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Currency exchange is a great bitcoin usecase.

The original idea was that one would exchange local currency for BTC only when needed, then transfer. The person receiving the BTC would then immediately exchange into their local currency. The result would be that either party would hold BTC for such a short period of time, BTC fluctuations would be negligible.

It should be a medium of exchange, but for now its a speculative gamble.

What's the benefit of this over doing a direct exchange. ie. Local currency <--> foreign currency?

Only think I can think of is that it is hard to trace, which is important if you are trying to get cash out of China or Russia (or probably other places).

Technically this use is still likely to be illegal.

That is not the use case I had in mind, think of amazon, ebay, etsy for international customers looking for a friction-less exchange.

And bear in mind, my original point is that bitcoin is moving away from the original intent.

The exchange would require a large amount of various currencies in stock.

With bitcoin in the example I gave earlier, the only currency required by both local exchanges would be Bitcoin, simplifying.

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