Blockchain: How the New Kid on the Block will Uproot the Archaic Banking Institutions and Revolutionize the World

The only reason money has value is because we believe it has value. The U.S. currency, once backed by Gold, is now backed by the Federal Reserve. Congress created the Federal Reserve to monitor, analyze, and administer money. They set interest rates which, in the most basic sense, is the price of borrowing money. The Federal Reserve looks for that “sweet spot,” where the interest rates maximize employment.

Economic Recessions =  Lower interest rates = Easier capital acquisition

Economic Inflation = Higher interest rates = Harder capital acquisition

Problems with the Federal Reserve’s Centralized Authority

First things first, the word “Federal” is a misnomer designed to foster the impression that it is purely owned by the Federal Government.

The Federal Reserve is both private and public. Let us take a deep dive into the institution that is shrouded in mystery.

The “public” part consists of seven members of the Board of Governors that are nominated by the President and confirmed by the Senate.

The “private” part consists of Banks set up exactly like private corporations. The Banker’s Bank. Commonly called the Four Horsemen of Banking:

  1. Bank of America 
  2. JP Morgan Chase 
  3. Citigroup
  4. Wells Fargo 

And these Banks own the Four Horsemen of Oil:

  1. Exxon Mobil 
  2. Shell 
  3. BP Amoco 
  4. Chevron Texaco 

Unfortunately, the goal of the private part of the Federal Reserve is in taking care of its shareholders. Why should the Fed’s first and foremost goal be in the interest of the shareholders?

The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. While the Board of Governors is an “independent” government agency (chosen by the President,) the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve. These stocks earn dividends.

Government & Banks: a Revolving Door

The 2008 Financial Crisis was not a surprise to anyone who followed the money. Everyone points fingers at each other and blames the mysterious, yet omnipotent market.

The single greatest contributor to the financial crises is the Federal Reserve manipulating interest rates in ways that distort the true price of capital.”  

Deregulation of the financial industry was the root cause of the Great Recession.

Unfortunately, during these swampy Trumpian times, Congress is trying to repeal the Wall Street Reform legislation passed in 2010. Their goal is to roll back the Dodd-Frank act that regulates the financial industry. Through deregulation, they are putting the average consumer at risk.

Louis McFadden, the Chairman of the House Banking and Currency Committee in the 1930’s spoke with clarity and honesty – “Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

Governments like to know where the money is, who has it, and what you’re doing with it.. but there is light at the end of tunnel via technology.

History no Longer has to Repeat Itself, Blockchain will Disrupt the Banking Industries

Banking is the most profitable industry sector, and its business model is relatively simple. It provides financial services to companies. Banks are so profitable because they lie at the crux of every business. Banking is a data business, and money is represented in financial systems through data.  Global Banking is a $134 Trillion industry.

We are witnessing a decentralized revolution that is changing monetary policies, business, and eventually the world. In 2017, we saw Bitcoin explode. At one point in time, a single Bitcoin was worth over $15,000.

The World Economic Forum defines blockchain as “a distributed ledger technology(DLT)  that enables data to be exchanged directly between differing contracting parties within a network that does not involve intermediaries.” People interact with encrypted identities (anonymity) and each transaction is added to the chain and distributed to all network nodes.

Blockchain is the underlying DNA of cryptocurrencies which eliminates intermediaries, i.e. Banks from transactions.

Blockchain is fundamentally changing market structures. Dan Tapscott, the Author of Blockchain Revolution says “the first generation of the digital revolution brought us the internet of information. The second, powered by blockchain will bring us into the age of value, which will reshape the world of business and transform the old order of human affairs for the better.” 


Blockchain is rooted in trust and transparency.  Banks are subject to corrupt and leaked data.

Blockchain Fundamentally Disrupts These 5 Core Banking Principles

  1. Fee Payments – Blockchain removes the Bank’s ‘cost per transaction’ fees like hidden exchange rate markups. Banks make a good chunk of money from these hidden fees. Blockchain technologies are also much faster than traditional banking transfer times.

  2. Fundraising – Startups and other companies are able to immediately start fundraising through ICO’s, or Initial Coin Offerings. In which they sell small shares of their prospective business to prospective investors. ICO’s are more beneficial than raising traditional capital through banks because it is global, online, anonymous, and gives companies immediate liquidity access – something Banks cannot provide.

  3. Settlement Systems – Moving money around in the archaic banking institutions is slow. It can take up to 3 days to move money around the world; because the payment gets muddied in the banking system’s structure. Instead of relying on Banks, transactions can be settled directly on the Blockchain.

  4. Loans and Credit – Centralized systems continue to provide inaccurate credit score reports and expose important credit card information. The FTC estimates 1 in 5 Americans have received a credit score error. And not to mention the Equifax hack which resulted in over 145 Million affected people. In typical fashion, Equifax only received a slap on the wrist. The Settlement was only for $70 Billion, the estimated loss in consumer information and data is worth much more and will cause harm for a number of years.

  5. Security – When selling or buying assets, financial systems use a complex chain of mediums like exchanges, brokers, and custodian banks. Blockchain technology will foster a decentralized database of digital assets that are encrypted and unique.

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Looking Forward

We are ushering in an age of micro and macro value creation without middle men. The days of centralized, financial systems and their architectures are coming to an end. The world’s of consumers, financial institutions, and blockchain are converging. Blockchain is great news for consumers.

The Harvard Business Review noted, ‘The Blockchain Will Do to the Financial System What the Internet Did to Media’.


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