Would bitcoin change the bank industry?

https://www.ramonmurguia.com/single-post/2017/12/02/Would-bitcoin-change-the-bank-industry

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www.ramonmurguia.com

Ramon Murguia

In order to understand how a technology could have an impact on a business model or a particular company, we first need to understand the basics of that particular technology. Bitcoin has been around since 2009 and is a system that works without a central repository or single administrator. This is something that impact or mitigate the white collar crimes, because there is no owner. The network operates as a peer-to-peer electronic cash system and transactions take place between users directly through the use of cryptography, without an intermediary, it is a consensus network that enables a new type of payment method and a completely digital form of money. Many people call it "cash for the internet".

All transactions with Bitcoins are registered permanently on a ledger called “blockchain”. this ledger is shared around the world, and is publicly-viewable. This means that all transactions are available to be seen, registered and open in the blockchain. Indeed all transactions that ever happened on the blockchain are publicly visible, and looking at transactions on such a blockchain explorer let's you discover what transactions moved the same Bitcoin balance before you received it. While all the transactional information is in the public, the involved parties remain private as they transact under pseudonyms called Bitcoin addresses (i.e. 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2). You could see time, volume, and involved addresses, but don't see the individual's private information. However, through data mining observers may learn that some addresses are under the control of the same entity and might make some guesses about their usage. This becomes a mayor challenge for banks, because they would now have visibility on how they are moving the money around. In fact, how many news related to money laundry have you heard that banks are involved? with this technology they would no longer be able to hide any transactions because all are public. 

All transactions are verified and  kept in the network secure. However, the Bitcoin protocol or lets say "available" is limited to 21 million bitcoins, this means that no more than that amount can ever be created. Moreover, also means that no central bank, individual or government can come along and simply ‘print’ more bitcoins when it might want to. In this sense Bitcoin is likely to grow in value based on this property alone. Lets take a look at the price chart since it started to validate this.

In January 1st 2017 the price of 1 bitcoin was $996.00 usd. today as of Dec 1st has spike up to $11,000 use, that is a growth of 1,000% only in 11 months. What we are seeing is an increase in demand due to the limited available offer in the blockchain. Now, how are owners using this money in order for this to grow, take a look at the chart of the number of transactions per month with Bitcoin.

In 2015, the number of merchants accepting bitcoin exceeded 100,000. Today, many large companies are accepting bitcoins as a legitimate source of funds. Some of the best well company names are: Microsoft to by xbox products online, Expedia.com, WholeFoods, Subway to mention some. Moreover, we are starting to see ATMs for Bitcoins around. A bitcoin ATM is an internet machine that allows a person to exchange bitcoins and cash, in some cases is bidirectional.

Companies now allow their online products to be bought with bitcoins. When we see some of this companies already exploring the technology and using it, seems to be worrisome for banks, mainly  because when you receive bitcoins you would not need to deposit that money again into a bank, you can always keep it as a bitcoin address. As a matter of fact, Bitcoin companies have had difficulty opening traditional bank accounts because lenders have been suspicious of bitcoin's links to illicit activity and have been very outspoken about it. However, now that we know that all transactions are registered and public, we could track down where the money is coming from. To me it seems that banks are scared to deal with bitcoin. 

If we have a currency that has no particular administrator, you can track all transactions, you are regulated by all users, transfer commissions are eliminated, no assist are required since all transactions are online and Bitcoin was born without physical address, nobody can print more money and there for all pricing is tied to offer and demand. Also, once you have a Bitcoin you will never be able to lose that money since the ledger is not in a single server, is all over the internet, making your bitcoin available 24 hrs, make transactions anytime and dispose of your money whenever you want. Seems to me that a lot of struggles are coming to the bank industry in a few years when this currency starts to get serious and massive.