Cryptocurrency is booming and there are many uses for it being explored. One term that has been tossed about is crypto and banking decentralization. Time to see how crypto banking is global decentralized banking in this virtual world.
How is Globalized Decentralized Crypto Banking Different?
Banking is currently centralized. Many view this as being monopolistic. Since monopolies benefit the company and not the consumer, it runs contrary to the theory and practice of crypto.
Looking at banking from a cryptocurrency point of view could prove enlightening.
Let’s say that banks main services are making loans and tasks related to credit scoring.
Since cryptocurrency is an intelligent asset, decentralized banking can be created. The term “crypto banking” has come into use.
Crypto Banking is banking that eliminates the middleman.
How is This Accomplished?
In our current banking system, bank services are performed by people. People are needed to approve loans, compile and structure data, and so forth.
In a crypto banking system, these people are middlemen and they are not needed. Banking services in crypto banking are performed thanks to smart contracts and via peer to peer.
Banking in this system occurs online. No more physical bank building. Your bank is now a computer interface. Cryptocurrency, for the most part, now takes the place of physical currency.
Is This Different From Decentralized Exchanges We Have Now?
Yes, there is a difference between what is called DEX and Crypto Banking. DEX is a recent concept. It is a peer to peer transactional exchange of currency. This exchange is performed without a middleman.
Now, imagine that concept applied to lending. In Crypto Banking, lending is an automated process.
In both DEX and Crypto Banking, the loans and the currency exchanges happen extremely fast.
What Tech in Involved?
Peer to Peer is in action. Individuals are conducting the business and not institutions. If the credentials match up then borrowers and lenders are connected. This removes bureaucratic hurdles.
Blockchains provide a secure transparent ledger for recording transactions. The data in the blockchains is used to properly pair up those who want to borrow with those who want to lend.
Machine Learning aka AI works through the data continually to find matches between crypto banking customers seeking loan services.
Cryptocurrency is the sole “money” being used. Cryptocurrency and Blockchains speak the same “language”. This means perfection in performing and tracking transactions.
Smart Contracts have numerous uses. They can be used to automate fund transfers, create binding contracts, converting currency and much more.
Are There Advantages to All This Tech?
Artificial Intelligence is a huge advantage in crypto banking. AI is 24/7. It is always working. This makes it ideal for fighting fraud. Data is crunched continuously within an automated system to find those that are unreliable.
By AI crunching all that data, more factors other than just “credit” are used to determine loan making.
This leads right into forecasting. Lenders will be better able to understand any risks with anyone seeking to borrow.
Credit Scoring is bigger and better. With big data, assessing the risks of conducting business with borrowers is more complete and accurate.
Can Crypto Banking Happen Anywhere?
We are talking global. Crypto Banking can be accessed worldwide. Because of the availability and transfer of information, a global loan marketplace would exist. No overhead from bank buildings. No people as middlemen that all need to be paid. No bureaucracy to slow the process down.
Taken together, this equals a global system of banking that juices up the global economy.