Why Bitcoin Can't Help the Poorest, Yet

http://techcrunch.com/2016/01/10/why-bitcoin-cant-help-the-poorest-yet/

by kennethologist • 11 years ago

37 50 11 years ago

fiatmoney• 11 years ago

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.

joosters2• 11 years ago

Bit coin simply doesn't help with remittances: https://www.saveonsend.com/blog/bitcoin-money-transfer/

circlecrimson• 11 years ago

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.

CyberDildonics16• 11 years ago

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.

bduerst14• 11 years ago

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.

nadaviv• 11 years ago

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.

bduerst14• 11 years ago

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.

zevyoura• 11 years ago

M-Pesa is mentioned in the second sentence of the article.

drcross2• 11 years ago

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.

bduerst14• 11 years ago

Refunds cannot happen while being anonymous.

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.

cwyers• 11 years ago

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.

afreak3• 11 years ago

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.

drcross2• 11 years ago

Bitcoin can, and is in the process of scaling.

McGlockenshire• 11 years ago

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.

davidgerard• 11 years ago

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.

joosters2• 11 years ago

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.

CyberDildonics16• 11 years ago

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.

afreak3• 11 years ago

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.

jrochkind1• 11 years ago

What does "bitcoin is illiquid in the poorest countries" mean?

mgraczyk• 11 years ago

It is not easy to exchange Bitcoin for spendable currency in those countries.

KMag• 11 years ago

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.

Why Bitcoin Can't Help the Poorest, Yet

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