I can transfer $5,000 to my brother in Ukraine for, essentially 0 using Bitcoin.
You are correct that the fees may be too high for typical consumer transactions like buying a soda from a vending machine. But for large transactions, and institutions moving money around Bitcoin provides a big advantage.
How does that compare to e.g. paypal?
The cost to transfer from wallet to wallet, is about $4.00 right now. This destroys Pay Pal where the cost which would be $145.00, if you do this wallet to wallet transfer at night it could take 30 minutes to move from person to person. This is fine for us, but obviously will never work for transactions in a store.
He can then use a site like Coinbase, to sell the Bitcoin and then withdraw the Bitcoin into his local bank/currency. This can happen in as fast as 4 days, but as much as a week. I'm not sure if that's on Coinbase or his local bank, but it actually has nothing to do with Bitcoin.
But the amount being transferred is fixed before the withdrawal starts, so it the time he is exposed to Bitcoin price fluctuations is only a few hours.
Basically it comes down to this. If you can afford to wait a week to access your funds Bitcoin is a great way to transfer large sums of money. If you need the money immediately you still need to pay a high fee to Pay Pal, or an even higher fee to Western Union to the less technically inclined.
http://mashable.com/2017/08/28/bitcoin-transaction-fees/#.7b...
Also, if you can afford to wait days, you do not compare to paypal, but to a normal international bank transfer. Haven't done that for a while, but I assume that cost is around 10-20 dollars.
Please correct me if I am wrong, but it very much looks like I need to pay minimum 1.49% to convert from USD to BTC and also your brother needs to pay minimum 1.49% before he has gotten his local currency. So this is more expensive than Paypal?
Most people who do significant transactions on Coinbase actually use the trading tool called GDAX. Which can be a little scary to look at first. It's a trading platform owned by Coinbase and transfers between the platforms are completely free.
Purchasing and selling directly through Coinbase has a similar fee to Paypal, especially if you are buying with a credit card.
Coinbase takes my money in U.S. dollars, then I transfer to GDAX, buy Bitcoin. You could actually skip Coinbase entirely and just use Gdax but the Coinbase interface is nice and its easy and I like to do it this way.
GDAX charges a .25% fee on the "taker" of a transaction. The maker/taker dynamic I am not equipped to explain, but only 1 of the parties pays that fee. If both my brother and I got hit with the taker fee on our transactions we would be losing .5% total, still much less than Paypal.
This fee could be avoided entirely by becoming the "maker" but that exposes you to some risk, because you are setting the price you think Bitcoin should be traded at, and you must wait for someone to agree to the price you are setting.
But still I fail to understand what is the case where bitcoin is a competitive option to get money from bank account to another. in addition to the possible 0.25% fee you are anyway facing the bid ask spread over two currency exchanges (usd-> btc and btc -> target currency) and if you compare those to bank transfer costs, I just don't see how looping through btc could be more economical.
https://commons.wikimedia.org/wiki/File:Gold_price_in_USD.pn...
People talk about Bitcoin as "digital gold", but in reality it's not even close, and no crypto ever will be. Gold is valuable because there is a fixed natural supply, and throughout human history, across many civilisations and societies, gold has always been worth something - unlike our fiat currencies who's supply can be altered and made valueless.
The problem with Bitcoin isn't it's supply, it's that it's value relies on it's demand remaining high (or at least maintaining current levels). Problem is there is no historic reason or intrinsic value to bitcoin to assume it will continue to have steady demand like gold.
More worryingly in my opinion is that bitcoin's current demand isn't really for bitcoin at all. The demand is to make USD fast. The moment people realise Bitcoin might not give them returns similar to other safe investments, it will crash like all other bubbles do.
I'm not saying people who get in early won't make loads of money, plenty of people made money from the dotcom bubble too, but you need to be smart about it and understand the risk. At $6,500 bitcoin's market cap is far beyond PayPal's which provides a genuinely useful service and processes millions of dollars of transactions every day.
> The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry.
(And to be clear, I do not mean volatility against other currencies, but volatility against your consumption basket, bread, butter etc.)
IMO, most fan-fiction is worse than the original, the best fan-fiction is often better.
The transaction rate issue is 99% political in fighting and that has basically been solved or will be by mid November.
And if the simple transaction is me purchasing a pizza instead of transferring a million from one speculator to another? How much does it cost and how much it takes time?
In dirt-simple terms, the lightning network allows you to squash several transactions taking place over a long period of time into one of a much smaller size. It also allows instant payments. [1]
Another way to scale is using sidechains, which shift the transaction burden onto a complementing chain that has a two-way peg to bitcoin. [2]
Neither of these are production-ready yet, but should help improve scalability by a couple of orders of magnitude in the long run.
That being said the current price bubble is out of control and I would strongly warn you away from buying any--and for the sake of full disclosure and identifying my bias I do hold some cryptocurrency.
Here's a lazy copy/paste from the site:
> The Lightning Network is dependent upon the underlying technology of the blockchain. By using real Bitcoin/blockchain transactions and using its native smart-contract scripting language, it is possible to create a secure network of participants which are able to transact at high volume and high speed.
> Bidirectional Payment Channels. Two participants create a ledger entry on the blockchain which requires both participants to sign off on any spending of funds. Both parties create transactions which refund the ledger entry to their individual allocation, but do not broadcast them to the blockchain. They can update their individual allocations for the ledger entry by creating many transactions spending from the current ledger entry output. Only the most recent version is valid, which is enforced by blockchain-parsable smart-contract scripting. This entry can be closed out at any time by either party without any trust or custodianship by broadcasting the most recent version to the blockchain.
> Lightning Network. By creating a network of these two-party ledger entries, it is possible to find a path across the network similar to routing packets on the internet. The nodes along the path are not trusted, as the payment is enforced using a script which enforces the atomicity (either the entire payment succeeds or fails) via decrementing time-locks.
> Blockchain as Arbiter. As a result, it is possible to conduct transactions off-blockchain without limitations. Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.
I haven't explored sidechains enough to give you a competent tl;dr but the security model is discussed in the whitepaper I linked.
I do not quite see how that increases the real world capacity by orders of magnitude. I mean if we assume that people actually spend their money to quite a few different places and everyone would require a significant overhead of a single transaction to be committed for unspecified time. Further, it requires a minimum of two transactions on the blockchain fore each lightning ledger, so if I buy pizza today, and need to close that ledger to buy a sandwich tomorrow, that brings three transactions to blockchain. Of course, you can optimize this, but still, orders of magnitude sounds optimistic.
I recommend you read the summary on lightning.network.
The issue it does not solve, though, is the volatility.