 22 years ago, had lost what money was comes from the fact the international banking system created an assortment of financial products that it used as money. Most of this operated outside any of the usual fiat currencies people have come to know.

Blockchain Enters The Picture

What is a blockchain?

At its core, it is really a node network that maintains a decentralized ledger of transactions. This is one of the revolutionary aspects of Bitcoin.

However, if we step back, isn't that what we just said our monetary system is? We combine accounting (ledger) with communications (computer network). That is blockchain.

This is one of the biggest problems banks have. Their relevance came, in large part, from the control of the master ledger. They were responsible for determining the balances of each account and adjusting as necessary.

With cryptocurrency, blockchain handles this without the need for third parties. The evolution of triple-entry accounting means we have entries that are debits and credits as well as being applied to the blockchain.

This fundamental premise is revolutionary. It also cannot be stopped.

Consider what we experience daily on Hive. Each time we open our wallets, there is our balance. We also can use a block explorer like Hiveblocks and see all the transactions that occurred. Of course, there are no humans involved in the process.

Hive, like all databases of this nature use distributed ledger technology (DLT). That means each transaction is added (in blocks) to the software that is run on over 100 computers globally. All carry the same information and sync up each time a new block is added.

Ultimately, this is where we arrive at consensus. The protocols within the different blockchains are used to determine what is where.

This is how the foundation of the monetary system is being altered. It isn't changing so much in what is done, only who is doing it.

With the present system, that consensus is the responsibility of the banks. In cryptocurrency, this falls to the chains themselves.

The Creation Of Money

Many want to allude to the thousands of different cryptocurrencies that were created and how they are worthless. It is true that many are just that. It does not come, however, from the addition of another cryptocurrency. Instead, it simply is the lack of utility. Without use, there is no value.

The international banking system uses all kinds of assets as money. Anything on the balance sheet can potentially be collateralized. In that market, that is what money truly is: collateral.

We see the same thing within the world of cryptocurrency. Money is a lot more than just a medium of exchange. In fact, to replace the present system, we need a lot more sophistication. That means getting into the world of derivatives and starting the process of borrowing, lending, and remittance. At the same time, we need to develop markets and exchanges around this.

Naturally, this is where decentralized finance (DeFi) enters the picture. The industry toyed with some of this even in its early stages. As we can see, the bear is clearing out a lot. The challenge is the typical players from Wall Street and Silicon Valley operated like it was business as usual. This is causing a lot of bankruptcies as the leverage is washed away.

For this to take place, smart contract capability is required. This is an area that Hive was traditionally light in. There are, however, a number of project underway that will increase this capability.

When we step back and look at the overall market, we see Bitcoin as a network that cannot be shut down. Nor can it be taken over. The same is likely true for Hive. These two have the decentralized feature to keep going.

After that, is gets questionable. Due to Founders stakes, there could be points of vulnerability. Either way, not everything is going to be hit by regulators. That mean, collectively, the tsunami is underway.

An understanding of the banking system, especially the wholesale end of things, reveals how exposed this industry is. Their role in maintaining the monetary system is no longer required. The alternative that is being created removes the human element while also reducing the transaction fees the banks change. On Hive, if a wallet has enough Resource Credits, there is no fee for the transaction.

Concepts like this are revolutionary and something the banking industry cannot compete with.


If you found this article informative, please give an upvote and rehive.

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the truth is that traditional banking is becoming obsolete in the face of technology and especially #Hive balances are important so always keep them in view

Correct, but to replace the banking system we also need to replace the value that it has in the current scheme of things. All, those assets have to be digitized, to cut it short we still have some major work to do, before the adoption of blockchain becomes more mainstream than it already is.

Certainly we have a lot of work to do. Right now we are in need of a lot more infrastructure upon which the applications can be built.

Fortunately the foundation is in place.

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Because this is such an awesome post, here is a BBH Tip for you. . Keep up the fantastic work

Hive's ecosystem is pretty good with balancing a stable coin with a cryptocurrency. The added benefit of having the hive-engine to help balance out HBD while providing more liquidity helps stabilize Hive's economy.

The banking system is in trouble and no doubt will try and weasel their way out of this by staying relevant. It is only a matter of time as we shall see the likes of Visa and Mastercard come under pressure later this year and early into the new year. This will be the first shock wave to hit the industry.

They are trying to insert themselves in crypto by being custodians. It is how they hope to retain control.

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Crypto is definitely technology that can change the current system and everything is moving towards the digital realm. CDBCs and online shopping were just the ways they moved it online and I think crypto fits well into that schema.

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Interesting and informative article. I feel that once banks realise that they are in serious danger of becoming dinosaurs in the financial world, they will move heaven and earth to retain their stranglehold on the global markets, and continue to fulfil their legacy of keeping the rich, rich and the poor down at heel. Unfortunately, for them at least, I dont think that future blockchain developments will allow them to do so. The writing is, IMHO, definitely on the wall.

A lot of economics in one post.

All I can say is automation will be the end of the banking system.

That automation lies in the hands of a reliable blockchain.

In fact, the blockchain is a computerized banking system just without staff.

All I can say is automation will be the end of the banking system.

That is what FinTech has done to the banks for near 2 decades.

They use to charge to make stock trades, now they are free since automated.

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Is DLUX still the only group that is working on the smart contract side of things or are there more now that are trying to get it going on Hive?

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SpkNetwork is looking at approaching this. Blocktrades mentioned he is going to take this on I belive. The HAF allows for the creation of a smart contract platform there.

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Very interesting! Lots of hands working the solution then.

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There are, unfortunatley due to the markets, the projects are still in testing phase. But don't worry the change is underway.

Very cool! Thanks for the reply!

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You're welcome. Keep engaging!!!

Very nice analysis, I like how it can be understood even by layman like me.
!HBIT

Thank you. Glad you found it a worthy read.

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Out of all of the options there currently are for DeFi, banking, investing, interest etc. Honestly Hive and HBD I feel are the most secure. It's because you remain FULLY in control of your assets while still being able to delegate them out.

I wonder if at some point we will see a delegation on HBD or how that would even work? Hive and HBD for sure offer some amazing options but it still suffers from real exposure and programs that use it.

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I am not sure there is reason to delegate HBD. What are the properties that you would convey to another?

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Very informative as usual.

Is there a Hive card? Should there be a Hive card?

When I need to liquidate, I have been lucky in Canada. I have a Shakepay account. I can swap crypto to bitcoin and send it to my shakepay account.

Then either use my virtual visa or withdraw to bank. The first step is best as I by pass the banking system.

How about a Hive debt machine for merchants? A Hive virtual card, QR code to accept payments in HBD.

Just some thoughts off the top of my head.

!BBH

!CTP

In building a new financial world, these traditional banking systems must give way to the new dispensation of blockchain technology which focuses on decentralization.

The more bridges between various blockchains, gift card reward systems, and actual payment systems that come into being the less important it is to traditionally bank. We're not there yet, but it is most definitely on the horizon.

All crypto needs is mass accepted methods of using cryptocurrency as payment currencies and it's... bye-bye banking system. Sooner than later we will have crypto companies issuing insurance and so on. They either jump on this train or they'll be left behind.

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Payment systems are very small in terms of overall financial and monetary activity.

Cryptocurrency needs to enter the other markets since there is where hundreds of trillions of dollars are found.

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We are going to have to see better DeFi sustaining projects to stand a chance of taking on the banks, I trust we are going to see better products emerge over time. One of the benefits of the current bear market is the purging of unsustainable projects, for blockchain projects to survive a lot is expected than just yields, Hive is well positioned in this area.

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Without a doubt. We are going to see some DeFi projects that really take off and accumulate a ton of capital.

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It's very obvious that the traditional banking system doesn't want to embrace the truth that Blockchain is taking over the service they offer even with a far better service with the openness of everything which has resulted in trust in Blockchain technology. #Decentralization over #centralization .

There is a good reason for the banks to deny the truth about blockchain.

It makes them obsolute.

That is like Blockbuster embracing streaming, which they didnt. And we see how that put them out of business.

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Simple but that's the fact.

Great Post!

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