The idea that Bitcoin and other cryptocurrencies pose a threat to incumbent financial institutions was real and much less imminent or existential was long limited to enthusiasts’ forums, dedicated sub reddits and certain corners of Twitter.
While decentralized financial networks could threaten banks’ long-term viability, the immediate threat posed by bitcoin and its peers is negligible. Bitcoin has several widely acknowledged flaws, which its detractors see as crippling. It can process only a handful of transactions per second, compared to the tens of thousands major credit card networks can handle. Its quasi-anonymity makes its use dicey if not illegal for certain applications, particularly by heavily regulated institutions. Its price in fiat terms is so volatile that accepting a salary or taking out a mortgage in bitcoin would be extremely risky. Finally, it’s occasionally high and unpredictable fees make it all but worthless for small transactions.
But despite all these flaws, Bitcoin and its peers enable something that has never been possible in human history: transacting at a distance without placing trust in an intermediary. Banks’ business models depend on their role as trusted nodes in a centralized financial system. Replacing them with a decentralized network remains firmly in the realm of theory. Bitcoin and other blockchain-based assets offer distributed networks in which value can be transferred trusting no single party, such as a bank.