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Comment by mrb | Hacker News Reader

"What is cryptocurrency going to help these people do that they can't do already today?"

International payments confirmed and spendable in minutes not days. Escaping inflation in Venezuela/Argentina/whoeverisnext. Sending remittance to family overseas without 10% wasted in fees. Receiving monetary donations for organizations that might be victim of oppressive censorship. Participating in modern e-commerce for the unbanked/underbanked. Allowing merchants to save 2% in credit card fees (which doubles their profit margin if it was 2% to begin with). Allowing merchants to sell in industries prone to credit card fraud. Etc.

Gosh it's so easy to find many benefits in cryptocurrencies.

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> International payments

When was the last time you made an international payment? I never made a payment outside of the EU and inside the EU I already have free wire transfers. For most people this is not interesting.

> unbanked/underbanked

You have the right to a bank account in the EU.

> Allowing merchants to save 2% in credit card fees

Currently Bitcoin is more expensive for typical transactions. And there's direct debit which is practically free at least here in Germany.

"When was the last time you made an international payment?"

I love that you asked this question! The very reason it doesn't happen often is because of friction inherent to legacy payment systems. Cryptocurrencies remove this friction in cross-border trade, hence are making such transactions more commonplace.

It's like you saying in 1890 "Why buy cars? People don't travel that much." But the invention of cars is precisely what increased the desire to travel.

"You have the right to a bank account in the EU"

What about the rest of the world? 6.6B humans?

"Currently Bitcoin is more expensive"

Not for transactions above approximately $100.

>I love that you asked this question! The very reason it doesn't happen often is because of friction inherent to legacy payment systems. Cryptocurrencies remove this friction in cross-border trade, hence are making such transactions more commonplace. It's like you saying in 1890 "Why buy cars? People don't travel that much." But the invention of cars is precisely what increased the desire to travel.

This argument presupposes what it tries to prove: the utility of cryptocurrencies.

There's no argument in there on why, if it was trivially possible due to cryptocurrency, the desire/need for international payments would increase.

> What about the rest of the world? 6.6B humans?

“Banking the unbanked” is much discussed in international development circles. Around 2013, Bitcoin advocates started claiming that Bitcoin could help with this problem. Unfortunately:

* The actual problems that leave people unbanked are the bank being too far away, or bureaucratic barriers to setting up an account when you get there.

* Unless they use an exchange (which would functionally be a bank), they’d need an expensive computer and a reliable Internet connection to hold and update 120 gigabytes of blockchain.

* Bitcoin is way too volatile to be a reliable store of value.

* How do they convert it into local money they can spend? Pretty much nobody accepts bitcoin.

* 7 transactions per second worldwide total means Bitcoin couldn’t cope with just the banked, let alone the unbanked as well.

* A centralised service similar to M-Pesa (a very popular Kenyan money transfer and finance service for mobile phones) might work, but M-Pesa exists, works and is trusted by its users – and goes a long way toward solving the problems with access to banking that Bitcoin claims to.

Advocates will nevertheless say “but what about the unbanked?” as if Bitcoin is an obvious slam-dunk answer to the problem and nothing else needs to be said. But no viable mechanism to achieve this has ever been put forward.

A few things:

Bitcoin, being electronic, precisely helps with people being far away from bank branch offices.

Bitcoin SPV wallets run on $10 Android smartphones. No need for an "expensive computer".

"Bitcoin is way too volatile to be a reliable store of value" Still better than being unbanked/underbanked. Also, volatility has been decreasing: https://mobile.twitter.com/lsukernik/status/8649208737189519...

"How do they convert it into local money they can spend? " As Bitcoin adoption increases, there is less and less need to convert it. Today 160k+ merchants accept it. 8 years ago it was 0.

"* 7 transactions per second worldwide total means Bitcoin couldn’t cope with...*" This limit is obviously not set in stone and will increase one way or another: segwit, block size increase, payment channels, etc.

> Unless they use an exchange (which would functionally be a bank), they’d need an expensive computer and a reliable Internet connection to hold and update 120 gigabytes of blockchain.

Some of your points are well thought out, but I couldn't leave this one alone.

The vast majority of bitcoin users don't use a bitcoin exchange to store their coins. They also don't download the entire blockchain.

SPV wallets exist (like electrum or the android bitcoin wallet) that give the user complete control over their private keys without needing a copy of the blockchain or using substantial bandwith.

https://en.bitcoin.it/wiki/Electrum

https://en.wikipedia.org/wiki/Bitcoin_network#Payment_verifi...

> The vast majority of bitcoin users don't use a bitcoin exchange to store their coins. They also don't download the entire blockchain.

I couldn't find numbers on this when I went looking, but that's a numerical claim. Do you have numbers on this?

Thanks for being curious. I scraped around to find some numbers to back up my wild claim--I think I did a fairly decent job of it. I do warn you--my numbers are pretty rough.

Blockchain.info claims to be the most popular web wallet with 10M users and users have control of their own keys without needing to run a node. Their android app has 1-5M downloads.

The Mycelium wallet for android has 100k-500k downloads.This is an SPV wallet like electrum, where users have control of their keys without needing to run a node.

Bitpay's wallet for android also has 100k-500k downloads, which is an SPV wallet.

The generic bitcoin wallet for android (also SPV) has 1-5M installs.

Multibit (also SPV) is the only desktop client that posts statistics but it claimed 1.5 million downloads in 2014. Now that multibit is discontinued (and bitcoin has gotten more popular since 2014) it's fairly safe to assume that electrum has numbers quite a bit higher than that. I suspect (although I can't prove) that electrum is more popular than all of the android wallets--It's even packaged in TAILS by default.

For comparison, the only popular wallet where users DON'T have control of their keys is the coinbase wallet with 9 million accounts. Other exchanges exist, and may have higher volume, but they don't market themselves as wallets to users.

There are less than 10,000 full nodes running at any given time--and a large amount of that is running 24/7. Its safe to say full-chainers are in the minority if you do some guesstimation.

I got most of these figures from the google play store.

I love that you asked this question! The very reason it doesn't happen often is because of friction inherent to legacy payment systems.

Perhaps I'm misunderstanding what is meant by "international payment", but surely for a majority of people this is just an irrelevance? I can't imagine my parents have ever needed to make an international payment, for instance.

I have an employee in Iran and my goodness was it hard to work out how to pay him (Iranian banks don't have SWIFT and IBAN and helpful things like that), and Bitcoin did actually seem like a legitimate option at one point, until we realised that between business banking and accounting, it was also going to be really hard to do - so I would love for this new wave of currencies to make international payments easier. But I just don't think it's of very much significance to many people in the grand scheme of things. 54% of Americans apparently don't have a passport; are these people really going to be making regular international payments, more than about once a lifetime?

(The significant number of "digital nomads" on HN who work from a beach in Thailand are really not representative!)

However, if we're taking "international payment" to mean "an easy way to take out/spend money when you're on holiday without getting stung by exchange rates and assorted complexities" then I will certainly grant you that this would be broadly regarded as a mainstream benefit (though, again, I guess those 54% of Americans would probably disagree).

At least personally, I make recurring payments in euros rather than US dollars and it can be a hassle to see what the actual exchange rate used will be. I also have the option to pay with Bitcoin (and even receive a small discount for it) and it's very easy to see the USD value of the payment in that case. And while I am now in the passport holding minority, that's a recent development and I was previously part of that small overlap with no passport and frequent international payments.

My parents are also moving abroad in the next few months and I'll be very surprised if we don't end up struggling to move money around at some point, even if it's only a minor issue.

> I love that you asked this question! The very reason it doesn't happen often is because of friction inherent to legacy payment systems.

I think the reason it doesn't happen often is that most people have no need to send money internationally when all the things they might want to buy are readily available locally or online. Of course there are people who do it all the time, but it's not "mainstream" and I don't see it becoming so.

Last week. I'm Canadian and currently working remotely for an American company. I am in Denmark at the moment and need Danish money because they don't do euros. The American company pays me by wire transfer and my Canadian bank skims $15 off the top. Then I transfer day-to-day spending money via the cheapest, best, most reliable service I have yet found - and it still costs $10 per $1000. I do that every month or so. If you're wondering whether a credit card would be cheaper, the answer is no. My credit card is the best one available to me for travelling abroad, and there's no foreign transaction fee - but they do charge 2.5% currency conversion, which is $25 per $1000. And some places don't take credit cards.

All these fees are wasted money from my point of view, and the sooner I can stop paying them, the better.

In the current situation with a few popular cryptos, you still have the exact same problem. Using ShapeShift to change BTC to ETC is going to charge a miner fee.

According to Wikipedia, remittances were in excess of $560 billion last year, faciliated by 250 million migrant workers[1].

You and I are not the user demographic ;)

1: https://en.wikipedia.org/wiki/Remittance

To be fair that demographic has been traditionally served by the hawala system[1]. It's not obvious to me right now that they'd switch to BTC so easily; of course I could be wrong.

1: https://en.wikipedia.org/wiki/Hawala

I'm long Bitcoin but those numbers should be taken with a grain of salt before using them to make a case for remittance and Bitcoin.

Some of the top receiving countries include France, Germany or Belgium (over $1000 per inhabitant) and the top sending countries include Luxembourg ($12B for a population of 575K).

So the numbers probably include cross-border workers. People living in France/Germany/Belgium but working in Luxembourg. Transferring euros within the SEPA region (for free) for at least $50B out of the $560B mentioned.

That's his point though, the early internet had many useful applications that where appealing to the mainstream. International money transfers are not a mainstream activity.

Can people in this thread please take a minute to consider demographics outside your immediate circles?

250 million people isn't mainstream? These are people sending money to their families on a monthly basis, and where current transfer fees can take the equivalent of a half day of work.

That strikes me as an appealing use case.

a highly regulated one too, crypto does not address the complexities of international monetary regulations. If the solution is to not abide by the existing regulations, it not going to be mainstream.

As jogjayr pointed out, the Hawala system has existed before and after formal regulations. Crypto alone might not represent a viable mainstream alternative, but it does have potential as one piece of a composite solution.

'International' exists outside of EU. Actually most of the problems mentioned above belong to the vast majority of people outside the developed west.

You're indirectly making international payments when you buy imported goods from local shops. When a single global currency is commonplace, you'll likely start doing it directly. The markets already exist in eBay, Alibaba, and Taobao.

> When was the last time you made an international payment?

About an hour ago. I'm on holiday ftw.

But even not on holiday ... Quite often. With an extortionate credit card fee.

You can get credit card with no foreign transaction fees quite easily. It's possible they make it up in the exchange rate spread though; I honestly don't know.

They do. There's a 2.5% conversion fee. $25/1000. It's irritating.

To add to the list of how many of those problems are already solved in the EU :

> Allowing merchants to save 2% in credit card fees (which doubles their profit margin if it was 2% to begin with).

In the EU those fees are capped at 0.2% for debit cards, 0.3% for credit cards [1]. It'll be helpful if the crypto currency fees gets even lower than those, but 0.2% starts to get pretty low.

[1] http://www.consilium.europa.eu/en/press/press-releases/2015/...

Interesting. In the US average fees are 2%!

>International payments confirmed and spendable in minutes not days. Escaping inflation Venezuela/Argentina/whoeverisnext.

So cryptocurrency is a niche app for crashing economies in the developing world and those needing to do international payments through unofficial channels?

Crypto simply levels the playing field for people in all types of economies. Many countries force you into using the national currency. Often they create artificial exchange rates which do not match up with market rates (Argentina, Venezuela).

Other countries impose capital controls which force their populations to hold devaluing currencies or restrict how they can spend their money. Think India, China. No surprise that China is one of the world leaders in Crypto right now.

Currency is used as a form of control by governments. It is never in control of the people. Look at what happened in Cyprus, and what almost spread across Europe. Banks went bankrupt, people's hard earned money was taken away, simply due to mismanagement at the highest levels.

Properly used cryptocurrency cannot just be taken away. You are in control of your money. Your government does not control its value. Bitcoin as an entity cannot take out loans which its holders are on the hook to repay. Governments can't freeze your wallet with the flick of a switch.

Money is power, and when people are in complete control of their own money, they take back some of the power that has been consistently taken away from them.

>Crypto simply levels the playing field for people in all types of economies. Many countries force you into using the national currency.

And how would you bypass that with cryprocurrency, except by breaking your country's law?

Just because it's a grey area now doesn't mean it will be forever.

Except, you know, the other use cases I listed that you conveniently left out :)

There are transaction fees with some cryptocurrencies (for example Bitcoin) – for a small purchase they can be much more than 2%.

Fees are always optional. Right now $0.25 will make a tx confirm in under 70 minutes (typical 225-byte tx, 40 sat/B: https://bitcoinfees.21.co). Solutions are being developed left & right to further reduce this: alts, segwit, block size increases (segwit2x, BCH 8MB blocks), payment channels, etc.

(Answer edited. Yes merchants care indirectly about fees.)

How will the average user be able to avoid these fees considering they'll probably be using some 3rd party app?

Appealing to the common person is going to involve larger exchanges how will digital coin grow and still keep digital currencies decentralized?

I apologize for my ignorance in advance. I'm really just trying to learn more about this, and can't find any consensus, even within blogs/articles authored by the same people.

Most Bitcoin wallets give users some control on how much they want to pay in fees.

> Merchants don't care as fees are paid by the sender.

As a merchant I absolutely disagree: the cost of my product is how much it costs the user, which includes the complete costs to the user, not just my price.

> Sending remittance to family overseas without 10% wasted in fees.

I just looked at TransferWise, and it seems like the rate is about 0.7-2.5% depending on the pair of currencies.

I found this post of transferring 1000 USD -> EUR via BTC which claimed to have done so for $14: https://bitcoin.stackexchange.com/questions/25583/does-it-ma...

TransferWise asks $10 for this. So in the same ballpark, but not necessarily any better.

> Escaping inflation in Venezuela/Argentina/whoeverisnext.

Who is going to sell you Bitcoins for Venezuelan Bolivars? The only people who want Bolivars are those who need it to purchase goods in Venezuela, and are only going to buy enough Bolivar for their spending in the next week tops because keeping any more in Bolivar would be crazy. It also assumes that the people with capital (eg Bitcoin) haven't already just fled the country, e.g. https://www.economist.com/news/americas/21721944-latin-ameri...

And how do they get Bitcoin anyway? I mean, you could use your subsidised electricity to mine it, but then you get arrested because it's sort of obvious: http://reason.com/blog/2017/02/03/venezuela-surbitcoin-arres...

> Allowing merchants to save 2% in credit card fees (which doubles their profit margin if it was 2% to begin with).

Well that would be cool, but Bitcoin has it's own fees, and an unacceptably long delay for any IRL purchases and inherent currency risk on every transaction.

>> Allowing merchants to sell in industries prone to credit card fraud. Etc.

WRT fraud, merchants certainly want transactions to be irreversible, but since we're all terrible at security, being able to reverse transactions is quite useful for dealing with criminals who would try and steal your money.

"I just looked at TransferWise, and it seems like the rate is about 0.7-2.5% depending on the pair of currencies."

Average remittance fees, worldwide, are ~7%.

"Who is going to sell you Bitcoins for Venezuelan Bolivars? "

No Bolivars involved. Venezuelan bitcoiners typically acquire BTC by selling services or products (sometimes internationally) while receiving payment in BTC.

"Well that would be cool, but Bitcoin has it's own fees, and an unacceptably long delay for any IRL purchases"

Fees are low: https://news.ycombinator.com/item?id=14926127

There is no delay, IRL merchants usually accept 0-conf tx.

"we're all terrible at security,"

Hardware wallets have largely solved this. There has never been a single case of BTC stolen from a hw wallet.

> WRT fraud, merchants certainly want transactions to be irreversible, but since we're all terrible at security, being able to reverse transactions is quite useful for dealing with criminals who would try and steal your money.

It's more a point about how the horrible service from the current transfer processors is opening a niche for different kinds of transfers to prosper. Somehow, that niche hasn't attracted good quality processors (I blame it on widespread corruption), so it's left open for unofficial money.

That's an opportunity, yes. But I am nor sure it can be fully taken before official processors close it.

I love cryptocurrency Goolybib Founder Voice

But could you expound on this part here

> Participating in modern e-commerce for the unbanked/underbanked

From my experience, the unbanked hardly have a chance to own cryptocurrency because they don't even have internet. In my country, MPesa is pretty much ubiquitous and that is because it doesn't need the internet to work.

Are there any ideas on how to overly SMS functionality over cryptocurrency in order to truly bank the unbanked? One idea that is bouncing in my head is a sort of agency model where agents can actually have the internet set up in physical premises and they can be the ones to set up crypto-wallets and withdraw/deposit fiat. The unbanked users can simply continue to use SMS based systems to operate their crypto-wallets.

Only problem is that they wouldn't necessarily truly own their coins - most users on HN may care about that but these folks wouldn't. If it works, it works and that's all they'd care about.

I just thought about the idea now when I read your comment so it isn't necessarily refined.

If you live in a high inflation country you still have to pay taxes in that country's currency. In many of these countries the exchange rate is pinned far away from its real value and it would be difficult to sell a large quantity of cryptocurrency without missing out and theoretically you could also be subject to punitive taxation.

>International payments confirmed and spendable in minutes not days.

Unless bitcoin transactions are clogged this week, and ignoring its extreme volatility and difficulties in conversion at both ends.

> Escaping inflation in Venezuela/Argentina/whoeverisnext.

The Venezuela case is made-up BS, and the same for slotting in some other country. Worked example: https://news.ycombinator.com/item?id=14552819

> Sending remittance to family overseas without 10% wasted in fees.

Instead, they lose it in volatility and delays, and the difficulties cashing out at the other end - the latter was so bad for rebit.ph that they literally had to start an exchange just to have enough pesos on hand.

You're reciting cut'n'paste talking points that are largely refuted, like a Gish gallop in a single paragraph. This is not good argumentation.

"Unless bitcoin transactions are clogged this week"

You can always choose to have a tx confirmed in 10 minutes if you choose to pay the appropriate fee.

"difficulties in conversion at both ends."

You are really stuck in the mindset that one "must" convert to spend coins. But as Bitcoin adoption increases there is less and less a need to convert it. Example: my brother in France sent me BTC and I spent it instantly in the US at NewEgg, a retailer who accepts BTC.

"The Venezuela case is made-up BS"

It's real. Yes journalists exaggerate on how much Bitcoin is used. But it is growing, and quickly: https://coin.dance/volume/localbitcoins/VEF

"Instead, they lose it in volatility"

Statistically, volatility (which has been greatly decreasing by the way: https://mobile.twitter.com/lsukernik/status/8649208737189519...) causes users to lose money half the time and win half the time. So, meh, not a real problem. It averages to zero. On the other hand traditional remittance companies screw you over every single time with a fee averaging 7% worldwide (https://remittanceprices.worldbank.org/en). Clearly I prefer my brother sending me BTC than using Western Union.

When Cryptocurrency goes mainstream, how do we know that the Governments won't introduce regulations (/taxes?) on them ?

They absolutely would do both of those things.

A world where Bitcoin was the default currency would rob nations of control over their own monetary policy, which is one of the most important tools for controlling the economy. Not to mention we'd be living in a world of persistent deflation (due to the ceiling on the maximum number of Bitcoins) which would have interesting consequences on the economy too.

The only cryptocurrencies that would be allowed to gain widespread usage would be those controlled by the central banks.

It would only be a deflationary world if Bitcoin were the only currency. Since there are lots of digital currencies, we actually have something like the privately-issued competing currencies advocated by Hayek in The Denationalization of Money.

I am rooting for cryptocurrencies just for cross border payments. What we have today is abysmal and pathetic. We pay a lot of overhead sometimes 3% + 2.5%. I think circle or some startup is about to offer near zero cost cross border payments. We might never need a payment gateway !, per my understanding of the protocol at least.

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