A decentralised cryptocurrency is a system of peer-to-peer money used to transfer wealth or ownership of any other commodity without the need of a third party, such as a bank. Cryptocurrency promises to reinvent the current notion of money and numerous other applications. There are many benefits to a decentralised cryptocurrency, such as borderless payments which allow for seamless and low-cost international transactions. It is also attractive to the ‘unbanked’ population since the only requirement is to obtain and use a wallet. All they need is an internet connection and a device.
With Bitcoin and other cryptocurrencies, you own what you have. It might feel like we already have access to our money digitally, after all, we receive salaries and payments into our bank accounts and make transfers online. But in fact, we don't own the money in our bank accounts. The bank owns the money and when you make a transaction online, you are essentially asking permission from the bank for them to make the transaction for you.
Let that sink in: You’re asking for permission to use your own money.
Bitcoin, on the other hand, is permissionless in that when you make a payment or transaction, you are the one authorizing it, not a third party.
Many people share a misguided view that Bitcoin and cryptocurrency is a phenomenon that will destroy central banking and banks. It will certainly change the way governments think about money, placing a constraint on how much money they can produce, but some would argue that they could complement each other through regulation in order to grow in value.
The vision that many others have is to bring Bitcoin to more people and the unbanked population. It is unlikely that the notion of being your own bank will exclude businesses and banks as we will most likely still need them. Issuing loans or investing capital are still banking territory, but if they can do it with Bitcoin, with sound money, then the whole system can strengthen significantly. Bitcoin is ‘sound money’ in that it's very difficult to change as there is no central choke-point or place that can determine the policy. The way that people use and think about money is evolving and the existing financial system (which includes banks, central and otherwise) will need to adapt to the needs of its customers.
Gareth Cliff, and Lorien Gamaroff, founder/CEO of Bankmoon and co-founder/CEO of Centbee, discuss the notion of ‘being your own bank’ and the role governments and central banks will play in the emergence of Bitcoin and other cryptocurrencies.
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