Bitcoin or its relatives is an excellent way to drive down the cost of sending remittances. The US poor do not depend on them, but in many areas they are a substantial part of the local economy. Initial retail liquidity isn't as much of a problem as you'd think if you have the equivalent of wholesalers making a market.
But yes, in general the existence of new cash-like asset classes isn't that helpful to people with ~no cash assets.
Bitcoin helped me with servicing my loan in my home country when I was earning in another currency. I escaped foreign exchange fees. Its a use case that a lot of people have but it's unfortunate that the most vocal people telling us bitcoin can't do something are those who don't seem to have that need for its use.
There is no truth to that and I'll tell you why - a bitcoin ATM in one country and a bitcoin ATM in another country are all you need.
If the combined spread is less than a money transmitter, then you save money. It is very simple. Many exchanges have around a %1 spread. Many remittance services are 10% or more. This is not rocket science and the article you linked to is from a service threatened by cypto-currencies.
The author is ignoring the fact that there are no refunds with bitcoin.
He talks about predatory banking, but the finality of bitcoin transactions and lack of competitive insurance makes it even easier to scam the "unbanked". Bitcoin is also only pseudo-anonymous, and is more complicated to use than cash.
The Bill & Linda Gates backed M-Pesa fits most of the criteria laid down in the article, much more than bitcoin, but seeing as that is a competitor of Freemit (the author is the CEO), I don't think they're going to go into it.
The multi-signature feature in the bitcoin scripting language allows to add a refund process into bitcoin transactions. Bitrated, which I founded, provides consumer protection using that mechanism and a marketplace for dispute resolution service providers.
Multisig escrow doesn't solve the refund use cases and isn't new/unique to bitcoin. There are plenty of use cases where a refund is needed just a day after the transaction is complete (defective items, economic hold up, etc.).
It can also be gamed if the additional parties are in on the scam, which requires a level of trust that the article says the unbanked do not have.
Credit cards can be gamed if Mastercard is in on the game, but that not something anyone worries about. Multisig escrow doesn't do away with the need for a trusted adjudicator, it just makes it possible to have one for Bitcoin.
> Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.[citation needed]
> Rules and regulations that govern the ACH network are established by NACHA and the Federal Reserve. In 2013, this network processed nearly 22 billion ACH transactions with a total value of $38.7 trillion.[1] Credit card payments are handled by separate networks.
>The author is ignoring the fact that there are no refunds with bitcoin.
The author's first point was that "the unbanked want to remain anonymous". Refunds cannot happen while being anonymous.
Bitcoin is a replacement for cash, not an pseudo escrow service which we have come to expect in the western world with credit cards. Transactions are built on end-user trust. Credit card companies introduce a third party into the transaction which costs money. This is not a bug of bitcoin, it's a feature. The services you are referring to can, however, be built on top of the bitcoin system.
Preferring anonymity != preferring no payment disputes.
Bitcoins are also only pseudo-anonymous, and every transaction is publicly available making it less anonymous than a closed payments system or cash.
This rhetoric that apologizes for Bitcoins design flaws ("it's a feature not a bug") is detrimental to future blockchain implementations that could design a competitive solution to refunds.
Nope. It's even easier to mod an automobile because it doesn't require a consensus from the mechanics (miners) to make a change. See the block chain size debate if you're still unconvinced.
There are many companies already building services on top of bitcoin, it doesn't take a change to the protocol and therefore it doesn't take any permission or consensus from anyone. I can't tell if you have a fundamental ignorance of crypto currencies or if this was an intentional straw man, but either way it is so far from being rational I'm not even sure how you would come up with it except for maybe learning about bitcoin through a game of gossip rather than reading or experience.
> The author's first point was that "the unbanked want to remain anonymous"
That seems wrong, and also self-serving. I doubt the people who are cashing their checks into prepaid debit cards at Wal-Mart are doing it for anonymity.
Why do people assume that Bitcoin is going to revolutionize the banking sector when it cannot even scale? Why would we want to subject the poorest to a system that won't be able to handle at best more than a handful of transactions per second?
Bitcoin is literally a bottom-tier system and suggesting that we use it to help those who are financially not-well-off is insulting.
Transactions per second are bound to the block size.
The mining groups in China are against raising the block size because of bandwidth and other realistic concerns.
The core developers, many of whom are employed by a company that has a business model that has a higher chance of success if bitcoin does not raise the block size, can neither agree that the block size needs to be increased, nor how to perform the increase, nor to what size to increase it to. Even if they could agree, the Chinese miners wouldn't update their software, and we'd end up with a forked blockchain.
The primary places where bitcoin is discussed are moderated by a single individual that considers things like XT and implementations of BIP-101 to be altcoins and actively shuts down discussions about them and other block size increases.
It seems to me that bitcoin isn't in the process of scaling at all.
Bitcoin is designed for having rational actors as miners. The miners profit less from the larger block sizes, and since they control the block size it's not going to happen.
Bitcoin users who think the miners will do it "for the good of bitcoin" don't realize that the entire bitcoin ecosystem is built on the miners acting in their own best interest, not bitcoin's.
If the bitcoin consumers were king, then the majority of them would collude and stop hoarding their bitcoins.
But they can't, because they're rational like the miners. Bitcoins are deflationary and always going to be traded as an asset, for which the small block size suffices and the Miners will continue to profit from. The bitcoin consumers can as much influence the miners as they can influence each other to voluntarily lose wealth.
I wouldn't call that a tragedy of the commons. I would call that "capitalism" because it is exactly the relationship between the owners of the means of production and everyone else.
"But anyone can become a miner" so it's free as in market and fair as in game. /s
It's tragedy of the commons because the miners are trying to reap from a shared resource, with no alignment to the changes that are beneficial for Bitcoin.
Miners profit from increased competition (for transactions to be included in smaller blocks) increasing the transaction fees. Only transactions with the highest fees are put into blocks.
It was proven several times with the "stress tests" of Bitcoin network.
> It was proven several times with the "stress tests" of Bitcoin network.
An attack on the network doesn't prove anything about the economic incentives that make up the mechanics of the system. Bigger blocks hold more data and transactions pay by the kilobyte. That's all there is to it.
Increased fees per transaction may give more money in the short term, but ultimately it isn't how a crypto currency will be sustained, because at any point a fork could have lower fees.
It's simple supply and demand. The less supply increases the demand for transactions and transaction fees. Larger blocks have way more supply and thus the fees are a minimum. Miners know this which is why they're not increasing block size.
There is nothing short term about it. The more competition the greater the fees and profits in the long run.
Miners haven't yet increased the block size because the Chinese miners are both risk adverse and afraid that any increase will give them more latency, which could reduce their mining competitiveness.
As soon as transactions are legitimately getting hung up with reasonable fees, any of the thousands of forks have the potential to fill the void and decrease fees since there is no real technical limit to blocksizes in the same orders of magnitude.
So what you are forgetting is competition in your model of supply and demand.
Miners will do what is most profitable for themselves. If they can double the amount in fees that they mine without halving the number of blocks they mine, they will do it, because they will make more money that way. This is much more likely than not since the latency introduced to block propagation from something like 1MB to 2MB is insignificant compared to the probability that someone else will mine another block and propagate it first.
The blocksize increase you're describing only benefits a single individual once. Once increased and there is no more competition, transaction fees drop to almost nothing again for all miners.
Bitcoin prevents individuals from making these one-time power grabs by design. Even if they colluded, the miners are not going to agree to increase the blocksize because it immediately means less money for 99.999% of them.
Again, it's tragedy of the commons. They could work together to make the shared resource better for someone trying to use Bitcoin as a day to day currency, but instead they're rationally maximizing their own returns.
> The blocksize increase you're describing only benefits a single individual once. Once increased and there is no more competition, transaction fees drop to almost nothing again for all miners.
This isn't true now and it hasn't been for quite a while now, transactions need to carry fees to go through because miners have another choice that you happen to overlook - they don't have to mine a transaction if they don't want to. Miners can ignore transactions and let another miner mine them. This is actually beneficial for them because it decreases their blocksize and therefore their latency. If a miner mines a block unusually quickly by chance and wants to be generous, they can include more low fee transactions but I'm not sure this something anyone is doing automatically.
So it isn't the bleak outlook you describe because mining small fee transactions isn't to anyone's benefit.
> The base transaction fee to cover latency is magnitudes less than that to be included in a competitive smaller block.
None of this makes any sense at all, the words don't even go together in the context of bitcoin. It is isn't even coherent enough to be true or false, it reads more like some sort of auto generated nonsense. Do you even understand what I said earlier?
I get that you have some sort of vendetta against bitcoin but stringing words is pretty desperate.
The Chinese miners are worried about the block size _LIMIT_ (not the block size) getting too much bigger so that their greater latency reduces their mining effectiveness. They aren't against any increase as far as I know.
The criticism isn't invalid, but I think the pessimism is. The miners are ultimately in control, not the blockstream idiots.
Bitcoin can't - the transaction limit is in the protocol. The community has bitterly resisted all attempts to raise it, so the only way around it are various proposals to use sidechains, i.e. altcoins somehow pegged to Bitcoin. None of these have achieved running code as yet.
When an article simply states, with absolutely no attempt at justification, 'But how do you solve this? Bitcoin will be the solution', you can just give up there and then. The author is a lost cause.
There are literally already lots of people in other countries who are saving a larger percentage of their money by using bitcoin even if they don't know it. Remittances from Filipino maids in southeast asia are already an up and coming area. All they do is go to a small stall in a shopping mall, and all their family has to do is go to a small stall in a shopping mall in Manila. Now any two people can set up a back and forth settlement using btc.
And how many of these anecdotes do you have going here? BTC is not simple enough to allow regular people to send remittances to other countries.
Also you're willfully ignoring the fact that Bitcoin doesn't scale. Are you telling me that people who send their money overseas are going to wait for BTC to process their payment which may take an insane period of time seeing that right now Bitcoin can only process 1-3 transactions per second?
What is in place right now works fine for those who want to send money overseas to their families. Hell, it doesn't require a day's worth of electricity consumption by an average home to do so.
> BTC is not simple enough to allow regular people to send remittances to other countries.
They are using companies to do it. There are also multiple bitcoin atms in other countries. Also a company in thailand has made it so anyone can send btc to a code, and someone using that code can get cash from the atm.
> Are you telling me that people who send their money overseas are going to wait for BTC to process their payment which may take an insane period of time seeing that right now Bitcoin can only process 1-3 transactions per second?
This is so far off base I have to wonder if you have even used bitcoin or if you are just threatened by it in some way. I've bought things with it many times including very recently. Transactions take 1-2 seconds to show up, and the same 10 minutes per miner confirmation that they always have (coinbase will let you use money after 3 confirmations).
> What is in place right now works fine for those who want to send money overseas to their families. Hell, it doesn't require a day's worth of electricity consumption by an average home to do so.
Both of these things are total bullshit. Gouging people who already have very little money for 11% just for them to send it to their families is not 'working' and your electricity idea is so ridiculous I think the burden of proof is on you ( and keep in mind that more transactions don't use up more electricity).
> They are using companies to do it. There are also multiple bitcoin atms in other countries. Also a company in thailand has made it so anyone can send btc to a code, and someone using that code can get cash from the atm.
Have you ever used a Bitcoin ATM? Because I have as I wanted to see how ridiculous the process was. To use the ATM it took me 45 minutes to make a transaction go through. Sure. To you, the person who's defending Bitcoin, it might possibly be acceptable, but to the average person they'll pay the 11% or whatever fee if it means that they don't have to wait for some feckless machine to artisanally process their transaction.
> our electricity idea is so ridiculous I think the burden of proof is on you
You used one awkward bitcoin ATM and now the process can't work? How would you even spend 45 minutes at an ATM? Which model was it? Where was this?
There are buy only bitcoin ATMs that take cash and print out a QR code. I think most people could figure that out. Again though, there are remittance companies operating right now that do the process for someone.
Even taking the article's numbers at face value even though it is not exactly the most objective (equating using bitcoin to destroying the environment may skip a few logical steps) that would still mean that each transaction costs about 57 cents (average household electricity usage time the upper bound estimate of electricity in China, where the article focuses).
This is all ignoring what I said preemptively, which is that electricity usage isn't a function of transactions. Transactions don't use up more electricity. Let that soak in if you need a moment. When there are more transactions, the cost per transaction goes down. The more people that use it, the more efficient it is, electricity wise.
I get that you have some sort of vendetta against bitcoin, and maybe cryptocurrencies in general, but you should figure out some legitimate arguments instead of trying to backwards rationalize why it wont' work when it is actually working right now. It works, it is working, get over it.
Specifically, there are several quantitative measures of liquidity, and they're generally correlated. In particular, the average bid-ask spread (the time-weighted or trade-volume-weighted average between the lowest asking price from local BTC sellers and highest bid from local BTC buyers) and the average daily trade volume (add up the number of BTC exchanged to or from local currency in an average day). Low liquidity generally means wide spreads and low trade volumes. As a result, if you want to convert BTC into local currency in the morning to buy chickens in the market and convert your chicken soup earnings back into BTC in the afternoon, you're going to either buy high and sell low crossing the bid-ask spread each time, or you're going to wait a long time for someone else to cross the spread and fill your orders. Of course, you can offer price improvement, allowing a whole range of price-time tradeoffs, but time is going to be expensive all along the tradeoff curve.
52 comments
[ 5.2 ms ] story [ 139 ms ] threadBut yes, in general the existence of new cash-like asset classes isn't that helpful to people with ~no cash assets.
If the combined spread is less than a money transmitter, then you save money. It is very simple. Many exchanges have around a %1 spread. Many remittance services are 10% or more. This is not rocket science and the article you linked to is from a service threatened by cypto-currencies.
He talks about predatory banking, but the finality of bitcoin transactions and lack of competitive insurance makes it even easier to scam the "unbanked". Bitcoin is also only pseudo-anonymous, and is more complicated to use than cash.
The Bill & Linda Gates backed M-Pesa fits most of the criteria laid down in the article, much more than bitcoin, but seeing as that is a competitor of Freemit (the author is the CEO), I don't think they're going to go into it.
It can also be gamed if the additional parties are in on the scam, which requires a level of trust that the article says the unbanked do not have.
Again, escrow is neither new nor unique to Bitcoin. It doesn't solve the refund problems. Why do you think it's not used by modern payment systems?
I agree but that's what credit cards are.
Do you not know how credit cards work?
> Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.[citation needed]
> Rules and regulations that govern the ACH network are established by NACHA and the Federal Reserve. In 2013, this network processed nearly 22 billion ACH transactions with a total value of $38.7 trillion.[1] Credit card payments are handled by separate networks.
The author's first point was that "the unbanked want to remain anonymous". Refunds cannot happen while being anonymous.
Bitcoin is a replacement for cash, not an pseudo escrow service which we have come to expect in the western world with credit cards. Transactions are built on end-user trust. Credit card companies introduce a third party into the transaction which costs money. This is not a bug of bitcoin, it's a feature. The services you are referring to can, however, be built on top of the bitcoin system.
Preferring anonymity != preferring no payment disputes.
Bitcoins are also only pseudo-anonymous, and every transaction is publicly available making it less anonymous than a closed payments system or cash.
This rhetoric that apologizes for Bitcoins design flaws ("it's a feature not a bug") is detrimental to future blockchain implementations that could design a competitive solution to refunds.
That seems wrong, and also self-serving. I doubt the people who are cashing their checks into prepaid debit cards at Wal-Mart are doing it for anonymity.
Bitcoin is literally a bottom-tier system and suggesting that we use it to help those who are financially not-well-off is insulting.
The mining groups in China are against raising the block size because of bandwidth and other realistic concerns.
The core developers, many of whom are employed by a company that has a business model that has a higher chance of success if bitcoin does not raise the block size, can neither agree that the block size needs to be increased, nor how to perform the increase, nor to what size to increase it to. Even if they could agree, the Chinese miners wouldn't update their software, and we'd end up with a forked blockchain.
The primary places where bitcoin is discussed are moderated by a single individual that considers things like XT and implementations of BIP-101 to be altcoins and actively shuts down discussions about them and other block size increases.
It seems to me that bitcoin isn't in the process of scaling at all.
Bitcoin is designed for having rational actors as miners. The miners profit less from the larger block sizes, and since they control the block size it's not going to happen.
Bitcoin users who think the miners will do it "for the good of bitcoin" don't realize that the entire bitcoin ecosystem is built on the miners acting in their own best interest, not bitcoin's.
But they can't, because they're rational like the miners. Bitcoins are deflationary and always going to be traded as an asset, for which the small block size suffices and the Miners will continue to profit from. The bitcoin consumers can as much influence the miners as they can influence each other to voluntarily lose wealth.
"But anyone can become a miner" so it's free as in market and fair as in game. /s
It was proven several times with the "stress tests" of Bitcoin network.
An attack on the network doesn't prove anything about the economic incentives that make up the mechanics of the system. Bigger blocks hold more data and transactions pay by the kilobyte. That's all there is to it.
Increased fees per transaction may give more money in the short term, but ultimately it isn't how a crypto currency will be sustained, because at any point a fork could have lower fees.
There is nothing short term about it. The more competition the greater the fees and profits in the long run.
As soon as transactions are legitimately getting hung up with reasonable fees, any of the thousands of forks have the potential to fill the void and decrease fees since there is no real technical limit to blocksizes in the same orders of magnitude.
So what you are forgetting is competition in your model of supply and demand.
Miners will do what is most profitable for themselves. If they can double the amount in fees that they mine without halving the number of blocks they mine, they will do it, because they will make more money that way. This is much more likely than not since the latency introduced to block propagation from something like 1MB to 2MB is insignificant compared to the probability that someone else will mine another block and propagate it first.
Bitcoin prevents individuals from making these one-time power grabs by design. Even if they colluded, the miners are not going to agree to increase the blocksize because it immediately means less money for 99.999% of them.
Again, it's tragedy of the commons. They could work together to make the shared resource better for someone trying to use Bitcoin as a day to day currency, but instead they're rationally maximizing their own returns.
This isn't true now and it hasn't been for quite a while now, transactions need to carry fees to go through because miners have another choice that you happen to overlook - they don't have to mine a transaction if they don't want to. Miners can ignore transactions and let another miner mine them. This is actually beneficial for them because it decreases their blocksize and therefore their latency. If a miner mines a block unusually quickly by chance and wants to be generous, they can include more low fee transactions but I'm not sure this something anyone is doing automatically.
So it isn't the bleak outlook you describe because mining small fee transactions isn't to anyone's benefit.
The point still stands, and you're demonstrating confirmation bias. How much money have you put into Bitcoin, I wonder?
None of this makes any sense at all, the words don't even go together in the context of bitcoin. It is isn't even coherent enough to be true or false, it reads more like some sort of auto generated nonsense. Do you even understand what I said earlier?
I get that you have some sort of vendetta against bitcoin but stringing words is pretty desperate.
The criticism isn't invalid, but I think the pessimism is. The miners are ultimately in control, not the blockstream idiots.
Also you're willfully ignoring the fact that Bitcoin doesn't scale. Are you telling me that people who send their money overseas are going to wait for BTC to process their payment which may take an insane period of time seeing that right now Bitcoin can only process 1-3 transactions per second?
What is in place right now works fine for those who want to send money overseas to their families. Hell, it doesn't require a day's worth of electricity consumption by an average home to do so.
They are using companies to do it. There are also multiple bitcoin atms in other countries. Also a company in thailand has made it so anyone can send btc to a code, and someone using that code can get cash from the atm.
> Are you telling me that people who send their money overseas are going to wait for BTC to process their payment which may take an insane period of time seeing that right now Bitcoin can only process 1-3 transactions per second?
This is so far off base I have to wonder if you have even used bitcoin or if you are just threatened by it in some way. I've bought things with it many times including very recently. Transactions take 1-2 seconds to show up, and the same 10 minutes per miner confirmation that they always have (coinbase will let you use money after 3 confirmations).
> What is in place right now works fine for those who want to send money overseas to their families. Hell, it doesn't require a day's worth of electricity consumption by an average home to do so.
Both of these things are total bullshit. Gouging people who already have very little money for 11% just for them to send it to their families is not 'working' and your electricity idea is so ridiculous I think the burden of proof is on you ( and keep in mind that more transactions don't use up more electricity).
Have you ever used a Bitcoin ATM? Because I have as I wanted to see how ridiculous the process was. To use the ATM it took me 45 minutes to make a transaction go through. Sure. To you, the person who's defending Bitcoin, it might possibly be acceptable, but to the average person they'll pay the 11% or whatever fee if it means that they don't have to wait for some feckless machine to artisanally process their transaction.
> our electricity idea is so ridiculous I think the burden of proof is on you
http://motherboard.vice.com/read/bitcoin-is-unsustainable
There's your proof, CyberDildonics.
There are buy only bitcoin ATMs that take cash and print out a QR code. I think most people could figure that out. Again though, there are remittance companies operating right now that do the process for someone.
Even taking the article's numbers at face value even though it is not exactly the most objective (equating using bitcoin to destroying the environment may skip a few logical steps) that would still mean that each transaction costs about 57 cents (average household electricity usage time the upper bound estimate of electricity in China, where the article focuses).
This is all ignoring what I said preemptively, which is that electricity usage isn't a function of transactions. Transactions don't use up more electricity. Let that soak in if you need a moment. When there are more transactions, the cost per transaction goes down. The more people that use it, the more efficient it is, electricity wise.
I get that you have some sort of vendetta against bitcoin, and maybe cryptocurrencies in general, but you should figure out some legitimate arguments instead of trying to backwards rationalize why it wont' work when it is actually working right now. It works, it is working, get over it.