What it Means to Be Your Own Bank
|— Self-custody – also known as being your own bank – is one of the defining features of owning crypto.|
— There are many disadvantages to using traditional financial institutions, such as lack of privacy, poor returns on lending and restrictions – self custody allows you to bypass all of these and obtain full control of your money and privacy.
— Ledger’s ecosystem brings security and convenience to the process of self-custody by providing a cold storage option for your private keys, so you can focus on enjoying the advantages of decentralized finance.
Owning crypto or NFT’s means you need to be your own bank. Here, we explain what this means for your security.
Now that we’ve got a firm grip on how financial institutions offer a false sense of freedom, it’s time to look at the alternative.
By no longer relying on traditional financial institutions like banks, and cutting out the middlemen, you can take full control over your assets—and reap the rewards that come with doing so!
This state of affairs is often described as “being your own bank” since you essentially take on the role of the bank by securing your own assets and making your own rules—giving you true ownership of your money and a sense of control that few get to experience.
But what does being your own bank really entail? And how does it benefit you? Let’s get into the nitty-gritty of it to find out what being your own bank means for you.
No third-parties to pay
One of the common misconceptions about banks is that they’re free.
While it is true that you are generally able to open a bank account without paying anything upfront, when you take a deeper dive into how banks work, it becomes clear that they are more costly than they first appear.
In short, banks make money with your money. They do this by lending out a large proportion of customer deposits (i.e. your money) to borrowers—usually in the form of mortgages, short-term loans, and overdrafts—earning interest as a result.
Some of this revenue is passed down to you in the form of interest, while the rest is kept by the bank. But why keep some of the profit… when you could have all of it?
By being your own bank, you eliminate this loss of opportunity and are able to retain and access the full earnings potential of your assets. You also avoid any potentially costly overdraft costs, international payment charges, currency conversion fees, and other unexpected fees that can come with using a bank account.
There’s also no minimum balance or monthly/yearly deposit amounts, and you are free to transact with whoever you want, whenever you want, without needing authorization from anybody—how’s that for true freedom!
Keep Your Privacy
According to a 2019 poll by Next Gen Personal Finance, almost a third of those without a bank account cited privacy as one of their major concerns.
People are becoming increasingly wary of forking over their data when accessing crucial financial services.
But thanks to modern technology, privacy concerns can become a thing of the past—but achieving this requires adopting the “be your own bank philosophy” we previously touched on.
By being your own bank, you not only retain full control over your finances, but you also ensure your privacy remains intact—no more worrying about whether your private data has been sold without your knowledge or direct consent.
You’ll also be free in the knowledge that there’s no “big brother” looking over your shoulder at all times. And will be able to spend your money as you see fit without needing to think about who might be checking your bank statements later—phew!
Remain in complete control
The final tenet of being your own bank is absolute self-sovereignty over your funds. This simply means that you, and you alone have control over how your funds are accessed or used.
While this might feel daunting at first, there is no better way to be truly free. After all, when you are the only one that controls how your funds are spent and used, you no longer need to count on others.
In turn, this complete control means that you don’t need to rely on any centralized entities like banks to access your funds, and are essentially immune to the risks that come with using them.
You can think of self-sovereignty as cutting the chains that link you with traditional financial intermediaries. Though this may have been a challenge (and even unwise) just 5 or 10 years ago, a wave of decentralized alternatives now means individuals and even businesses can still access financial services—without making any sacrifices.
When you are truly financially free you should feel empowered, not restricted. This is explored further in the next piece in the financial freedom series, coming up next week!
Stay tuned to find out how cash, stocks, and gold all offer some semblance of financial freedom—but with more than a few compromises.
Knowledge is power – so keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video 3 Ways to Earn Passive Income from Crypto.