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Part 1: Traditional Banking model turning obsolete, can Bitcoin and Blockchain turn it around?

Traditionally commercial and custodian banking have been heavily dependent on monetary policies of the country they are operating in. The main source of income for the existing system is majorly vested in investments and services provided to customers. Implementation of these strategies can be through various channels, but majorly sum up to a common end game: generate revenues. But with the economic landscape shifting drastically, the existing banking system has slowly started to transform into a loss stricken one. Let’s look into what has been plaguing the banking system and how can we avert the impending disaster:

Bank routines for revenues:

As already stated, banks have various channels to earn revenues. Major categories include:



Major Banks (both commercial and custodian) acquire money from their customers by operating savings account. As a part of one of the services they offer, they store the money of customers and ensure its safety. Idle money over a period of time leads to devaluation as it means loss of investment opportunities. Hence banks go for viable investments for reaping profits out of the stored money. These investments are dependent on a multiple conditions and at times might not result in profits in a receeding economy.




Banks offer a host of services to customers for which they levy a service charge that would generate revenue. Few of these services include storing money, transfer of money to other stake holders, fixed deposits and storage boxes. For the stored money, banks are able to provide fixed amount of interest in exchange for the right to invest the money in a better way. For transfer and handling of money, they levy service fee and transaction fee that would generate revenue. Fixed deposits and storage boxes also generate revenue in a manner similar to savings accounts. Hence this range of services provides significant revenue for commercial banks.

Monetary policies hampering this model:


The economic dynamics of the world has slowly been shifting towards a detrimental equilibrium that enforces negative monetary policies. Owing to heavy recession and other obstacles, central banks are enforcing negative interest rates that are further hampering the economy of the country. While the negative interest rates would deprive the banks of the investments they earn, it would also halt the commercial banking services.

Even in the long run, these policies would cripple the economy. Irrespective of the time frame, the banking system would take an irreparable hit that would lead to economic downfall.

In the next segment, we see how banks try to combat these adverse conditions and how can disruptive technologies help to reinforce/transform the existing sytem.

Blockchain based assets: Answer to major Global Financial Challenges?

The world economy is undergoing a massive shift owing to the development and applications of disruptive technologies. While these technologies are facing heavy skepticism, some are optimistic about their impact.  United States has been doing fine in the aftermath of 2008’s great recession. But most parts of the world are still feeling the sting of the event. To recover from the same, the Central banks are employing monetary policies that might be not desirable. One such policy is negative interest rates. While such policy might set a dangerous precedent for global economy, it gives an opportunity for alternatives to thrive. Negative interest rate might fuel the growth of cryptographically backed open blockchain assets.

Problems with Negative Interest Rates:

Sweden, Japan and Switzerland are among the countries that are currently imposing negative interest rates. Negative interest rates essentially mean charging users to store money in the bank. This is to stimulate borrowing which would help a suffering economy. This becomes reason for central bank to print more money known as ‘Quantitative Easing’.


This policy would clearly push people to look for alternatives which can be a service that reflects growth rather than contraction. Holding cash would be more lucrative for people in a negative interest rate environment. But this would be difficult due to security and storage issues. This is where Bitcoin and Blockchain can be a savior.

Role of Bitcoin and Blockchain:

Bitcoin and Blockchain are still in the growing stages and looked up to as much sorted alternatives. Their ability to store money and the probable increase in its value owing to its adoption is what makes them great alternatives for the existing system. For this to be effectively formulated, entrepreneurs must be educated about the importance of Bitcoin and open blockchain. This means promoting it as an engine of economic growth and financial inclusion.

Transparency, combined with tools such as programmable agreements, ranks among the most exciting characteristics of open blockchain assets. As such, these assets are expected to be considered highly impactful to the future of the global economy. With further work, existing long term problems like negative interest rates might be mitigated and economy can be reconstructed around these assets.