Future of banks
Physical coins and notes will soon be replaced with cryptocurrency. A currency not controlled by banks or governments, but what will this mean for the banks that we know? Will the cease to exist? Or will they adopt the cryptocurrency? Some of us believe that banks are history once these currencies get into gear.
What are the opportunities and dangers of these currencies?
Bitcoins are not the first form of cryptocurrency, but so far is the most valuable and well known of the bunch. The basis of this system consists of a huge public ledger in which special software updates all transactions automatically. A set of accounts present on computers form part of the network and makes this system work. Transactions are recorded into a distributed, replicated public database known as the blockchain, with consensus achieved by a proof-of-work system called "mining". The protocol was designed in 2008 and released in 2009 as open source software by "Satoshi Nakamoto", the name or pseudonym of the original developer/developer group. Since its release Bitcoin has grown immensely and has a result there are thousands of accounts nowadays, this causes the system to add a new block to the accounts six time an hour and these block together form a chain.
With this block chain technology each computer has to approve a new payment, otherwise any transaction that is not correct will be blocked preventing money from leaving the account in the first place, this makes the human check factor redundant, removing the need for a human supervisor to check transactions and even though all the transactions are public and can be checked they are still anonymous, thus giving privacy to the user. A user can only make a payment with bitcoin if the user has the unique digital signature created by this user, a password per say.
The bank as an intermediary
Because of this automated system, intermediaries are excluded, this includes banks. Since people place their full trust in this technology, a need for a centralized issuing institution is removed also removing the need for unnecessary charges and fees that banks love. But these anonymous transfers raise other issues is the area of security and legislation, should drug dealers be able to make deals and not be traced? Or should terrorists be able to buy weapons and not be able to find out who is giving them financial support?
Cryptocurrency and the technology
Block chain is not Bitcoin, but Bitcoin is block chain. A virtual currency is, in fact, no more than an application of the block chain. In practice, the block chain is making many other applications possible as well. One promising development for example is 'smart contracts'.
The coin and the technology
Bitcoins are one of these promising developments. Steenbergen: 'We often use the term bitcoin to describe both the currency and the technology behind it, the block chain. The block chain technology is however completely separate from the bitcoin. A virtual currency is in fact no more than an application of the block chain. In practice, the block chain is making many other applications possible as well. One promising development for example is 'smart contracts'. The check processes can be operated much faster, more efficiently and more intelligently if you can embed them in a block chain. All the checks are then made fully automatically.
A great opportunity
Instead of today’s payments system in which people play a big role, there will be a fully automated system based on a smart mathematical model that makes transactions checkable and indisputable. Whether cryptocurrency will be the only form of payment in the future is anyone's guess. We are seeing only the beginning of a new phenomenon that be compared to the mid-1990s when the Internet took off. There are more and more user-friendly applications still to come. We see this as more of an opportunity than a threat. For now, paper money and coinage will continue to exist as normal. I do not see this disappearing. Cryptocurrency will exist alongside the other forms of money we are familiar with.