A typical person likely interacts with their bank (or bank account) at least several times a week. Sometimes we may not even notice when these interactions are happening because they happen so automatically. It could be when our employer pays us through a direct deposit, or we use a debit card to buy a pack of gum. There are also ATM transactions, credit card payments, mortgage and car payments, the list goes on and on. With banks being so integral to our lives, what would it mean if people started deciding en masse to live a life without banks? More so, what would a bank-free future even look like?
A world without banks would be a world without money as we know it. Today, the only way to send (non-cryptocurrency) money to another person electronically is by using a bank. Even when we make in-person electronic purchases, we are still using an intermediary — typically a bank or other similar financial institution. That means a future without banks is a future where we no longer have any use for “money” and have instead moved on to something better.
Cryptocurrency is a logical choice for the next step in the evolution of money. We all know that it doesn’t require an intermediary for any type of transaction or storage. As such, companies that try to offer traditional bank-like services and nothing more will greatly struggle in a world where such services are no longer required and no longer desired.
But will all the cryptocurrencies in use in this hypothetical world be completely decentralized and autonomous systems like Bitcoin or Ethereum, or will governments try to keep their national currencies relevant by transitioning them into their own form of cryptocurrency?
In a world without banks, it’s unlikely that governments will simply give up their national currencies. There is simply too much value at stake for this to happen. As the seemingly inevitable march towards a transition to cryptocurrency continues, it’s safe to bet that a number of forward-thinking countries will start to release their own cryptocurrencies based on and pegged to their national currencies.
While this could allow a government to maintain a better degree of control than if they had chosen a completely open system like Bitcoin, this could stifle innovation and make the currency less attractive in comparison to another national currency that does not suffer from similar restrictions. For example, if Hong Kong releases a cryptocurrency version of the Hong Kong dollar that suffers from no such restrictions or requirements, it could become a popular choice for settling international transactions.
One further development that could arise from the appearance of nationally supported cryptocurrencies is the creation of stable coins that are directly tied to baskets of these assets. These stable coins could act as a way to protect one’s assets from the inflation of any single country, as well as the potential violent upward and downward swings of untethered assets like Bitcoin and Ethereum. As the stable coins could be based on other cryptocurrencies, auditing them could be far more simple and transparent than other cryptocurrencies that claim to be fully backed by an equal reserve of a national currency but are near impossible to audit.
One major improvement in a bankless world could be that workers and employees could choose to receive their salary in cryptocurrency. As cryptocurrency transactions can be nearly instantaneous, it could be completely normal in this hypothetical future to receive one’s pay every day instead of every two weeks or every month.
An employee’s salary payout could be configured in a cryptocurrency wallet with just a few keystrokes and none of the complex red tape that is the bane of many HR departments across the world. The flexibility of a cryptocurrency salary could bring many untold benefits and innovations as the space continues to grow and develop over time.
Borrowing money is a difficult subject to dig into. That’s because it’s landscape is as complex as an organic chemistry textbook. A big reason why it’s become such an unwieldy behemoth is because it relies on an outdated business model that is fast becoming obsolete.
What’s worse, current loans today that require collateral essentially never allow for the use of cryptocurrencies. That means if you hold cryptocurrency, as far as the lender is concerned, you have nothing.
In a bank-free future, this could all change.
Bank loans are typically based on creditworthiness, which is a fancy term for trust. A bank builds a profile about you based on publicly and privately available information and makes a decision as to whether or not they should lend to you.
The system can work for some people, particularly those that are already well-established and fully financially independent. However, the system simply does not work for younger people, recent immigrants, the self-employed, and those who have largely chosen to stay out of the credit system for whatever reason. For example, if you have a good job, pay all your taxes and bills on time, but choose not to have a credit card or other loan products, then you likely have no credit score. That means even though all your behaviors demonstrate trustworthiness, they simply do not exist as far as your typical lender is concerned.
We imagine that in a world without banks, an alternate system will arise that can establish creditworthiness using the power of blockchain. With a blockchain-based system, the entire process could be completely transparent, which is starkly different from the closed and vague systems we have today.
A blockchain-based system would be truly international; your creditworthiness would follow you around the world instead of being left behind if you decide to relocate or immigrate.
And most importantly, a blockchain-based system could be decentralized and immune to hacking attacks such as the one that hit Equifax and revealed the personal information of hundreds of millions of Americans. We think that a blockchain-based credit system will fundamentally change the way that we interact with loans, lenders, and credit.
One final point we like to discuss is that of a simple yet sometimes elusive concept — freedom.
In our world of banks and bankers, the individual is generally trapped into using one type of currency for everything. This puts the individual at great risk in the event of hyperinflation or other economic stresses that occur on a national scale. In a world without banks, everyone will have the power to easily and freely diversify their personal wealth into non-correlated assets using easy and intuitive smartphone apps and websites.
The good news is that the future has already begun, but it is still in its infancy. The bad news is that the average person is still largely unaware of the freedom that they already have access to. But in a world without banks, that freedom will be available far more easily and readily than in today’s world.
This hypothetical future sounds like a place we want to be a part of.
Celsius Network is a democratized interest income and lending platform accessible via a mobile app. Built on the belief that financial services should only do what is in the best interests of the community, Celsius is a modern platform where membership provides access to curated financial services that are not available through traditional financial institutions. Crypto holders can earn interest by transferring their coins to their Celsius Wallet and borrow USD against their crypto collateral at interest rates as low as 4.95% APR.
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