How Payments Work

In traditional payments, banks keep records on a ledger of who owns what. Assume we have Alice and Bob, and Alice wants to pay Bob. Alice authenticates with a bank to prove she is Alice. The bank updates the ledger, debits the money from Alice's account, and credits Bob's account.

Pros

• Digital payments using banks ensure that the two parties don't have to be in the same location.

Cons

• The bank must be online.
• Privacy concerns.
• The bank can censor transactions.