Can Crypto bank the unbanked?
Bitcoin was created for multiple reasons, one of them being to help bank the unbanked. Because crypto networks like Bitcoin only need an app on your phone to store your money. Having a bank account won’t be a necessity anymore.
This makes it possible for those that can not open a bank account to still have a way to pay online and store their money. Without having to put all that money under their mattress. Countries like El Salvador and the Central Republic of Africa have already realized this and accepted Bitcoin as their national currency. Thus legalizing Bitcoin. Both of these countries have a large percentage of their population unbanked. So adopting a cryptocurrency that brings financial inclusion to those that can not open a bank account, seems like the smart move to make.
Although you will still need to have a phone or other computer device to access any crypto network. More people in a lot of developing countries have mobile phones than bank accounts. Making the adoption of crypto more accessible than the adoption of bank accounts. For countries that do not even have their own national currency and depend on the currency of another nation. There is no good reason to not adopt a strong cryptocurrency like Bitcoin as a primary or secondary currency. As their people would only benefit from a strong decentralized hard money, that they can control themselves.
Can I use Bitcoin as a bank account?
If you have a Bitcoin wallet, it basically functions as a bank account in your pocket. A Bitcoin wallet can store as much BTC on it as you would like. But just as with keeping cash in your pocket. There is a risk of it being stolen. So diversifying it might be a good idea instead of holding your BTC all in one place.
If you would happen to be unbanked and want to use Bitcoin as your Bank account. You might want to consider spreading your BTC over more than one address. And making strong backups of all your accounts. Bitcoin does function as a bank account. But you will be in full control of that bank account. Which makes you also fully responsible for it.
When you hold your own BTC and decide to be your own bank you might also want to use some financial instruments to use that money. More and more stores start to accept BTC making it already one of the most usable currencies around the world. So spending should not be a problem especially as you can use intermediates to pay almost anywhere with BTC. But if you decide you want to also earn some interest on your BTC and still stay in full control. You could take a look at Bitcoin DeFi. Because DeFi protocols can help you earn a yield via collateralized loans that function on the blockchain. Making it so that you will still be in full control and can also use some financial instruments that a bank normally would offer.
How Crypto wallets function as your own bank
A crypto wallet functions essentially like your own bank account on your device of choice. So if you have a crypto wallet on your phone you basically have a bank in your pocket. With a crypto wallet, you can interact a blockchain of choice which will allow you to use a lot of financial instruments but also gives you access to play to earn games and NFT ecosystems. Which can be fun and sometimes also a little bit lucrative.
When you have used a crypto-wallet as a bank account you will see that crypto is not just about making money. But rather that it can be a super useful banking tool that can give you more freedom in a world that does not distribute wealth and opportunities equally. And can open you up to a world where your data and time are valued more.
The lightning network and wallet providers
One way to get started with all of this is by starting out with your own crypto wallet. But for some, it might be hard to start and put capital on it right away. That is why more and more ecosystems spin up those pay users small amounts for games or activities online. Giving more value to your online activities.
One of these systems that can work on a Bitcoin lightning gaming ecosystem is Zebedee. Their Zebedee wallet lets you set up a Bitcoin lightning wallet with your Google, Facebook, or email address. This makes it super easy and with their great design you will understand the wallet in no time.
On top of their wallet, they have built an ecosystem of Bitcoin games. These games pay players directly over the lightning network into their Zebedee wallets. Which can be a great start to getting into the BTC ecosystem. Especially for those that are unbanked and might not have access to convert their cash into BTC via a bank account or Bitcoin ATM. So this way they can earn some Sats (the smallest unit of BTC) and use this to transact with others or save it up for later.
If holding your own crypto is not for you. Then you could always try to go for a crypto bank. Although this is not 100% a thing yet. Some companies basically function as a crypto banks. With companies like NEXO and Coinloan that offer you high-interest rates on your cryptocurrencies, with the flexibility to withdraw them at any time. With even the same features for fiat currencies.
Although these so-called crypto banks might require you the same things as setting up a regular bank account might require you to have. For many people that can open one, it can bring more functionality to their crypto in a form of yield.
If you however can not set up a crypto bank account and hold your crypto on-chain. You could always find the same set of products in DeFi protocols. With hundreds of DeFi protocols on many different blockchains, which offer you a large variety of financial instruments. Many of these are listed on websites like Dapp radar where you can have a nice overview of the protocols and browse through them.
Can I use Coinbase or other exchanges as a savings account?
On crypto exchanges, users can buy and sell cryptocurrencies at a fast pace. But besides trading, most exchanges also offer other financial products these days. Some of them give you the option to earn a yield on your fiat and/or crypto. So if you have a Coinbase account and want to use their savings rate account as your savings account. You can do that.
However, a Coinbase account is compliant with all the necessary regulations. It does not have the same rules apply to it as a bank savings account. Which means it might bear a bit more risk. But a bank account might not really give you any interest on a yearly basis. Whereas a Coinbase account does. This makes it much more interesting for people already familiar with crypto to store their fiat and crypto on an exchange that offers a higher yield than their bank.
The yields diver per exchange with Coinbase and Binance giving quite the low yields on savings accounts. But also more security to higher yielded products. What is best for you depends still on your own personal decisions. And you should keep in mind that when it comes to your finances you still are responsible for it all.
Decentralized financial products on the blockchain
When you bank yourself with crypto, you might want to look more into DeFi products. DeFi stands for Decentralized Finance. This refers to financial applications on a blockchain. That anyone can use without having to ask permission. This can be great as you do not have to be controlled by a bank and have to wait for their work hours and long processes. Instead, you could simply swap your (game) tokens on a DEX and use the coins or tokens for something else. DeFi lets you make use of all that you have online and can run on a blockchain, from game items to simple BTC.
DeFi products are many and there are new products being developed every day. For people that do have access to a blockchain network and not to any bank account. DeFi is the go-to solution. Because no one needs to give you permission to start using it. And you can do so from your phone.
When we talk about banking the unbanked, two things might be most important. And those two things are giving unbanked people the option to bank themselves and store their money, and the second would be for them to use that money to be included in the global financial system. So they would not have to miss out on opportunities that can occur there.
We hope this blog thought you how crypto can serve the unbanked and that if you are unbanked, you now understand a bit better how to help yourself. If you are unbanked and want to start with crypto please take a look at our wallet finder feature and choose a crypto wallet that suits you best.
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