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The Real Problem With Centralized Banks And Why Crypto Is Inevitable

Hand holding abstract bitcoin againct purple background.


Satoshi Nakamoto's invention of Bitcoin, as highlighted in Bitcoin’s whitepaper published in 2009, had, but one compelling goal. To eliminate the need for a trusted third party and enable two willing parties to transact directly without having to suffer from the weaknesses of a trust-based model.

But why? The reason is that modern banks have flaws and disadvantages, the repercussions of which are ultimately felt by the consumer. Due to their centralized nature, they are subject to human intervention. They can be unreliable, vulnerable to security threats, charging crazy amounts of fees, and even be biased.

These exact problems and weaknesses of the current financial systems in the world are exactly the reason why cryptocurrencies will pave the way for a better banking and payments experience in the future.


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Traditional centralized banks can be unreliable. If you use mobile banking and their servers are down, you can’t access your finances unless you go to a local ATM and withdraw money in paper cash. The issue here is that ATMs can be out-of-service as well, especially for people located in developing nations.

Just imagine the hassle you would have to go through. If you’re in a time-sensitive situation and you need money, but your bank's mobile app is ‘on maintenance’. It’s unpredictable, but it worries a lot of people. It’s ironic that you entrust your money to banks and in return, they end up becoming gatekeepers of your finances.

On the other hand, cryptocurrencies never go out of service as they use automated systems since their software by nature does not require too many human interactions or interventions. Therefore, they are accessible every time of the day, including the weekend and holidays.

Today, cryptocurrencies are usually bought through crypto exchange platforms and stored in safe and secure crypto-wallets like Metamask or Ledger. These digital currencies are decentralized, and they operate in a very secure way. All you need is your computer or your mobile phone and an internet connection.

Crazy Fees

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Banks make over $15 billion a year in overdraft fees, according to the federal Consumer Financial Protection Bureau. That’s $15 billion of hard-earned money from people’s pocket to their pocket. Overdraft fees at this point should be illegal. With overdraft fees, a simple cup of coffee can go from $3 to $35.

That’s not the only fee to worry about; fees can take many different forms, including fees for late penalties, returns, using an out-of-network ATM, money transfers, inactivity, and international remittances fees.

When a person needs customer support, they may even be charged a fee just for seeking assistance from a real person. Cryptocurrencies, on the other hand, don’t charge you that many fees for transactions.

The most common fees for transacting in crypto are called gas fees, which are basically the reward given to miners for putting transactions on the blockchain or executing the said transactions.

Transactions can take an eternity

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With centralized banks, transactions can take a long time depending on the type of transactions. For large amounts of cash or international payments, it can take a week or more. This might seem okay at first, but what if you’re in the middle of a situation like the Ukraine-Russia war. You don’t have a week, you have minutes.

Unlike traditional banking systems, which have queues and protocols to follow, cryptocurrency transactions are extremely fast. As a result, cryptocurrency can handle more transactions per day than traditional banking systems.

This capability elevates them above banks, as they would provide the economy with a better possibility of rapid expansion. Cryptocurrencies do not have business hours and are available 24 hours a day, seven days a week.

As a result, cryptocurrencies are proving to be crucial in ushering in a post-banking, post-cash financial era.

Human Bias

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Since bank transactions and financial services depend on account numbers and personal information, they are open to biases. In case of a feud with the officials of a certain bank, the financial service issuing officer can deliberately delay the transactions, or, worse, freeze your assets. Every month, thousands of people have their life savings frozen by banks and exchanges.

Modern centralized banks have your demographic data, background information, and spending habits. Believe it or not, their treatment of their customers can sometimes be influenced by their data. But it could be worse; banks could have their own customers arrested.

In late 2021, Joe Morrow, the 23-year-old man who claimed that U.S. Bank refused to cash his check after racially profiling him and alleging the paycheck was fake, was arrested. Of course, Joe Morrow got his justice and received a settlement, but that doesn’t change the fact that centralized banks can be influenced to make bad decisions by a simple human bias.

Cryptocurrencies are completely free of the control of third parties. This decentralized nature minimizes human interactions, which makes them free from biases. Cryptocurrencies don’t judge or profile you, centralized banks do.

Data collection

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A lot of platforms today do share your data with third parties. But it’s one thing for a social media platform to collect your data and another thing for a bank to collect your sensitive information like passport or ID information, residence address, SSN, and employment information.

For banks, these types of information are required because they operate on a trust-based model, or specialized mechanisms required to respond to a certain threat profile.

Instead of being upset with Tiktok or Facebook for mishandling or selling your data, the real evil-doers here are centralized banks. Purchases show where you are, what you like, and much more. Centralized banks can share your personal and sensitive data with their affiliates or partners or third-party buyers.

Not only do banks steal money from you, but they also make money off of you. How can you trust banks if you can’t even trust them to take care of your personal data or money?

Security Issues

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Banks suffer an average of 85 attempted serious cyber attacks a year, and one-third are successful, according to a survey by Accenture. Skilled hackers and engineers can hack many web portals and mobile banking apps. As a result, some people end up losing large sums of cash from their accounts or getting scammed.

The systems are also prone to fraud and especially money embezzlement. As a result, a loss of hard-earned money. Now with crypto, threats like those are less likely to happen since there’s no central source of power due to its decentralized nature.

Instead of relying on one central source of power, crypto relies on a distributed network of computers all over the world. Crypto is more secure and reliable since they’re tamper-resistant because they use anonymous ID numbers in transactions.

There’s always some potential for fraud or security risk, whether it’s centralized or decentralized. However, when it comes to dealing with people’s finances, privacy, and data, people tend to choose machines more than humans any day.

With the power of cryptocurrencies, people don’t have to suffer from the flaws of the modern financial system. While crypto as a whole is still in its early stages, millions of people already benefit from the advantages of cryptocurrencies and blockchain. People deserve better.


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