Banks Could Go Away! ? !
So I am sure you have heard of Bitcoin, Cryptocurrency and blockchain. These new technologies are touted to remove the need for a “Trusted Third Party” (aka Banks) when dealing with money. OK don’t close your checking and savings account we are not talking next year or anything.
But just how might this play out? Could banks and banking (40% or more of the GNP) go away as we know them today? What happed to travel agents when the internet became popular, news papers, retail, they all have been radically transformed by the democratization of information, now we are looking at the democratization of money.
To understand how this might happen let’s look a little closer at the new technology and fire up our creative imagination.
Public Blockchain – Global distributed secure ledger no third party required. Bitcoin (probably others to follow). This is where the money lives. It has been called “The internet of Money” and “Programmable money”.
How is it programmable and why does that matter? Because of its digital nature the blockchain has programs that determine how it works, keeps you money safe, allows you to transfer you money to someone else. With Bitcoin we have a programming language called bitcoin script. With others like Ethereum (another cryptocurrency / blockchain) we have Solidity. And a string of combinations and flavors that will be secure and robust.
These languages allow users to set up rules about how your money should behave. With online banking you can tell the bank to pay $300 to your electric supplier on the 15th of the month. With blockchain programming you create similar rules commonly referred to as “Smart Contracts” They are only smart because you tell them what to do and they follow your orders or program.
Now imagine you’re a retailer you have a brick and mortar store, with smart contract tags on your merchandise. I can scan the tag with my phone and it tells me everything I want to know about the product. It also offers me the option of paying for the object with cryptocurrency (Bitcoin or some other) and walking out of the store without ever speaking to anyone.
Unlike a credit card where a number of parties get involved to clear and process the transaction, Bitcoin needs none of these. I pay, the merchant get’s their payment in a matter of moments rather than days, we are done! No Bank! No ACH, No SWIFT, No hassle. Ahhh you say but what if something goes wrong? The bank will step in on my credit card purchase and make me Whole! OK there is nothing to say that this same logic could easily be written into the contract on the smart contract tag I scanned with my smart phone. Still no bank!
But 40+ percent of the GNP, if banks go away what are the other disruptions that could impact life as we know it? Well, No more government bailouts, no more hidden transaction fees, no more … wait what will we see in place of that clearly antiquated corrupt institution that has dominated daily life for all of us? What about the ties between banks and government?
Countries and Banks are looking at putting whole national currencies on the blockchain, but that would be different that cryptocurrency would be just like the paper money without the paper. Government controls, banking fees, same meat different gravy. What if instead everyone started using Bitcoin, what would banks do? What could they do to remain meaningful? How do the power dynamics change when government gets taxes after the officials keep their word on deliverables? When transparency is the norm rather than secrecy?
Every time I am in one of these conversations folks are quick to jump to … “They would never let that happen” They, the power people, surely will continue to jockey for control, but what if “They” slip up and like the democracy of information this democracy of money catches on? Never say never, think about it, how do you see it playing out?
- How would economies change?
- How would governments change?
- How would trade change?
- How would poverty change?
Think 5, 10 or 20 years out! Come on you can do it! Leave a comment, really this is what Einstein called a “Thought Experiment” Think it out, it’s more entertaining than television!
Forbes has some great articles on the subject check out
Chris Myers & especially Laura Shin!