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Bitcoins versus Banks Part I


Bitcoins versus Banks

Before even completely understanding the in and out of this new currency system and Bitcoins, we need to know its purpose. Why do we need this new currency system? What is the purpose of its existence? How will it change the world for better than it is today? These are some of the critical questions that need to be answered for you to get a clear idea behind Cryptocurrencies.

If you have a gun, you can rob a bank, but if you have a bank, you can rob everyone. - Bill MaherFor that, let’s understand the problems we face as of today with the existing currency system, which is maintained and controlled by Central Banks and Federal Reserves.

These banks suck. Like, for real! From the expensive transaction fees, skyrocketing credit card interest rates to providing a mere 0.25% rate on your savings account, they are looters.

Fractional Reserve Banking

The worst part of these banks is where we want to focus, which is Fractional Reserve Banking (FRB). It is the biggest Ponzi scheme the world has ever seen, and since it is done by the governments of a nation, it is completely legal.

FRB is where a bank accepts deposits, provides loans and investments but is only required to hold a fraction of its deposit liabilities. This means the money which bank nicely lent you at a very low price actually does not even exist.

Isn’t it strange? Banks are completely capable of legally creating money in the form of credit and lend it out. There is a strong need to outlaw this practice. But the problem is with the bank investors, executives, and government officials. These people do not want to change this system as they directly or indirectly depend on it.

Since these people who are rooting for the banks are powerful enough, it is hard to change the entire system. Hence there is a necessity to create an alternate system.

Before that let’s understand why Banks are so popular?

Despite the growing dissatisfaction with banks and other financial institutions, the reality is that there is no other stable system that works well like how banks do. Banks are in existence from hundreds of years, and the foundations of it are very strong. Technological developments have helped these banks in becoming stronger and also made its usage convenient for the common user. Banks also undertake some of the essential functions which are vital for the smooth functioning of a nation and maintaining a stable economy. They are as follows:


It is extremely important to store your hard-earned money safely. Storing your money in your house is a security risk. Thieves and armed robbers can easily break into your home and steal your money and other assets which you have stored in the form of precious metals etc.

Banks reduce this risk dramatically by providing depositors with the appropriate infrastructure. You can deposit your cash and other assets in the bank and can stop worrying about them not being secure. Because banks have specific measures in place which ensure the safety of the depositors’ funds. For instance, if at all any bank files for bankruptcy, the funds of depositors are secured with something known as depositors insurance. Hence, depositors can secure their funds, important documents, and valuable assets like jewelry in the banks.

Managing Transaction Details and Record Keeping

It is essential for every individual. It is necessary for a person to know how much money he has and how much he can spend. People working multiple jobs will have very little time for themselves, and record-keeping can become an extra burden for them. Tracking an individual’s finances manually is also a tedious task. To solve this problem, banks provide these services for you to track your expenses. Banks also track your savings, and income and all of the transactions you make are recorded in their systems.

Easy Access to Cash is also one of the crucial services provided by banks. If not for the ATM services provided by the banks, imagine how difficult it would be for us to go to the banks in its working hours, and withdraw cash for our daily necessities. Also, the entire banking network is global. You can go to any country in the world and exchange currencies to spend as you like only because of this banking network.

Other than this, there are a lot of macro-economic functions that the banks undertake like controlling inflation and providing loans for interest rates, but we hope you got the gist.

Now let’s understand why people are unsatisfied with banks!

Conventional banking services do lack in a lot of areas. This is resulting in growing discontent among its users. Some of the reason are:

Regulation and Restrictions

Regulation and Restrictions in withdrawing your own money is one of the major complaints people have with the banks. It doesn’t matter; however rich you are, you will have to adhere to bank rules and can only withdraw according to the limits they set. There are daily, and monthly withdrawal limits banks set for its users.

For instance, if you have some emergency and willing to withdraw $10k, it is not allowed because of these limits. On top of that FBI and IRS are supposed to be alerted by the banks if a single transaction of yours exceeds $10k. It is also ironic that the banks accept your deposits instantly no matter however large they are but are often reluctant to give back the same funds in an instant too.

Cost of transactions

The cost of transactions that banks impose sometimes can be pretty outrageous. Along with that, a lot of other charges like maintenance fees, transfer fees, ATM charges, overdraft fees, and so much more. All of these combined sums up an amount that cannot be easily neglected. Bank customers pay thousands of dollars a year in just bank fees alone.

Human Errors

Human errors are another reason why people are unsatisfied with banks. All the existing banks are controlled by humans. Since humans aren’t perfect, a lot of errors in transactions occur. Even though they do not occur very often, we would have heard or experienced a lot of instances where this happened.

The Cryptocurrency system and Bitcoins we were talking about, solve almost all of these problems and more. Let’s see how in our next article.



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