> Why would I pay middlemen (banks) when there is no need to? Also why would I trust them, when there is no need to?
Payments are only relative small function of financial sector. Much more important is to act in credit markets, i.e take deposits and issue loans. How did you think that crypto removes need for fees (interest rate) and trust in those applications?
I see this as a disadvantage of using banks. They act as if you can freely access your money in your account, but actually you can't. That money is loaned out for the most part, and it's a trick that keeps the current system going. But once you have a bank run, reality will kick in on how banks really work.
At least the cryptocurrency that you own is really yours today. The numbers on your bank account are yours some day.
Most people I've spoken with about crypto prefer the way banks work. The idea that losing your keys means losing your money, with no recourse, terrifies them.
So, how would you then like to arrange your mortgage if banks are not allowed as intermediaries managing the credit risk between depositors and yourself?
But I would still as a depositor have the promise from the bank that the bank will give me back my cryptocurrency when I want?
If I do, there is practically zero difference how banks would work with crypto and fiat. And that promise can be used as money just like it can now with fiat. Thus banks would be able to monetarily multiply crypto at will as well.
If not, well, how exactly are you planning to stop me and my bank making such a contract? You know, the bank can pay me some interest on my savings is I let them lend the money forward, so both banks amd my incentive is to allow the lending of my deposit.
In practice, there would be 1 big difference: payments are made in cryptocurrency, not in bank credits. And this difference has an impact on all the rest.
We use bank money now because it's more convenient than paying with gold. But imagine that paying with gold was more convenient and preferred. In that case, we would see money in the bank as an investment, not as a wallet.
Your employer does not wire transfers money to your bank, but to your wallet. He pays you "in gold" so to speak. Same when you go shopping etc. There is no bank involved in transferring money anymore.
If you put money on the bank, you cannot use those credits to pay other people, as you are able to do now. Because people expect "gold", not bank credits.
You are correct that in a cryptocurrency world, banks could still have fractional reserves. But the main difference is that there will be a clear distinction between "real money", which is cryptocurrency, and "bank notes", which are a promise of the bank to pay you cryptocurrency. Right now, you cannot make the distinction between the two.
This is also the reason why they were able to let the gold standard disappear, because nobody would notice. If everyone trades in gold, the gold standard cannot just be abolished.
Basically a cryptocurrency world is a gold standard, where gold is the preferred way of paying.
This would also mean that banks will go back to how they operated when there was no central bank. And even further back than that, because payments are more conveniently made with "gold".
Cryptocurrencies are not a replacement for banks; they are a replacement for gold.
If cryptocurrencies ever become mainstream, banking services will be built on top of them, just as they were originally built on top of gold.
The only thing I can think of that cryptos let you do cheaper than banks is rapid, relatively frictionless funds transfer, so I’ll admit their utility there. But other than that, what banking services do cryptos give you?
Loans no, not at all. Money transfer for coin is extremely inefficient. Volatility makes crypto a terrible place to keep money.
Besides, you're paying for the legal and institutional protection anyway. If crypto made money transfer more efficient, they'd use it and still have the value add of a large institution backing transactions.
I thought we were talking about the hypothetical situation where crypto becomes amazing and not at the current state? Of course, crypto can't replace banks as it is now…
That's only useful as a hedge for ETH. A mortgage where you have to put down 373% of the value of the house in liquid currency as collateral is not competitive in the slightest.
Again, nothing stops you from keeping gold under your bed. The reason people don’t do this is because most people don’t actually need, want, or care about having absolute control over their money. And the probability of your home being robbed is much higher than that of your bank (and the FDIC) becoming insolvent.
Crypto 101: never let anyone have your private key. No-one who religiously followed that rule has ever had their crypto stolen.
Coins go missing from exchanges, which break the basic private key rule. People use exchanges for convenience because as clever as cryptocurrency is, it has no answer to the exchange problem.
The infrastructure of both payments for goods and services, and for storing your assets.
As of now, paying for goods and services with cryptocurrencies is relatively risky; it's hard to get recourse if you're scammed; and the standard credit card infrastructure with chargebacks and fraud protection is comparably more trustworthy.
As of now, storing cryptorcurrencies is risky. And I'm not even talking about the shady brokers/exchanges that can steal or lose their customer's money. You can store it yourself as well as you can - but, as it turns out, most people aren't that good at storing it securely, so all kinds of risks and breaches (e.g. hacking your devices to get access to your secrets) are more common than for bank accounts but, also, the consequences are more severe - if your bank account gets drained in an identity theft attack, very often these funds are recovered or compensated, not so with crypto. So again, the existing financial infrastructure with regulation, FDIC or similar insurance in case of fraud or insolvency, mandated consumer protection in case of scammed credentials - it's more trustworthy than the commonly used processes&procedures&infrastructure of crypto storage.
I don't understand you are talking about theft? like what happens to banks and jewelry stores? like what was happening every day with dollars on far west? and somehow this invalidated the cryptocurrency narrative? how?
In reality most of the exchanges and sites dealing with crypto were (and probably still are) built by absolute amateurs with no checks and balances on their apps from a security perspective. Its scary as hell that people trust those sites with their actual money.
The recent QuadrigaCX fiasco shows this very clearly. The entire exchange (one of the biggest in Canada) was somehow just running on the encrypted laptop of this one guy, and after he suddenly died in December, there is 250 million Canadian Dollars owed to 100k+ customers that nobody can recover, because the guy with the password is dead.
Payments are only relative small function of financial sector. Much more important is to act in credit markets, i.e take deposits and issue loans. How did you think that crypto removes need for fees (interest rate) and trust in those applications?