Decentralized Banking as a Replacement for Traditional Banking using Blockchain Technologies

Abstract

This paper investigates the rapidly evolving model of decentralized banking and evaluates its potential to supplant conventional banking systems. As blockchain technology and decentralized finance (DeFi) continue to evolve, they are reshaping the financial services landscape. This study traces the historical development of traditional banking [6], delves into the technical foundations and advantages of decentralized banking, and scrutinizes the associated challenges. By synthesizing insights from a comprehensive literature review, various case studies, and an in-depth analysis of regulatory, technological, and socio-economic factors, that the paper posits despite offering enhanced transparency, improved accessibility, and greater efficiency [5], decentralized banking still faces significant hurdles particularly in areas such as regulatory compliance, scalability, and user adoption—before it can fully replace traditional banking.