During the Corona lockdown, we all have to accept massive restrictions in our daily lives. Kindergarten and schools remain closed, grandchildren cannot see their grandparents and the economy is more or less paralysed. The latter effect might not be felt completely until later this year, when a global recession will hit us to an extent we have not experienced for a long time in our history.
But we don't need to speculate on future effects, because the impact on our lives in the recent past is already quite something. For the first time, the banking system has reached new limits that were not known at all. The virus also paralyzed banking and everyday business in many countries.
Why was this a drastic event? And why was Bitcoin not affected?
Personal ties are crucial
Many people have not even felt the effects, because a large proportion of customers in the Netherlands rely on online banking. On top of that, many institutions are pure online banks and therefore have no customer traffic at all. If the customer has to clarify something with the bank, he does this himself in his online account, via telephone banking or sends his documents by post.
What is completely overlooked are the people who are not customers of such banks, but remain highly dependent on the service that is offered on the counter. This affects certain generations of bank customers who cannot identify with online banking or do not understand it. Those affected have had to put up with considerable delays in their transfers because the counter service was not available to the usual extent. In some cases, branches even had to shut down operations completely. And the cuts are going to continue. Rabobank will close half of its branches and ING is aiming to close down one quarter of its branches for good.
But even people who can handle the applications were suddenly left alone. Consultations had to be dropped, could only take place via Skype or Zoom, and thus the customers were hit at the most sensitive spot.
Their trust in their own bank.
For most people, the personal relationship with a bank or their personal advisor is particularly important because it is a trusted relationship. But this suddenly changed with Corona.
Bitcoin puts the Trust in the Protocol
One problem that Bitcoin already solves based on its protocol is that of trust. No one needs to have trust in institutions that give themselves a face through individual employees. Bitcoin is neutral and conveys its qualities on a purely technical level. Even though many people tend to prefer to interact with other human beings, this aspect has great advantages. Since it remains on a purely factual level, trust must never be questioned. But it can always be checked and verified.
With the appropriate tools, this is even possible for laymen. If you have deeper knowledge, you can go one step further and audit the code. With this we have solved a primarily interpersonal problem based on software.
DeFi: Banking Services on the Blockchain
Taking out a loan by lending against existing assets is now possible without having to trust an intermediary. Conversely, it is possible to service the loans secured in this way by lending cryptocurrencies and thereby earning interest on an ongoing basis. In an economic situation where banks have not paid interest to consumers on their deposits for years, this is a huge step forward.
In this case too, the protocol replaces trust in the institution and helps users not only to become more independent but also to find more lucrative sources of income for their assets.
Even in the area of Decentralized Autonomous Organizations (DAO), despite Corona, the institution is completely self-sufficient and unstoppable. A prime example is the Dash DAO, which shows that there is no real need for an institution, but that all stakeholders can also make decentralized decisions and distribute funds.
Bitcoin Transactions cannot be stopped
While bank customers could sometimes experience problems because their institution was unavailable, Bitcoin cannot develop such problems at all. The network of nodes and miners is decentralized and globally distributed.
Even if mining were no longer possible in one region of the world or the operation of a node were prohibited, someone else would simply step up in another part of the world to perform the tasks. This not only provides a surplus in network and transaction security, but also enables smooth functionality despite a global pandemic.
Of course, you have to be able to operate a computer or a smartphone in order to participate. But this participation is not determined, unlike in banks, by the fact that an employee also works in the back office. The infrastructure of the Bitcoin network has to be maintained by the individual operators, but this is a rather lean process compared to the personnel that is needed to run a bank.