Digitalization or Why the Future of Banking Doesn’t Look Like Much of Anything at All

Digitalization or Why the Future of Banking Doesn’t Look Like Much of Anything at All

Digitalization is one of the biggest topics in the 21. century! If you are reading this article, there is a good chance that you have used a digital currency of some sort recently.  When you think about digital currencies, the first images that come to mind might be one of criminals anonymously trading cryptocurrency for goods and services so unsavory that one would never want them associated with one’s real name. However that is actually only one small aspect of what people can do with digital currencies.

We have a question for you. Already logged into your bank account online to set up a bill payment or make an electronic funds transfer? Yes? Then you have already participated in the digitalization of banking.

Digitalization does not just have to do with transactions made in cryptocurrency unconnected to the national currency of any country; it involves any transaction that takes place through the exchange of computer code instead of through the exchange of physical banknotes or coins.

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What is Cryptocurrency?

When you make an electronic funds transfer through your bank or make a purchase through your PayPal account, that is a consequence of the digitalization of banking, but it does not involve cryptocurrency; you are still just using U.S. dollars in their digital form. Cryptocurrencies are less like dollars, Euros, pounds, or any other type of national currency (those are fiat currencies).  Cryptocurrencies are considered to be more like precious metals on which fiat currencies were originally based on.  Instead of being made of any of the chemical elements, though, cryptocurrencies are made of computer code!  Plus they are created in limited quantities.  Thus, one “mines” for cryptocurrency the way one mines gold and silver. Once an amount of cryptocurrency has been mined, it can be exchanged.

What Is Blockchain Technology?

Blockchain technology is the system of encryption that powers Bitcoin. Founded in 2009 Bitcoin has seen widespread popularity.

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Blockchain technology requires several users, independently of each other, to confirm the actions of cryptocurrency miners before the miner is able to extract the piece of cryptocurrency they are trying to mine.  One of the reasons this technology has gained so much attention is because it is very effective at keeping private information private.  It is technically possible to compromise the security of blockchain technology, but so far no known breaches have taken place.  Therefore, the blockchain technology is essential to the success of cryptocurrencies.

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