Blockchain Fundamentals

How Blockchain is disrupting Banking industry (part 1)


Blockchain technology was invented back in 2008, but now it is taking off at a rapid rate.

As interest towards Blockchain grows, the biggest question is: will the traditional banking industry adapt to this new technology or be replaced by it?

Undoubtedly, the many powerful features of Blockchain technology make it capable of solving numerous issues traditional banks and financial institutions are now facing.

Global banking is currently a $134 trillion industry. The scope of Blockchain as a trustless, decentralized ledger is to disrupt all of that, including:

  • Payment
  • Identity management
  • Account deposit and withdrawals.


One of the core reasons why Banks exist is to store, transfer, receive and process payments. Nowadays, trillions of dollars flow every day in an obsolete system of slow payments and unexcused fees: for example, if you work in London and want to send part of your salary back to your family in India, you might have to pay a $30 flat fee plus additional costs up to 7%.

Sending bank gets a cut, receiving bank gets another one and you are charged. Your transaction will be received around a week later.

By eliminating the need to approve transactions between consumers(peer to peer), blockchain can send faster and cheaper payments than banks. The most famous example of this is Bitcoin.

Identity Management

Blockchain technology can also be applied in the creation of a decentralized client identification system.

Personal identity data is highly vulnerable in the kinds of centralized, online databases that exist today. Creating an identity on a blockchain can give individuals greater control over who has their personal information and how they access it.

Today, all banks need to perform KYC (Know Your Customer) before processing any applications.

But the great advantage of identities within blockchain is that users have strong ownership; the information will be stored in a secure location, accessible to everyone or to particular people according to the user’s requirement. This is in direct contrast to Twitter or Facebook usernames, which could be confiscated or censored at any time by the respective companies they belong to.

Account deposit and withdrawals

Very few people understand how the modern banking system really works. Most consumers don’t investigate on what banks actually do with your money after you deposit it in a bank account: once you deposit money into a bank account, the bank loans most of it out via their reserve banking. They only hold a fraction of the money their customers deposit as reserves.

For this reason, there is usually a huge panic when people want to withdraw their money at once and banks are unable to satisfy this request.

With blockchain, traditional banks will not be able to find alternative solutions to when the panic arises because the blockchain is ultimately a ledger representing all accounting entries.

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