Can Crypto Bank the Unbanked in the Developed World? An Introduction
Bank, DeFi - September 11, 2020
What was the original purpose of crypto? It wasn’t to trade, or use for crypto arbitrage, it was to replace the trust we put in the bank.
We trust a bank to hold our money safe. We trust the bank to give us a piece of paper or plastic to signify that we hold this money. We trust the bank to allow us to transfer it between other people. This allows us to do so much.
For starters it allows us to not have to carry around a briefcase full of cash all the time. But banks do so much more. Here’s a few things banks do to make our lives easier:
- Provide credit and other lending services
- Take custody of our money and keep it safe
- Insure the funds deposited
- Coordinate investments to grow wealth over time
These functions are essential to any society, and yet 1.9 billion people in the world are unbanked. That’s 54% of the world’s population who can’t keep their money safe, can’t avail credit, and can’t transfer money beyond their local community.
These ‘unbanked’ receive their money in cash and keep it that way. This may seem like an unfortunate number, but it doesn’t tell the whole story. For instance, out of these 1.9 billion people, not everyone wants a bank. To live without a bank would seem disadvantageous, yet some people choose to do so.
Why? Banks charge a slew of fees for their services, deposit fees, withdrawal fees, transfer fees, overdraft fees, maintenance charges to name a few. If someone has very little to deposit, it would not make sense to pay such fees. A vast portion of their salary would have to pay for bank charges. To them, it isn’t about living paycheck to paycheck, it’s about surviving from payday to payday, and that’s a fine line.
For these people, a system that can remove these fees and friction would prove beneficial. That’s what DeFi and blockchain technology is trying to bring about. In this video, we talk about how the banking system is beneficial and where it can prove burdensome to some sections of society.
Enjoy the video!