Bitcoin vs. Traditional Banking: Examining the Differences and Benefits
Are you torn between Bitcoin vs. traditional banking? This blog post examines the differences and benefits of Bitcoin against conventional banking.
Conventional banking has been integral to the financial systems for years. It has provided regulated and secure means of transferring and storing money. However, Bitcoin has introduced a new system without a central authority. And this has sparked a debate over the differences and benefits of each financial system.
Traditional Banking
Most people argue that a central regulatory authority helps curb criminal activities. However, leakages of official documents have prompted many people to doubt conventional banks. Thus, people doubt traditional banks’ seriousness in implementing anti-money laundering laws. Even worse, dirt money flows into various banks despite their strict regulations.
Many traditional banks lack mechanisms for detecting and handling transactional risks in real-time. Thus, they take time to complete transactions, yet customers face fraud risks. Enhancing security and convenience requires advanced technologies like artificial intelligence, machine learning, and real-time transaction data analysis. Also, several industries must collaborate with banks to discover criminal activities before they happen.
Therefore, conventional banks lag by not investing in the latest technologies and performing essential processes for preventing illegal activities or financial crimes. While regulation is vital in preventing crime, complying with rules doesn’t provide a magic wand. The traditional banking sector should investigate its risks and take appropriate measures to reduce or mitigate them. That way, they can safeguard their customers and enhance their overall experience.
Understanding Bitcoin
Bitcoin’s father, Satoshi Nakamoto, launched it after the 2007/8 financial crisis. The goal was to introduce an alternative monetary system without a central regulatory authority. Initially, people acquired Bitcoin by mining it. Bitcoin mining introduces new digital coins into circulation. Miners generate new tokens by validating Bitcoin transactions, which involves solving cryptographic or mathematical problems.
However, this process became more challenging as more people ventured into Bitcoin mining. Also, the Bitcoin protocol increases the mining difficulty to ensure miners generate all the 21 million coins possible within the stipulated time. As mining becomes more complex, people turn to platforms like Immediate Edge to purchase Bitcoin. Such platforms allow individuals and organizations to buy Bitcoin using fiat money.
Bitcoin differs from conventional banking in several ways. For instance, this cryptocurrency is decentralized, meaning no central authority controls it. Instead, Bitcoin uses blockchain technology to establish a digital ledger via which miners validate and add transactions to the blockchain.
Since its launch, Bitcoin has challenged the conventional banking system as its usage has increased. It allows users to transfer funds globally in real time. Also, some people see it as a digital asset and a tradable commodity. That’s why more people are buying and holding or trading this cryptocurrency.
Why Bitcoin is Better than Traditional Banking
Satoshi Nakamoto introduced Bitcoin to solve some issues affecting the conventional banking system. Therefore, cryptocurrency offers more than conventional banking. Here’s why Bitcoin is better than traditional banking.
Decentralization
No third parties control Bitcoin. Its decentralization reduces human interactions and interferences, making it bias-free. Bitcoin is more reliable and secure since it’s challenging to tamper with, as its transactions use unique numbers to identify users.
Security
Security concerns are rampant with conventional banking systems. However, Bitcoin uses blockchain technology to create a digital ledger that’s challenging for criminals to hack or manipulate. Since the system processes transactions automatically, it reduces the chances of fraudulent activities. Thus, Bitcoin introduces more innovative ways to curb insecurity, making it better than conventional banks.
Smart Contracts
Smart contracts provide instructions for computers to process when the involved parties perform specific functions based on predetermined conditions. These processes have minimal human intervention and are vital since they eliminate corruption. This innovation makes Bitcoin way better than traditional banks through which dirty money flows regardless of the regulations.
Final Word
Bitcoin presents innovation in the financial sector. It has more to offer than traditional banks. Also, it has minimal entry requirements, which helps the unbanked access financial services. Therefore, Bitcoin is better than conventional banking. However, before using it, understanding how Bitcoin works and its risks is vital.
