Cryptocurrency and financial freedom

Banks and currency

Traditional banking institutions have been around for centuries, and when you consider how much has changed over this time, especially over the past 50 years, it seems only natural to expect banking to follow suit.

Exchanging value came from a need to trade for goods or services. These early currencies were commodities that held inherent value, like salt or livestock. It was easy to see how these were used for trade, because their value was obvious to both parties. Cut to around 2,500 years ago in China, and representative currencies, such as paper banknotes, replaced this system.

This is because currencies like paper banknotes or coins are transportable, divisible, interchangeable and form part of a trusted system for exchanging value.

In the past, people trusted and relied on banks to safely store their currency and, more importantly, record transactions accurately. Some people have tried alternatives, but none were as safe and trusted as money in the bank. At Luno, we’ve seen that the banking system of the past hasn’t quite caught up with the digital transformation of the present.

At its core, one of the biggest factors driving the financial evolution can be attributed to individuals’ desire to have control over their own money. Traditional banking systems use your money to make a profit, while limiting your access to it; whether by making you wait days for money to transfer between banks or holding it hostage with terms and conditions in complicated banking products.

Banks and your money

When banks lend money to customers, the bank essentially “invests” those funds. But banks don’t just invest by making loans to their customer base. In fact, some banks invest extensively in different types of assets. Adding to that, fractional reserve banking systems, which most banks employ, enable them to facilitate bank loans for more than the funds actually available to a bank.

In addition to this, bureaucracy and red tape limit the control people have over their accounts. For example, banks are often closed on national holidays, impose lengthy waiting periods for transactions to clear or even force customers to keep a minimum amount of money in their accounts to keep them open.

Assuming the best, banks created all this red tape in an effort to curtail fraud and protect their customers. However, more often than not, it just forces fraudsters to be more creative with how they gain access to your money. Cryptocurrencies don’t have the same problems, especially when intense security measures are taken to protect your cryptocurrency wallets.

How is cryptocurrency different?

Certain cryptocurrency wallets focus on keeping your cryptocurrency safe and secure. Internal storage and security measures include online storage (aka a “hot wallet”), offline storage (or cold storage) and deep-freeze storage.

In this way, some of the benefits associated with storing and managing cryptocurrency in a wallet like this are:

• Your money is accessible 24/7 – holidays and bank closures don’t affect your ability to manage your finances;
• Sending and receiving cryptocurrency from anywhere in the world;
• Complete control over your money;
• Improving accessibility for those who may not have access to modern banking systems, but do have access to the internet and mobile phones;
• Eliminating human error and fraud;
• Keeping your personal information safe; and
• Increased security.

You should have total control over your money and, in turn, enjoy true financial freedom. That’s the future of banking and how we crypto services, can work together with banks.

Right now, decentralised cryptocurrencies are independent of any sort of institutional control and Bitcoin is largely immune to some of the most serious problems local currencies face. Empower yourself with the opportunity to use your money when you want, how you want.

Want to learn more? Read Luno's Bitcoin education series here.

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This article was paid for by Luno