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Why Dash, Monero, and Zcash failed to replace the “physical” banks

The financial industry has come a long way from the appearance of the first currency via chinese paper banknotes from the 9th century to the modern, extremely complex economic system that is difficult to maintain, even for powerful governments. We have come from the barter system to the ultra technological platforms like the Nasdaq with its 10,000 transactions that take place per second. In developed countries, you will not find it difficult to pay for purchases by credit card, take out a loan online, or send money to a friend using a mobile application. Quickly getting used to the good, we rarely think about how amazing these achievements of fintech industry actually are, which are erasing the physical boundaries and distances between people. At the same time, on a global scale, these benefits are not available to a large portion of the global population. For example, only 2% of adults worldwide have a mobile bank account.

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Modern financial industry and the unbanked problem

The portion of the population that does not have access to banking services — the so-called unbanked population, which in today’s world is estimated to be in the billions (approximately two billion people are outside the banking system) — has a special position. The main reason for these people to be excluded from the system is that they simply do not have enough money.

Luckily, cryptocurrencies can be the solution to this very problem. In Satoshi Nakamoto’s original vision, Bitcoin was created to become a revolutionary network for peer-to-peer transfers of value that will change the existing financial model. No wonder the text of the Genesis block of BTC says: “03/Jan / 2009 Chancellor on brink of second bailout for banks.” However, first-generation cryptocurrencies face serious problems when applied to the unbanked problem (see the general payment coins section).

In today’s crypto world, there are projects aimed at creating Banking-as-a-Service platforms that in the future will be able to give access to banking services to all who need it.

However, creating a widely adopted payment coin is not an easy task. Let us look at the three main types of projects that are aiming to solve this task in some way.

Niche projects

Currently, there are hundreds of coins adapted to any conceivable niches and markets: education, painting, taxi, real estate… Almost any sphere of life today accounts for one or more projects that seek to tokenize it. Let’s imagine for a moment that we live in a world where all these cryptocurrencies have spread, despite national borders and the resistance of existing centralized institutions.

Of course, this “world of a thousand cryptocurrencies” will be a very uncomfortable place to live in. For example, you are late to the airport and you urgently need to take a taxi. As luck would have it, the taxi coins you had just run out, and there is no time to exchange them. During the trip, you will have to hurry to go to your exchange to sell, for example, the donut-coins lying around in your wallet for BTC so you can buy taxi-coins for BTC. It would even be a good scenario if taxi-coins and donut-coins are both traded on one exchange (otherwise you will have to wait for confirmation of the BTC transaction from one exchange to another). If you don’t have time, you will have to persuade your driver to accept donut-coins or something else as payment. The driver will be unhappy because they don’t eat doughnuts, and he wanted to get some film-coins instead.

You haven’t even had breakfast after running into the airport. The donut-coins have been spent, and there is no time to exchange the funds. How lucky you were to prepare aero-coins in advance!

It is obvious that such an economic model will be based on a new barter exchange with a digital face. It would be strange to think that after a few millennia of economic development we will become so backward in the issue of exchange of values. The solution is obvious — you need a single means of value that is recognized by all subjects of the economy. This leads to the need to have “digital cash,” a single cryptocurrency used for a variety of payments.

General payment coins

Such a goal is shared by Dash, Monero, Zcash, and other coins, and in many ways, this is possible. For example, Dash is very popular in Venezuela, and Monero is the worldwide standard of anonymous cryptocurrency.

Nevertheless, there are two significant drawbacks to this decision, which call into question the emergence of “global digital cash” and stop these currencies from solving the unbanked problem. First, it is the low scalability and throughput of the existing blockchains: if one of the cryptocurrencies is going to become the global one and help people all over the world get access to banking services, new technical solutions will be required.

Second, it is the opposition of traditional financial institutions. No matter how many bankers do talk about their commitment to innovation, we must not forget that Bitcoin was created as a peer-to-peer network, which means that its model contradicts the modern banking system based on mediation. Anonymous coins have already been outlawed in South Korea, and regulation of the crypto industry can be expected to tighten in the coming years.

Banking as a service platforms

Last but not the least, the third group of startups that aim to solve the unbanked problem are the specific Banking-as-a-Service (BaaS) projects (do not mix this up with the Blockchain-as-a-Service projects such as Ardor).

One of the most promising projects in this area is IUNO. The main mission of this startup is to resolve the underbanked problem, and the project has some features needed to fulfill it. IUNO intends to save people from the need to interact with the “physical” bank, creating a peer-to-peer network of banking services. According to developers, “any service you expect to find in the online interface of your traditional bank will be available within your IUNO wallet,” this includes payments, deposits, wires, transfers, savings, money market, investments, loans, credit cards, etc.

Doesn’t it kind of sound like IUNO intends to replace banks in the underbanked problem solution? Not at all. IUNO’s model is based on asset or fiat-backed tokens to replace actual fiat currency. The project is using fiat-tied ABT-USD (IUNO asset-based token) while at the same time depositing USD into a traditional bank account. As the white paper says, “it prevents the system from tearing itself apart during the transition from a world that is controlled by banks to a system that is controlled by the asset holders themselves.” In other words, IUNO isn’t opposed to a banking system, but instead they use it to actively back their stable token.

IUNO’s asset-based tokens (not only in USD, but also in EUR and others) are in fact stablecoins. According to the team’s words, “they are pegged to their respective fiat currency equivalents, thereby eliminating any exchange risk, while at the same time allowing to benefit from the security and transparency of blockchain-based transactions.”

Linking their own asset-based tokens to the dollar will allow IUNO to avoid problems with financial audits as their bank accounts will always contain the amount of USD equal to the circulating amount of ABT-USD tokens.

The second half of the project is the IUNO utility token (IUNIT), which is a service-driven utility token. IUNIT is paid to redeem the IUNO asset token, which is then used to pay the masternode holders and other utility needs.

The internal wallet of IUNO will contain all tokens (including all popular cryptocurrencies, ERC20, and compatible tokens) that have at least some minimum liquidity, which will allow them to avoid the problems with conversion described above. This is one of the IUNO features that give it good universality across different niches, ultimately solving the conversion problem described above.

Surely, IUNO is not the only project working on creating a decentralized banking platform. There are a number of teams out there that focus on the specific aspects of such systems. For example, Bankex is proposing a system that allows for the easy and safe tokenization and trading of assets. Crypto Capital is offering a seamless gateway to many of the mayor exchanges with one signup and single AML/KYC verification. All these are particular pieces of what IUNO is aiming to build.

Some teams are constructing complete banking ecosystems, like Bankera and Crypterium — direct competitors of IUNO. Only time will tell which blockchain architecture is better, however, the “unbanked” market is big enough for several projects to share it.


There are several different approaches to creating a widely used payment coin. Such a cryptocurrency should have a number of properties, including high scalability, universality, and, at the very least, a connection with the traditional banking system.

Traditional cryptocurrencies like BTC are without a doubt highly valuable in their influence on the industry. However, the stumbling block is the controversy between cryptocurrencies and traditional financial institutions. A person who uses Bitcoin stores his or her assets in in the blockchain instead of a bank, and it would be naive to suppose that they will accept it dutifully. A fundamental confrontation between “crypto” and “traditional” financial models is indestructible, and thus we hardly believe that banks will ever give some “new kind of cash” to become a solution for the unbanked problem. In fact, it would not even be a solution: there is no way to imply lending, credit, or other instruments in Bitcoin core code or BTC forks. To do so, you would need a coin that supports smart contracts, which introduce a whole new circle of safety issues (like the ones that Ethereum has faced, for example the DAO hack).

What about niche projects? They have very limited utility potential and will exist only if some project solves the conversion issues (like IUNO does with their multi-currency wallet).

So we believe the future of the unbanked problem is closely connected with specified Banking-as-a-Service projects. They comprise the benefits of the blockchain and fiat-backing, which is the much needed link to the traditional financial industry.

Not all existing projects will find success, but the competition is a benefit of this sector, and sooner or later we will see a truly global payment coin.

About the author:

Kirill Shilov — Founder of and Interviewing the top 10,000 worldwide experts who reveal the biggest issues on the way to technological singularity. Join my #10kqachallenge: GeekForge Formula.

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