It’s hard to imagine a world without banks. These gigantic financial monoliths have stood the test of time for generations. However, people have been growing increasingly frustrated at the kinds of special treatment banks get from governments, and banks themselves have been underperforming.
Some researchers predict bank branches to start disappearing as soon as 2034. Other research, however, suggests that banks will simply adapt and adopt new means of holding on to customers, such as adopting crypto. However, will this be enough to save banks, or are our most prestigious financial institutions simply running out of time?
Today, we’ll be answering that question, alongside why people are growing tired of banks, and what kind of institutions might grow to replace them.
Why Are People Growing Tired Of Banks?
It takes little more than going to your nearest bank branch and waiting in line for 20-30 minutes to be reminded of why banks are slowly losing the people’s favor. There is always the simple fact that waiting in line at bank branches or fussing with badly designed mobile apps is tedious.
Partly, people are growing tired of banks because of all the privileges they get. If a business or project is failing, the government will generally offer minimal, if any aid. However, if that business is a bank, they’ll get bailed out within weeks. This unfairness allows banks to make riskier decisions, knowing that they’ll get covered in case they mess up.
Now, outside of that, since most countries have a central bank, a lot of their currencies’ innate value is tied up in that bank’s performance. Even outside of this, centralization leads the entire country to rely on the bank, and be put into a position where it pretty much has to bail the bank out if it gets into trouble.
Finally, on the darker side of all of these issues, fraud, money laundering, and the promotion of terrorism are rampant among banks today. Banks will often ignore KYC(know-your-customer) regulations in order to get more money, and will often get away with just a slap on the wrist compared to the amount of money they’ve earned through malicious action.
Outside of all of these cases where banks were found out, nobody knows the exact number of times banks have pulled the wool over the eyes of the public. Part of this is due to how difficult fiat money is to track when compared to another kind of asset like crypto.
So, if banks are so bad, what is the alternative?
Decentralized Exchanges- The Way of the Future?
Now, if centralized banking and government involvement is the cause of most of the people’s issues with banks, the natural solution would be to decentralize. This means taking away the middleman in exchanging funds. Where before you would have your bank profiting off of your savings money, decentralized exchanges(DEXs) are transparent and fair.
The idea is that the DEX removes the middleman(in this case the bank) out of asset exchanges. Instead, since there needs to be an authority when large sums are exchanged, the exchange is facilitated through a smart contract.
This allows DEXs to provide complete transparency about how funds are moving through them. Since DEXs are largely crypto-based, you can even track every single transaction through the blockchain down to the origin.
And since DEX trades are facilitated by smart contracts, rather than humans, they can pretty much guarantee that trades will be executed exactly as intended. This is in strong contrast to the often opaque and censored execution methods present in banks and traditional markets.
Most DEXs also have a mandatory KYC procedure that needs to be filled out by each new user in order to use the exchange. This means DEXs are much less likely to be accidentally(or intentionally) supporting an unethical organization.
Finally, DEXs are simply more convenient a lot of the time. While there are some geographical restrictions, largely all you need is an internet connection and a crypto wallet. And their interfaces are generally superior to most banks’ apps.
One of the biggest issues posed to DEXs has always been that they dealt with little other than crypto, until now at least.
SOMA Finance- The First Hybrid DEX
SOMA finance is the world’s first globally compliant multi-asset DEX and token insurance platform. The exchange not only lists what you would expect from a traditional DEX(cryptos, NFTs etc.) but also offers tokenized stocks.
In essence, this allows SOMA to provide a bridge between traditional finance, and the more modern, sleek DeFi experience. Tokenized stocks are digital assets that mirror the price action of a publicly-traded stock. This allows SOMA traders to be exposed to traditional stock’s price action without including a centralized exchange in the mix.
The DEX seems to be taking the main challenges of proper regulations, bad actor control, liquidity, user base fragmentation, and market manipulation of fragmented asset classes seriously. Some of the platform’s biggest perks are:
- Users are able to stake their assets through a Uniswap-style AMM with multiple compliance layers
- The DEX works cross-chain, and provides FIAT off/on ramps
- It’s secure, having built-in KYC and AML functions
- It’s licensed to sell tokenized stocks on the platform
While banks remain to be frustrating, oftentimes inefficient, and sometimes downright harmful, we still don’t have a complete replacement. The closest thing to a replacement available are hybrid DEXs like SOMA Finance which provide a bridge between traditional finance and DeFi.
However, with the speed at which DeFi technologies have been growing, we have no doubt that banks will soon start to be phased out by alternative forms of financial establishments.
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