One of the most powerful concepts, which once understood, will help convince people to begin using cryptocurrency is that you can be your own bank.
Using banks: great for them, terrible for us
Take a moment to think about how ridiculous the voluntary arrangement you have with your bank is. You entrust your hard-earned money with your bank by depositing it with them. Thanks to the fractional reserve system (the biggest scam in human history) your bank holds a small fraction of what you deposit and turns around and lends it out to others who need credit for a massive profit in the form of interest, which you get no cut of.
Your bank also imposes limits on what you can deposit and withdraw for your own “safety”, which can be immensely inconvenient depending on your situation. Other negatives include travel limitations for your “safety” and a host of fees including but not limited to monthly maintenance, overdrafts, international payments, ATM, card replacement, early withdrawal, etc.
Bank runs and capital controls
With all these negatives out of the way, I’d like to focus on the biggest risk and most terrifying possibility for any bank account holder – the “bank run”. A lot of the people i’ve personally talked to about the concept of “be your own bank” seem to be under the impression that bank runs are a thing of the past.
Well-developed central banking systems and deposit insurance have no protections against a bank run. In fact, if all the deposits in U.S. banks were simultaneously requested to be withdrawn, it would take an estimated 20+ years for the U.S. just to print all this digital money that doesn’t actually exist as paper currency.
And for those who may be under the impression that bank runs and capital controls are a thing of the past, you need to think no further back than to the latest 3 examples, all within the past 5 years.
US and other economic superpowers not immune
It’s important to note that more developed countries like the U.S. are in no way immune to this. The fact of the matter stands that when people want physical cash, banks will have a huge problem and they will be absolutely unable to facilitate even a small portion of these withdrawals.
Why is Bitcoin better?
Reviewing all the negatives about using banks sheds a bright light on the stark contrast between using banks and using bitcoin.
Bitcoin shares none of the negatives of bank accounts and at the same time incentivizes users much better to “deposit” (or hold) bitcoin. Bitcoin provides users with security. Sending and receiving bitcoin is easy and has no limits or extra fees aside from the transaction fees used to compensate miners for securing the network.
Bitcoin’s value is also very attractive in the middle of this low to negative interest rate environment. While interest rates are at historic lows, Bitcoin’s likelihood to continue growing increasing in price over time is much more attractive than interest payments that don’t even match the inflation rate.
Bitcoin is also extremely portable. It’s easy to store on anything from hardware wallets to paper wallets, and even brain wallets. Yes, with the advent of bitcoin we have for the first time in human history the ability to store our wealth in our brains. Simply memorize your private key and hope that you don’t suffer from amnesia down the line (pro-tip: always back up your private key somewhere!).
Power to the people: BYOB (Be Your Own Bank)
Banks are worried about Bitcoin because it’s a serious threat to their current power structure. For a number of reasons, Bitcoin and other cryptocurrencies could make them entirely obsolete. Since Bitcoin has no liabilities or debts associated with it, it’s truly yours when you hold it. This type of asset is known as a “bearer instrument”.
There can never be a run on the “bitcoin bank”. Therefore, the biggest risk (a bank run – which is highly likely to happen again) is entirely absent from bitcoin. This is a huge reason that Bitcoin is superior. This is also why you should seriously consider BYOB’ing with Bitcoin and cryptocurrency. Be Your Own Bank!
Printing your own money is optional
Another major factor in favor of being your own bank with crypto is the ability to “print” (otherwise known as “mine”) your own coins.
Bitcoin and other major cryptocurrencies have a limited supply and pre-defined parameters for issuing the bitcoin currency which is created through mining. Unlike central banks, where a small centralized group of bankers entirely controls the issuance of the currency, the bitcoin code was written to continue issuing the precious cryptocurrency to miners until 2140.
Although Bitcoin mining is very competitive at this point and requires serious start-up costs, expensive mining equipment, and high energy expenditures, there are many other options for “money printing” in the cryptocurrency world. A couple of these options include GPU mining and holding PoS coins in wallets.
Summing up the benefits of Bitcoin over banks
Bitcoin has all the benefits of banking and more without the risk of capital controls. This is the main reason Bitcoin has grown so much in recent years, and continues siphoning value out of national currencies. All this is being done with Bitcoin’s main use case as a store of value and speculative investment vehicle. It has yet to reach any level of mass adoption to be excited about.
If you ask me, it’s a no-brainer to use Bitcoin and other cryptocurrencies over traditional banks. Either A) you hold your wealth in an institution that might never allow you to withdraw it when you need it the most and lose value in the form of inflation, or B) you hold your wealth in cryptocurrencies and benefit from better incentives and almost certainly increase the value of your holdings in comparison with fiat currency.
The choice is yours. Hold On for Dear Life.