With cryptocurrencies being more mainstream, one may wonder how transacting with them is different from using fiat through centralised banks. What makes the former better than the latter and vice versa? Is shifting from banks to crypto worth it or is working with both the best-case scenario?
Today, Casino Days India lays out the difference between the two so you can find the answers to these questions and learn how the cryptocurrency world has forever changed the way of transacting. Keep reading to compare the two based on different factors below:
As centralised organisations, banks require their clients to provide personal information to confirm their identity and prevent financial crimes. This means you have to give them your personal information such as full name, email, home address and/or mobile numbers before you can make an account and transact.
Then as your account is made, all your personal information is then placed within a centralised server. In doing so, the bank and its teams receive complete access to your data. This also makes your information vulnerable to hackers who might compromise the bank’s server.
Cryptocurrencies use decentralised blockchain networks to store information. There are no centralised servers hackers can crack into since the blockchain’s nodes are spread globally.
Additionally, you’re not required to give personal information whenever you transact with crypto and only your wallet address and not your name will be recorded on the blockchain, assuring your privacy.
Banks keep your transactions safe by requiring you to use strong passwords (with both symbols and numbers) and using the One Time Password (OTP) authentication technology.
By using a strong password, you can keep your account under a strong lock because adding extra characters like symbols and numbers can make it difficult for hackers to guess them.
Then in the unlikely event hackers do guess your password, the OTP acts as a secondary ‘key’ to open your account. The bank program only sends this OTP to the registered email or mobile phone numbers so only the authorised user can access the account. This stops hackers from opening your account just by guessing your password alone.
However, these two safety measures may be rendered useless because all your information is stored within the bank’s central database. In the event there’s a massive data breach within your bank, the hackers can take everything, including your data.
Because of this, they can easily goad you into giving them your information through the creation of false messages from the bank and claiming they need your email, password and OTP. So whenever you see suspicious emails or text messages claiming they’re from your bank, refrain from giving them any essential information.
Since cryptocurrencies exist within their own decentralised, blockchain network, all transactions made are safe. Because in these networks, countless nodes oversee all the verification and validation of all transactions.
Once these transactions are verified and validated, they’re sent to a block within the chain and hash codes are then made. Acting as your blockchain transaction fingerprint, these hash codes are what stop hackers from entering the blockchain and stealing your investments.
With this process, hackers need to access countless nodes to be able to alter hashes and hack into transactions within the blockchain, which is virtually impossible to accomplish.
Bank services are not always easy to access especially since they are closed during weekends or holidays. What this means is, you won’t be able to make large transactions these days since those can only be done in person and you need to have the bank’s approval first to do so. Thus, this causes a major problem whenever you need to pay big amounts of money immediately.
Also, if your online banking transactions have a problem, you won’t get immediate customer service assistance until the working week begins.
Meanwhile, since cryptocurrencies use automatic systems, very little human participation is needed in the process. You can then make transactions at any time of the day, even during weekends and holidays.
However, since its network relies completely on the internet, you’ll need to have an electronic device and internet connection to make crypto transactions. The latter may be hard to get in remote areas.
Transaction speeds and fees
When confirming transactions, banks go through bureaucratic processes that may require red tape and inter-bank connections. Because of this, you’d have to pay fees which can be large depending on the transaction.
In terms of processing time, banks tend to take 3 to 5 days to clear because transactions are processed by batch in an automated clearinghouse. There, bank transactions are sorted in 2 to 4 hours. Afterwards, they will send them back to the main bank and later give them to the receiving bank.
But if you want to fasten the process, you can pay an additional charge aside from the processing fee which can be expensive depending on the bank.
Because of their decentralised nature, cryptocurrencies’ blockchain networks are independent of centralised processes.
This eliminates the need for the expensive fee and time-consuming processes that you have to worry about when you’re transacting within the banking network. This is made possible not just because cryptocurrencies are decentralised, but also because of the unique program called ‘smart contracts’ ingrained within the blockchain system.
Smart contracts are programs that immediately get activated whenever certain conditions in the transaction are met. Controlled automatically not by people but by the blockchain system itself, smart contracts allow both parties to enjoy easy, hassle-free transactions every time.
Should you and another party want to conduct more business in the future, you can program more smart contracts within the system. Then when certain requirements are once again met, they’d automatically be done in an instant.
So through cryptocurrency networks, you’d no longer have to worry about spending additional time and resources. After all, its smart contracts can do everything a bank can do without needing people to go through the hassle, resulting in a much quicker and more affordable process.