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mrbluze writes:
"An interesting blog post by Charles Hugh Smith on Why Banks Are Doomed: Technology and Risk.:
The funny thing about technology is that those threatened by fundamental improvements in technology attempt to harness it to save their industry from extinction. For example, overpriced colleges now charge thousands of dollars for nearly costless massively open online courses (MOOCs) because they retain a monopoly on accreditation (diplomas). Once students are accredited directly--an advancement enabled by technology--colleges' monopoly disappears and so does their raison d'etre.
The same is true of banks. Now that accounting and risk assessment are automated, and borrowers and owners of capital can exchange funds in transparent digital marketplaces, there is no need for banks. But according to banks, only they have the expertise to create riskless debt.
...
One last happy thought: technology cannot be put back in the bottle. The financial/banking sector wants to use technology to increase its middleman skim, but the technology that is already out of the bottle will dismantle the sector as a function of what technology enables: faster, better, cheaper, with greater transparency, fairness and the proper distribution of risk.
There may well be a place for credit unions and community banks in the spectrum of exchanges, but these localized, decentralized enterprises would be unable to amass dangerous concentrations of risk and political influence in a truly transparent and decentralized system of exchanges.
It's still early days, but can new electronic currencies such as Bitcoin become mainstream without the assent of governments?"
(Score: 4, Insightful) by Thexalon on Monday February 24 2014, @12:03PM
How exactly does technology enable student accreditation? If you're thinking that you can have students quietly sit in the comfort of their home and take tests, the problem is that anyone who really wants the accreditation but doesn't have the skills will just hire somebody else to take their test, making the accreditation worthless. The human element is necessary for verifying that somebody is as familiar with the materials as they say they are.
Good commercial banks and credit unions provide some very real services, in some cases with the assistance of the Evil Government (TM). The most important services are, in a nutshell:
1. Temporary holding of highly liquid assets in deposit accounts that are guaranteed to lose value no faster than inflation. Right now, Bitcoin exchanges can hold assets, but can't guarantee against a loss of value the way an FDIC or NCUA insured savings account can.
2. Management of a ridiculously huge number of financial transactions - you'll probably do a half-dozen or so today without thinking about it. Bitcoin exchanges can conceivably do that.
3. Risk evaluation when making loans. Bitcoin exchanges have absolutely no way of managing that right now.
Until Bitcoin has universal deposit insurance, a stable-enough value, and good risk management, it cannot replace commercial banking. It's as simple as that.
If you look at how people are using Bitcoin, there are basically 2 big camps right now:
- Those who use it as yet another foreign currency exchange.
- Those who use it as a replacement for suitcases full of cash for illegal transactions (money laundering, drug purchases, etc) thinking that it will prevent them from getting caught. This is turning out not to be true.
What I'm not seeing are people using Bitcoins extensively for either wealth storage or everyday transactions.
Every task is easy if somebody else is doing it.
(Score: 1) by starcraftsicko on Monday February 24 2014, @12:47PM
You've just reduced the role of higher education to that of a careful exam proctor. It does seem to me that it should be possible to accomplish this for less than $50,000-$100,000 per student.