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The Much-Hated Bitcoin is Becoming the Saving Grace for Banks

It is no longer news that traditional financial institutions hate Bitcoin and they’ll do anything to stifle its growth. Bitcoin seeks to decentralize the money supply in the economic landscape and a decentralization of money could make banks obsolete or mostly unnecessary. More so, Bitcoin offers incredibly low transaction costs and the low fees associated with Bitcoin payments makes Bitcoin a better payment alternative to many of the payment solutions that banks offer.

From the foregoing, banks have an ax to grind with Bitcoin and they are fueling the war of fear in order to slow down its adoption. More so, the banks are leveraging their economic and political affiliations to lobby against regulation that would empower Bitcoin as a global currency. Nonetheless, The Guardian reports that banks are now hoarding Bitcoin in order to protect themselves against cyber attacks in the future.

Cyber attacks take a deadly form

On October 21, the U.S. Department of Homeland Security began investigations into a DDoS (distributed denial of service) attack on some popular websites. The DDoS attack was targeted at websites in both the U.S. and Europe and it is one of the strongest DDoS attack in record. The DDoS attack took out popular sites such as Twitter, CNN, Reddit, PayPal, Fox News, Wall Street Journal, and Netflix among others.

The attacks were designed to target Dyn, a firm that provides DNS services to many of the aforementioned websites. Dyn notes that “We began monitoring and mitigating a DDoS [distributed denial-of-service] attack against our Dyn Managed DNS infrastructure shortly after 7:00am ET of Friday”.

Last Friday attacks highlight a worrisome trend in the cybersecurity industry as hackers harvest IoT (Internet of Things) devices to wreak havoc with DDoS attacks.  There are about 7 billion to 19 billion IoT devices; hence, DDoS attacks will only become severe going forward.

The more worrisome trend is that the hackers often request for ransom in order to call of the attacks. Interestingly, the hackers prefer getting paid in Bitcoin because of the anonymity that it provides them.

Banks are now hoarding Bitcoin to mitigate cyber attacks

The Guardian reports that banks have started buying up hoards of Bitcoin, which they plan to use to for ransom payments if they happen to become a victim of DDoS attacks. In reality, paying off the hackers in Bitcoin (or any other currency) makes economic sense for banks because law enforcement agencies are currently incapable of preventing or stopping those kinds of attacks.

Dr Simon Moores, a former technology ambassador for the UK government and chair of the annual international e-Crime Congress observes that, “The police will concede that they don’t have the resources available to deal with this because of the significant growth in the number of attacks.”

Moores also notes that it makes sense for banks to pay off hackers than to risk a DDoS attack. In his words, “Big companies are now starting to worry that an attack is no longer an information security issue, it’s a board and shareholder and customer confidence issue.”

Strangely enough, the same Bitcoin than banks have vilified so much is now turning out to be their saving grace in the face of security challenges. Moore notes that, “From a purely pragmatic perspective, financial institutions are now exploring the need to maintain stocks of bitcoin in the unfortunate event that they themselves become the target of a high-intensity attack, when law enforcement perhaps might not be able to assist them at the speed with which they need to put themselves back in business.”

How Bitcoin is slowly replacing fiat currencies

How Bitcoin is slowly replacing fiat currencies

From its inception in 2009, Bitcoin has been regarded as one of the most versatile payment methods that exist in current times. It goes a long way in solving the many problems associated with moving fiat currency around the world and in the internet age, the digital currency has the potential to be accepted as a universal form of currency.

Though skeptics have long voiced their doubts about Bitcoin ever being adopted wide enough to replace‘real money’, Bitcoin’s 2016 performance has outperformed most asset classes to date. In fact, Bitcoin’s performance since inception has been nothing but stellar.

Bitcoin Performance

Fiat currencies are deemed acceptable if they meet the following criteria. Let us see how Bitcoin fares on these terms.

  • Easy and convenient means of exchange
  • Should serve as a unit of account
  • Act as a viable store of value

On the first criterion


Bitcoin passes this one with flying colors as this is one of the main reasons why it is on its way to mass adoption so quickly. Bitcoin’s influence is gaining steam, due to its easy, low cost peer to peer network.  Anyone can join and use it and there is no authority. From select cafes and restaurants in the developing world to thriving eCommerce giants, many businesses have adopted Bitcoin as a medium of payment. While a major portion of the world is yet to accept adopt Bitcoin, we are tracking its rise.

The second criterion

Bitcoin as a Unit of Account

Would be that the payment medium should serve as a unit of account. This means it has to be used to value goods & services or anything else for that matter. Most currencies have goods valued in its denomination and they have a trading exchange rate that can be used to compare the value of goods across currencies. While the world economy finds its global reserve currency to be the US Dollar, Bitcoin and other digital currencies can serve as a better unit of account on the basis of having uniform value across borders. There is no government intervention when it comes to manipulating it and in today’s internet enabled world, it has the potential to literally become the world’s global reserve currency.

The final criterion


Is that the currency should act as a stable and reliable store of value. Traditionally any asset class can act as a store of value over time but most lack convenience as a universal means of exchange. Bitcoin faces some challenges as well, mostly owing to its high volatility.

Statistically, however, Bitcoin’s high volatility can basically be chalked up to speculation around its potential to disrupt deep rooted industries.  This will eventually be resolved once wider adoption occurs and Bitcoin becomes a way of life.


Owing to the above factors, Bitcoin fits the bill as a strong promising contender for becoming a universal form of currency.