Should crypto make banks richer or makes them obsolete? Do people need banks or can rely on themselves? 

Big misunderstanding about adoption

We have seen a nice example recently in May 2020. Goldman Sachs hosted a client call about Bitcoin and gold. A significant amount of crypto-community members celebrated it as a good sign and a promise of the price surge. Many YouTubers reported about the event and advised people to buy a piece of bitcoin right away since it can be the last time they can buy it cheaply. A few days later, it showed up that the bank did not recommend buying cryptocurrencies to its clients. Clients learned that cryptocurrencies like Bitcoin are not even an asset class in the first place and that they offer neither cash flow nor a hedge against inflation. They could also see the following sentence on a slide:

“We believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients.”

Crypto community takes the potential interest of institutions about investing in crypto assets as an argument for buying cryptocurrencies. It blurs the original Satoshi’s vision and strengthens the misleading opinion that crypto is mainly investment rather than the alternative to the current system. Instead of using crypto on a daily basis, there is a strong community of hodlers. It has a very negative consequence. People do not refuse the bank system, use fiat currencies, and wait for an all-time-high price to sell. The majority of new-comers are interested in crypto just because of investment with possible high return. Ideology is in second place. It is a paradox. The technology invented to fight against banks become financial speculation and people wait for banks to come in.

Banks and institutions are willing to buy crypto for their customers and offer them custody services. Some banks publicly criticize cryptocurrencies but secretly buy it. Big players take advantage of cryptocurrencies and it is business and speculation for them. It must be said that there is nothing that could prevent it. Everybody can use a public and open network. The issue we perceive is the volatility and possible high return of investment. It is a known fact that the adoption of cryptocurrencies is very low and a big number of coins sit on a few addresses. Moreover, a significant amount of coins is bought by big players. It means that only a few unknown entities can dump the market quickly and drastically. It has very negative consequences. If crypto is perceived just as a speculation then the market price is the most important reason to hold it. Even if you try to earn cryptocurrencies and pay with it you will not be satisfied with the high volatility. At the moment, we are 3 years in the bear market. Many people entering the crypto-space have probably recently lost money. The price manipulation can be a good protection of banks against cryptocurrencies. It is sufficient to terrify new users and it is easy for them if they can manipulate the price. Is it even the reason why banks buy and hold cryptocurrencies? We do not know. Do not forget that banks want to earn money via speculation and need to protect themselves against alternatives. Both can be achieved by buying cryptocurrencies.

And there is yet another negative consequence. The security model of cryptocurrencies is based on the market price of coins. If coins lose value quickly and dramatically then the security decreases. PoW projects are more vulnerable than PoS networks. PoW networks like Bitcoin reward miners for every mined block. In a PoS network like Cardano, the security budget is always present and it consists of approximately half of the staked coins. The market price of staked coins will be probably always much higher than a block reward in PoW consensus. Moreover, there is no halving in PoS so the budget is not gradually decreased over time.

Do not take us wrong. It is fine to speculate on the price. On the other hand, it must be admitted that the original mission of cryptocurrencies is completely overshadowed. It is still true that you can send transactions and nobody can censor or prevent it. People tend to behave rationally. They will not simply be using volatile cryptocurrencies on a daily basis if it would mean losing value expressed in fiat currency. A highly volatile asset will always tend to be an investment option rather than a currency. It will probably not change in a few decades that are ahead of us.

At the moment, the adoption of cryptocurrencies is mostly about adopting a new speculative asset class. The transaction abilities are used to send coins to exchanges or to wallets. Only a negligible number of users are willing to pay for goods by cryptocurrencies. It is affordable only for early adopters that have already made 10x. Only rich people can afford to lose a small piece of money from time to time. All holders and professional investors into volatile assets must take into account the market price of coins. It is needed to watch it at least for the protocol security reasons.

It is necessary to realize that by holding cryptocurrencies for speculation reasons we do not build an alternative financial system. It holds true for early adopters, retail, and also for banks and institutions. There is an opinion that cryptocurrencies can be used as a hedge against volatile fiat and a potential increase of volatility if a crisis hits us. It is commonly believed that a digital scarcity of cryptocurrencies should ensure price stability or even rise. It is expected the same behavior as with gold. I would be the truth only if more people would benefit from it. Gold is still the king for the majority of people. A new standard with such a big impact can be established only if at least a third of the population would agree with it and start actively using it. We are not there yet. As we have said, a few individuals have the power to influence the narrative by holding or dumping coins at the critical moment when a crisis will come.

Banks and fiat are not going anywhere and there is a high probability that they will be with us for a long time. Building alternatives do not mean that we need to destroy banks. We need to build an infrastructure that can be used by people in the same way as fiat is used. Usage must be similar. The key difference lies in principles like decentralization, censorship resistance, and global access. We need to build a working infrastructure and then gradually attract new people. People will probably adopt the ideology but the usage must be very similar to what they are used to nowadays. Moreover, people expect to gain some advantages when using alternative solutions. Cryptocurrencies have to satisfy their needs. 

Cardano will allow people using of blockchain technology

To make a world a better place to live we need to utilize the full potential of blockchain technology. Limiting the usage for keeping the digital scarcity is good for the price speculation but it has nothing or little to do with building an alternative to the current financial systems. The real adoption of cryptocurrencies must be about allowing users to use the blockchain daily for payments and other financial or social operations. Adoption will be low at the beginning. It is necessary to build a solution that enables the coexistence of traditional fiat networks with blockchain. The issue with volatility must be also resolved. We can imagine that people will be willing to pay with stable coins since there is no risk related to losing value or waiting for a higher price of coins. The speculative aspect of cryptocurrency must be eliminated.

Cardano is the third generation of blockchain that will be technologically ready to be used as a backbone of an alternative financial world. It will be scalable and transactions will be fast and cheap. Transaction fees must be neglectable otherwise nobody will be willing to pay for goods on a daily basis. If you pay in a shop you usually swipe by a card over a terminal. The process takes just a few seconds and you can pay for a cup of coffee without a concern that the fee will be higher than the price of the coffee.

Cardano uses PoS consensus so it is cheap to keep the network running and the security budget is still high. The high network throughput allows processing many transactions with low fees. It is exactly what is needed for the world financial computer. Cardano is a very inclusive network. A user can just install a wallet and start sending transactions for a few cents. PoW networks are the opposite. It is expensive to keep them running since it is necessary to pay for the electricity and they have low network throughput. As a result, transactions are slow and expensive. Maybe it is the reason why we diverted from the original Satoshi’s vision and changed the Bitcoin’s narrative to the store of value. It is not necessarily a bad thing. It is evolution. Bitcoin can be a good store of value but it can hardly be a blockchain that processes a huge amount of transactions per second. Bitcoin can be exclusive even with Lightning Network. There will always be a need to make a few on-chain transactions and they might be very expensive for people in developing countries. It makes sense to use blockchain only if people are responsible for their private keys. Moreover, the second layer solutions have nothing to do with blockchain so for many purposes are unusable. If we need to utilize ledger transparency then the second layer solution will not help us much.

Cardano can keep the transaction fees low forever and the security budget will not be put into danger. Scalability will be only improved. Hydra, the second layer solution for Cardano, will be sufficient for a long time. Issuing tokens enables the creation of stable coins. It would be fantastic if ADA was used as a backing of the stable coins. People can start building new communities and companies on the Cardano blockchain. If a few of them succeed locally then we can see bigger and bigger globally. Maybe it is too difficult to implement one new global standard as a store of value. Maybe it is easier to allow people to create values locally and enable global access.

There always are many organizations and institutions to which we will have to trust. We can use blockchain to create an alternative that allows us to avoid these institutions. Or, current institutions could agree with using blockchain and give part of the control and power back to our hands. Banks can buy and sell cryptocurrencies and can use the old financial infrastructure. They know well how to use it and also how to hide some information or make some fraud. This obviously does not solve any current issue from the people’s perspective. Blockchain is mainly about the distribution of trust and immutability of records. It is also about the prevention of censorship and clear and fair rules for all users. There is no superuser with higher privileges in the blockchain. To utilize the blockchain’s abilities we have to insist on the integration of the technology with the current financial systems. One day, we could be able to fully replace obsolete systems. It might seem like a difficult task or even a dream. Nevertheless, we have the right to build alternatives and decide in which system we want to live. It is the biggest power of blockchain technology.

People always need to trust other groups of people or organizations that are able to take care of something. There never can be only independent individuals in the world and we need to delegate a lot of tasks to organizations. The change that blockchain can bring is the ability and freedom to choose who will be responsible for what and take the power and money back in the case of failure.

For example, people decide to put together a bunch of money to build a new community center. Let’s assume that organization X will be able to build a new center if the necessary amount of money is collected. People will have to trust organization X. The advantage is that people can check what exactly happens with money and can even cancel the contract if something goes wrong and the majority of investors will agree. It can hardly be achieved without smart contracts and a kind of voting mechanism. Cardano will be technically prepared for these tasks. It can be easy to create a smart contract that will gradually release a part of the money. People can see how the community center is growing and vote about further releasing of money. Organization X cannot just take the money and disappear. What is nice is the fact that investors remain owners of the community center with all duties and benefits. Of course, interconnection with the traditional system is needed and ownership will have to be recorded in the property register. It is only about the integration of systems and it is more a political problem than a technological problem. Hopefully, we will get over it.


We could find many similar examples like the one in the last paragraph. The real potential of blockchain technology lies in giving people back the decision power and allows us to get rid of middlemen. Cardano is built for exactly this purpose. Having such a system will be very valuable for society and we will own it via ADA coins. At this moment it is also about price speculation. However, Cardano technology will enable changes that would not be possible in society without it. If it is achieved then ADA will be naturally valuable as well. Technology must be used and be beneficial to people. Only such technology has a fair value. We believe that in a few years Cardano will be used by many people.