Decentralized cryptocurrencies have powerful benefits over distributed economic structures, mainly because of their capacity to work and operate without a single stage of error that hackers and poor players can target.
A simple example of this is during holidays. All or almost all local banks are closed during these days. Negligence to provide financial services to people and businesses that may be in sudden need of financial settlement facilities to make the transactions. Whereas, cryptocurrency is always available regardless if its weekend or holiday. By using cryptocurrency wallets, consumers of Bitcoin and other cryptocurrencies can easily transact on a peer-to-peer basis.
The idea of cryptocurrency began as a grassroots movement of individuals who saw the constraints of traditional banking schemes, and how they could be hazardous in terms of defending your cash, privacy, and ease of mind. So they created something that could not be controlled by a single government or a few of the most powerful people, but by all people, a form of payment and exchange that required only access to the internet, no restrictions on geographical borders, no governments, and regulators.
Advantages of Decentralizing the Financial System
Increase Worldwide Access to Financial Services
Decentralizing the financial system could only mean that anyone could access the financial services with the use of internet connection or smartphone.
With the current traditional system, several barriers limit the consumers such as:
Status: Lack of documentation, citizenship, credentials, other requirements, etc.
Wealth: Consumer should have high entry-level funds to access financial services, otherwise the consumer will not be able to access financial services.
Location: Extensive range from operating countries and financial services. In decentralizing, the financial system, a top trader of a business firm would have an equal level of access the same as a farmer in a remote region of India.
Transferring or Sending Funds
Cryptocurrency transactions can settle in a matter of ten minutes to two hours the most before it gets confirmed while on the traditional banking system it would be a case to case basis. It can be transferred instantly to several days, and it would take longer during banking holidays that could cause substantial delays.
Cryptocurrency has a much lower transaction fee compared to banks. It goes higher up to double digits of 15 percent depending on how far the area or location. Banks offer transaction fees depending on the kind of transactions you do. Interbank transactions have higher fees than local bank transactions. Wire transfer fees are also tremendously higher than cryptocurrency transaction fees.
Ease of Transfer
In cryptocurrency, consumers and business owners can transfer funds anywhere with an internet connection through SMS cable phone, smartphone or computer. In banks, the account holder can transfer funds through the use of a mobile phone, online banking, issue checks or just visit the nearest bank branch in the location.
Cryptocurrency is slowly evading the eCommerce industry and some are already accepting cryptocurrency as a mode of payment. Consumers have the option to purchase products online and pay using bitcoin. On the other hand, those who have savings account have a lot of options on how to pay for goods and services. Banks offer credit cards, debit cards, cash cards that account holders could use anytime and anywhere.
Better Privacy and Security
Cryptocurrency holder has the responsibility for security. Each individual has its responsibility to control their bitcoin. While banks help the bank holder to secure their account utilizing insurance in the case against loses by the bank or thief.
As long as the individual will not expose his key wallet, the government has no way to seize your account. Whereas for a bank, the Government may seize the individual account including savings, deposit boxes and even put it in bank bail-in.
Five Potential Impact of Decentralizing Finance
1. Any individual who has an internet connection could access financial services even the use of smartphones. The individuals have the same level from top-notch trader to a simple consumer.
2. Without the third-party intermediary would bring down the cost of a transaction fee. This is very good for all the bitcoin holders to bring down from a seven percent transaction fee to 3% only.
3. In decentralized finance, consumers have ownership of their virtual assets and can act safely without validation by the main group. Meanwhile, in the present scheme, custodial organizations are putting people's assets and data in danger if they manage to safeguard it.
4. In a decentralized financial system, transactions are immutable and blockchains can not be broken down by key organizations such as regulators, central banks or large corporations. For example, Venezuelans are already adopting Bitcoin to protect their wealth from government manipulation and hyperinflation.
5. Plug and play applications will allow individuals to use decentralized financial services intuitively without the difficulty of the distributed scheme.