Cryptocurrencies and Blockchain Technology will Propel “Open Source” Banking
Bitcoin, Ethereum, 0xProject, Dharma, and Aragon are all incredible building blocks for an open source decentralized future. However, an open-source financial system requires an open-source interface to operate successfully. Balance is, therefore, leading the open-source banking movement by building a Distributed Autonomous Bank (DAB).
Evolution of Banking Systems
The banking system today is a closed-source banking system. It is one that recreates every function, competes with other banks, is accountable to governments, and are driven by quarters. An open-source banking system, on the other hand, shares every function, collaborates on standards, are verifiable by people, and are incentivized by tokens.
Burton noted one of the most significant problems with the existing banking model is the misalignment of goals. The incentives are unclear because of “back-handers, sweetheart deals, and cheeky kickbacks.”
With an open source banking system, in the long run, token engineers can design new protocols that will ensure fees charged are open and easy to understand.
“We will be able to display the costs of your token exchange, new loan or retirement account in clear terms,” said Burton. “Balance will take a small cut on these transactions and openly display it.”
Balance believes Open Source Banking is the Future
Balance recognizes that there are many components to the banking system. Banks help people store and manage money. Coinbase is therefore considered the world’s largest closed source bank when it comes to open economic protocols.
However, “one of the common complaints about Coinbase from hardcore HODLers is that the company is centralized and antithetical to the mission of these protocols,” said Richard Burton, the co-founder of Balance. “I find this argument pretty hollow. They made it easy for normal people to buy, store, and manage Bitcoin. Secondly, it can point me to a single piece of decentralized, non-custodial wallet software that is easy-to-use, I will be singing from the rooftops about it.”
Burton noted that Balance’s goal is to create a software that is non-custodial and easy to use. The interface should be easy enough for everyday people to use it without having to read a manual. It should also work infinitely better than the existing closed sourced banking system.
The idea is to allow people to control their funds without fearing the loss of their funds. They should be able to enter the website and gain access to many different financial services “powered by unstoppable economic protocols.” Burton openly admits that he is unsure whether this goal is possible, however, the Balance team is trying their best to ensure it is.
Their most considerable barriers include scalability, recoverability, and usability. Burton commented that while the Balance team see the transition to open banking as an inevitable step into the future, most people see it as unfathomable.
“At Balance, we want to buidl an open source bank that anyone can use or improve. If you do not like something we are doing, you can fork the code and change it. If you are not technical, you can try to convince people who are to change it for you.”