The Bank Don’t Have Your Money

A man called Peter walks into a bank with $100 and gives it to the bank to keep for him, the bank will have to pay him 1% because they are trying to appreciate him for leaving their money with them. Then Paul walks into the bank, and request for a loan, the bank gives Paul Peter’s $100 at a 16% interest rate. As humans, we always need money and sometimes we dont mind getting this money at any rate as long as we sort out whatever we want to do with the money. Technically, the bank has made 15% of $100 from Peter’s money, that is, from the 16% interest rate they got from Paul’s loan, they gave Peter his 1% interest back and kept the remaining 15%.

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In this process, the bank never had Peter’s money, since they signed an agreement form, Peter will have to wait till the stipulated time before he would request for money back, and Paul had to deposit a collateral worth $100 or more to take the loan, so that, should incase Paul fails to pay the loan back, the bank will have to sell the collateral to replaced the loan and interest. This is ho the banks work and have been working this way for a very long time, if every bank customer decides to withdraw all their money at once, the bank will go bankrupt and get liquidated because they dot have enough cash to return people’s money. But the world is changing, we are leaving that behind.

Crypto really changed the game and reminded us that we can actually keep our money ourselves and not necessarily keep it in the hands of people that will use our money to make more money for theirselves and give us less. Sadly a lot of us still fall for these centralised crypto platforms that also work as banks, look at the case of FTX and celsius, they ceased with people’s money. You can only be responsible for your own asset, the moment you trust another entity for your pwn asset be ready for the consequences that come with it.

Posted Using InLeo Alpha