Will Banks and Blockchain Collaboration Lead to Bitcoin's Downfall?

Bitcoin has been around for almost seven years now and has come a long way in that short time. Although Bitcoin has been adopted by a significant number of people around the world, the technology that supports Bitcoin transactions has become even more popular.

Bitcoin has been around for almost seven years and has achieved a lot in a short time. Although, a considerable number of people around the world have adopted Bitcoin, and the technology that supports Bitcoin transactions has become more popular.

All Bitcoin transactions rely on blockchain technology, which is a secure, transparent ledger that records every transaction that occurs on the Bitcoin network. All transactions require blockchain approval and record permissions to ensure that neither party conducts fraudulent transactions. In addition to Bitcoin transaction data, blockchain can also record non-transactional data.

Banks and blockchain

In addition to Bitcoin transactions, blockchain technology has also found its way into various other applications. The use of blockchain technology differs from simple laboratory data management applications dealing with banking and securities as a means of protecting proprietary financial transaction instruments. Recently, we have witnessed banks experimenting with blockchain technology to evaluate its role in their daily operations.

A handful of banks are already using the Ripple network for basic experiments, while a group of international banks want to build a proprietary blockchain, also known as a federated blockchain, that would connect all of them to a single network similar to the bitcoin network, allowing funds to be taken out of one bank or branch and transferred to another instantly, bypassing conventional means.

Although the research is still in its infancy, implementation won’t take long. Of course, widespread adoption is another question. Banks and businesses are so large that it will take a long time to achieve widespread implementation.

However, if implemented, it could spell doom for Bitcoin as we know it. It is highly unlikely that banks and financial institutions will adopt Bitcoin or adopt an open source technology on top of their existing ones. Therefore, the possibility of banks developing their own cryptocurrencies or tokens is very high.

Once blockchain technology is implemented in banks around the world, the turnaround time for money transfers will drop rapidly. Banks will be able to process transactions at the same rate as Bitcoin transactions. If banks can successfully circumvent the SWIFT network and central banks, the transaction fees associated with transferring funds will also drop significantly.

This way, bank customers will be able to enjoy similar benefits as using Bitcoin transactions through the current banking system. Once banks start processing transactions on the blockchain, the crypto tokens used by banks can be easily exchanged for local legal tender without the need for any third-party exchanges.

Decentralization no longer exists

Bitcoin is popular mainly because it provides a fast, convenient and economical way to transfer money. If mainstream banking also starts to have these advantages, people will choose traditional banks between the two. Apart from that, there are only a few mining pools that are getting bigger every day.

The top three Bitcoin mining pools control more than 50 % of the Bitcoin hash rate, and F2pool alone controls nearly 25 % of the Bitcoin hash rate. If this trend continues, Bitcoin may no longer be able to maintain its decentralized characteristics.

Once people realize that the decentralization of the Bitcoin network may be affected, they may start looking for other options. There is a consensus that the problems of the Bitcoin network have been solved, and continuing will only compound the problems and may lead to the early downfall of the beloved cryptocurrency.