The [banks](https://leofinance.io/@leoglossary/leoglossary-bank) are under attack.  This is something they realize and are trying to adapt.  Unfortunately, the utility they provide is starting to be duplicated.

In this article we will delve into how blockchains like [Hive](https://leofinance.io/@crypto-guides/what-is-hive-crypto-hive) are starting to make the banks completely obsolete.

Most people take for granted what is in front of them. They rarely look below the surface to understand what is really taking place.  For this reason, they miss what is happening, even as it start to unfold.

Nowhere is this more accurate than with banking.  When it comes to [money](https://leofinance.io/@leoglossary/leoglossary-money), we simply take things as they are.  It is presumed that what we believe is true while the entities that were always there are necessary.

As we will show, the introduction of [Bitcoin](https://leofinance.io/@leoglossary/leoglossary-bitcoin) change a lot of things.  Since that time, technological evolution has made it even more clear: **the banks are cooked**.

![image.png](https://images.hive.blog/DQmZysh89goHGEkPEWtxyqZKXGTAmMvPE5mZ7TVPoaGwt8s/image.png)
<center>[Source](https://www.marshallstrategy.com/wp-content/uploads/2016/10/bank1.jpg)</center>

# Money

What is money?  We think we know what it is but do we really?

Certainly, we can head to the [Internet](https://leofinance.io/@leoglossary/leoglossary-internet) and get a bunch of definitions.  These will come from economists, [financial](https://leofinance.io/@leoglossary/leoglossary-finance) wizards, or agenda on Twitter.  Either way, most miss the point.

Before getting to money, it is best to uncover what the monetary system is.  Here again, few think about something they utilize daily and what it is.

In short the monetary system is the combination of [accounting](https://leofinance.io/@leoglossary/leoglossary-accounting) and communications.  We  have a global communications network that is utilized to send money all over the world.  This is done because money resides on [ledgers](https://leofinance.io/@leoglossary/leoglossary-ledger).  Thus, transferring is really altering the different account balances.

This is what banks do.  

Consider when you log onto your account.  There is where you see the money.  What happens when you pay a bill?  Obviously there are a lot of steps involved but the bottom line is the money moves from your account to that of another.

In other words, the ledger is altered.

Hence, money is also not what most think.  It is not currency as such.  Instead, it is a ledger system made up of balance sheets.

Here again, this is where banks come in.  Not only do the commercial banks create most of the national [currency](https://leofinance.io/@leoglossary/leoglossary-currency) through lending, they also generate a vast amount of "shadow" money.

It got so bad that people like Alan Greenspan, as Chair of [the Fed](https://leofinance.io/@leoglossary/leoglossary-federal-reserve-bank-the-fed), admitted in an [FOMC](https://leofinance.io/@leoglossary/leoglossary-federal-open-market-committee-fomc) meeting that it could not even find money anymore.  

>The problem is that we cannot extract from our statistical database what is true
money conceptually, either in the transactions mode or the store-of-value mode. One of the reasons, obviously, is that the proliferation of products has been so extraordinary that the true underlying mix of money in our money and near money data is continuously changing. As a consequence, while of necessity it must be the case at the end of the day that inflation has to be a monetary phenomenon, a decision to base policy on measures of money presupposes that we can locate money. And that has become an increasingly dubious proposition. 

<center>[June 2000 FOMC Meeting P. 82]</center>

The reason why the Fed, 22 years ago, had lost what money was comes from the fact the international banking system created an assortment of financial products that it used as money.  Most of this operated outside any of the usual [fiat currencies](https://leofinance.io/@leoglossary/leoglossary-fiat-currency) people have come to know.

# Blockchain Enters The Picture

What is a [blockchain](https://leofinance.io/@leoglossary/blockchain)?

At its core, it is really a [node](https://leofinance.io/@leoglossary/leoglossary-node) network that maintains a [decentralized](https://leofinance.io/@leoglossary/leoglossary-decentralization) ledger of [transactions](https://leofinance.io/@leoglossary/leoglossary-transaction).  This is one of the revolutionary aspects of Bitcoin.  

However, if we step back, isn't that what we just said our monetary system is?  We combine accounting (ledger) with communications (computer [network](https://leofinance.io/@leoglossary/leoglossary-network)).  That is blockchain.

This is one of the biggest problems banks have.  Their relevance came, in large part, from the control of the master ledger.  They were responsible for determining the balances of each account and adjusting as necessary.

With [cryptocurrency](https://leofinance.io/@leoglossary/cryptocurrency), blockchain handles this without the need for third parties.  The evolution of [triple-entry accounting](https://leofinance.io/@leoglossary/leoglossary-triple-entry-accounting) means we have entries that are debits and credits as well as being applied to the blockchain.

This fundamental premise is revolutionary.  **It also cannot be stopped.**

Consider what we experience daily on Hive.  Each time we open our [wallets](https://leofinance.io/@leoglossary/leoglossary-wallet), there is our balance.  We also can use a block explorer like Hiveblocks and see all the transactions that occurred.  Of course, there are no humans involved in the process.

Hive, like all databases of this nature use [distributed ledger technology (DLT)](https://leofinance.io/@leoglossary/leoglossary-distributed-ledger-technology-dlt).  That means each transaction is added (in [blocks](https://leofinance.io/@leoglossary/leoglossary-block)) to the software that is run on over 100 computers globally.  All carry the same information and sync up each time a new block is added.

Ultimately, this is where we arrive at [consensus](https://leofinance.io/@leoglossary/leoglossary-consensus).  The [protocols](https://leofinance.io/@leoglossary/leoglossary-protocol) within the different blockchains are used to determine what is where.

This is how the foundation of the monetary system is being altered.  It isn't changing so much in what is done, **only who is doing it**.

With the present system, that consensus is the responsibility of the banks.  In cryptocurrency, this falls to the chains themselves.

# The Creation Of Money

Many want to allude to the thousands of different cryptocurrencies that were created and how they are worthless.  It is true that many are just that.  It does not come, however, from the addition of another cryptocurrency.  Instead, it simply is the lack of utility.  Without use, there is no value.

The international banking system uses all kinds of [assets](https://leofinance.io/@leoglossary/leoglossary-asset) as money.  Anything on the [balance sheet](https://leofinance.io/@leoglossary/leoglossary-balance-sheet) can potentially be collateralized.  In that market, that is what money truly is: [collateral](https://leofinance.io/@leoglossary/leoglossary-collateral).

We see the same thing within the world of cryptocurrency.  Money is a lot more than just a [medium of exchange](https://leofinance.io/@leoglossary/leoglossary-medium-of-exchange).  In fact, to replace the present system, we need a lot more sophistication.  That means getting into the world of [derivatives](https://leofinance.io/@leoglossary/leoglossary-derivative) and starting the process of borrowing, lending, and remittance.  At the same time, we need to develop [markets](https://leofinance.io/@leoglossary/leoglossary-market) and [exchanges](https://leofinance.io/@leoglossary/leoglossary-exchange) around this.

Naturally, this is where [decentralized finance (DeFi)](https://leofinance.io/@leoglossary/leoglossary-decentralized-finance-defi) enters the picture.  The industry toyed with some of this even in its early stages.  As we can see, the [bear](https://leofinance.io/@leoglossary/leoglossary-bear-market) is clearing out a lot.  The challenge is the typical players from [Wall Street](https://leofinance.io/@leoglossary/leoglossary-wall-street) and Silicon Valley operated like it was business as usual.  This is causing a lot of [bankruptcies](https://leofinance.io/@leoglossary/leoglossary-bankruptcy) as the [leverage](https://leofinance.io/@leoglossary/leoglossary-leverage) is washed away.

For this to take place, smart contract capability is required.  This is an area that Hive was traditionally light in.  There are, however, a number of project underway that will increase this capability.

When we step back and look at the overall market, we see Bitcoin as a network that cannot be shut down.  Nor can it be taken over.  The same is likely true for Hive.  These two have the decentralized feature to keep going.

After that, is gets questionable.  Due to [Founders stakes](https://leofinance.io/@leoglossary/leoglossary-founders-stake), there could be points of vulnerability.  Either way, not everything is going to be hit by regulators.  That mean, collectively, the tsunami is underway.  

An understanding of the banking system, especially the wholesale end of things, reveals how exposed this industry is.  Their role in maintaining the monetary system is no longer required.  The alternative that is being created removes the human element while also reducing the [transaction fees](https://leofinance.io/@leoglossary/leoglossary-transaction-fee) the banks change. On Hive, if a wallet has enough [Resource Credits](https://leofinance.io/@leoglossary/leoglossary-resource-credits-rc), there is no fee for the transaction. 

Concepts like this are revolutionary and something the banking industry cannot compete with.

___
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