[blusterXY]

Look past the ICOs and drug sales -- you only notice these because they are salacious and thus reported on. What you aren't noticing are the people who are eliminating financial intermediaries in pretty much every industry that matters, from international shipping to remittances to supply-chain management.

Let me give you one example that might make you reconsider what is coming. In the future, you won't go to the bank to get a mortgage. One reason for this is because banks won't have the capital to lend you anymore because people won't deposit their money there: why accept a 0.5% interest rate on savings when you could be holding a mildly-deflationary token or staking a proof-of-stake security scheme? Or investing in solar power farms....

So what will people do when they want to buy a house? Instead of going to a bank, they will talk to the real estate company that showcases the property, and that company will take a 20% downpayment and then issue a token to collect funds for the rest. You will pay off your mortgage directly to the broker in cash or crypto (and all payments are recorded on the blockchain, along with the purchase contract -- a transparent template so you will know your rights in full) and the funds will be automatically transferred to token holders, who are splitting the savings with you: they get higher interest payments and you get a cheaper mortgage. Win-win. And if people need cash they can sell those tokens on any number of 24/7 decentralized peer-to-peer token exchanges, because who won't buy a token like that at a slightly discount?

The real estate agency will probably also be plugged into a decentralized AirBNB operation and have various other ways to monetize real estate. So if you ever fail to make a payment, they will take responsibility for monetizing the property such that token holders are paid-off in full. Systemic risk is thus split between the real estate company (that issues the tokens and guarantees the ROI) and the token purchasers (who take on the risk of the property company getting liquidated before they redeem the tokens in the event of a foreclosure -- not a big risk since their financials are mostly visible directly on the blockchain and your token is legally backed by the property in any case).

Where are the banks in this? Good question. We don't need them anymore. And this is just one small part of the financial system.

[neilwilson]

"and one reason for this is because banks won't have the capital to lend you because people won't deposit their money there anymore."

That's not how banks work. Banks are factories not warehouses.

Banks create money out of thin air. The loan comes first and that causes the deposit - which is then trapped within the banking system for that denomination until it is used to discharge a bank or government liability in that denomination.

As the Bank of England explains: http://www.bankofengland.co.uk/publications/Documents/quarte...

[blusterXY]

> Banks create money out of thin air.

The ability of banks to leverage deposits into fractional debt is restricted by the size of their deposit base and the need for fiat assets to earn competitive rates of return. This is not a "one way street".

Once people start shifting capital to crypto, banks will sell assets to cover withdrawals, and the cycle to which you refer starts to spin in reverse as the worsening terms-of-trade for fiat/crypto exchanges triggers a fall in the real value of assets in terms of fiat. In short, we are going to get more inflation as crypto spreads because there is less stuff being sold for fiat and more stuff being sold for crypto or held because people don't want to trade it for something likely to lose value.

At that point banks will have to raise interest rates to ensure they are not lending at a loss. Higher rates will weaken borrowing and push more borrowers into bankruptcy, at which point your expansionary cycle reverses until enough loans are written-off and the debt overhang is reduced and/or inflation eats up the implicit increase in the money supply relative to actual underlying GDP.