How Cardano can disrupt the traditional financial system

If we want to replace traditional financial services, we need an alternative. The concept of decentralization and blockchain technology offers one of the possible options. In today’s article, we’ll talk about what services banks and financial institutions offer and how it would be possible to build something similar on the Cardano platform.

Banks and financial institutions.

What banks do

A regular bank can offer you many services. You can open a standard or business account. You can also open a savings account so you can increase the value of your funds. You can take different types of loans, for example, short-term, long-term, or business loans. You can also insure yourself or your property. You can invest or save on your pension with a bank or other financial institution. Here, you basically give your money to someone else who invests it instead of you, but for you. You can find other financial products on the market, but for the purposes of our article, we will only debate about these.

Financial institutions need your identity, your payment history, and other information about your assets. A bank will offer you the best possible interest based on all this information. If you have a good payment history, reputation and luckily own several properties, you will get a higher loan and lower interest. This also applies vice versa. If the risk is higher, the interest rate increases accordingly. This is how it works in developed countries. If you have a negative entry in the register, you will probably not get a loan. Let’s add that in developing countries you often don’t even have a chance to borrow.

The bank is primarily a middleman, which always has enough funds for loans and profitable investments. Commercial banks manage people’s money and lend it to other people. Banks profit from all offered financial products. Banks and financial institutions have the right to hold and use our money for their benefit. They also have the right to lend and invest money. This right is guaranteed by the states. People trust banks mostly because the state and the legal system guarantee their fair behavior. Moreover, the state is often in a position to decide who can set up a bank and what conditions it must meet. Banks thus have a kind of monopoly on making money from citizens’ money. In…