Why Cryptocurrencies?: For the Unbanked | Hacker News Reader

Why Cryptocurrencies?: For the Unbanked

whycryptocurrencies.com

6 pointslawn21 comments

Yes, and someone who can't get a bank account can definitely afford to acquire a fast persistent Internet connection and ever-increasing amounts of storage to download the full Bitcoin/Ethereum blockchain so they can send and receive “coins” with extremely volatile prices and huge transaction fees.

Correct me if I'm wrong, but you don't need a fast persistent Internet connection or enough storage to download the full Bitcoin/Ethereum blockchain to be able to send transactions correct?

I think you do since not having it means that your wallet wouldn't know if you've spent or received any coins.

For that you would just need some sort of Internet connection and some storage, nothing out of reach for the vast majority of people, or am I wrong again?

Yeah I mean there are many many parts of rural north america that do not have easy access to broadband. I grew up in Wisconsin - I just simply couldn't give someone coins when I'm up in the Northwoods.

Here's a quick example: https://www.vox.com/2017/6/20/15839626/disparity-between-urb...

Edit: If you give someone a coin with the private key on paper, technically you can give them coin offline, but the rest of the networks have no clue this happened, and you can't spend unconfirmed monies.

Bitcoin's blockchain is a quarter of a terabyte in size, Ethereum's is not far behind.

I share your opinion

I call this type of thinking "TED talk ideas" something that looks good on paper with a lot of wishful thinking but fails to consider most of the actual problems

Underbanked people use cash or some financial products targeted at them.

They have more things to worry about than having to worry their bitcoins might disappear because of some shady exchange

You don't need to run a full node. Light clients that don't need to sync everything do exist, and I would guess that they are a more popular way of using cryptocurrencies than full nodes.

Firstly you do not need to run a full node. Use a light wallet or even better an SPV wallet, which you can only cheat by faking POW which is very expensive.

Secondly it is only Bitcoin that has huge transaction fees. For example Bitcoin Cash has a next block fee of $0.0015[0].

Thirdly, as noted in the article, 420 million do have internet access.

[0]: https://bitcoinfees.cash/

Other networks not having as big fees is only because they are not used much. Eventually you either reach Bitcoin-level congestion or accumulate hard drive space so quickly as to be unaffordable to the “unbanked”.

Not true at all. Bitcoin Cash could for example process around 20x to 30x the amount of transactions as Bitcoin, with the same low fees as today.

There are scaling challenges of course, but Bitcoin is not a good example of that. The technical issues come at a much higher usage.

> accumulate hard drive space

The unbanked, like 99% of all others, should use light wallets or SPV wallets so they don't have to store the whole blockchain.

> Eventually you either reach Bitcoin-level congestion

Bitcoin's problems are bitcoin's problems because they are intent on shooting themselves in the foot at every opportunity they can.

Other networks hopefully are run by less hard-headed people that know a bit more about incentives and the importance of liquidity. Dash and BCH are better in this sense.

We should separate what the tech can do in theory, and what the tech in practice can do.

In theory, cryptocurrency can probably do this. Even as someone who is extremely critical of cryptocurrency and blockchains, this is actually one of the few use cases in which it makes sense - "Hey Bob, I want to buy a business license online. If I give you a $20, can you give me some bitdollars?"

On the other hand, this probably won't work out in practice. Cryptocurrency exchanges do fall under KYC, so the documentation burden still exists. The unbanked could build their own exchange... if they had the capital. In addition, the high level of technical complexity and the need to trust in the unseen (proof of work stakes aren't as good as physical bills when it comes to trust) means the benefits are negated compared to just using the grey market to have someone transact on your behalf (which is a common practice for the unbanked, and also my uncle who still doesn't understand Amazon).

Someone could solve these problems, but they'd need to maintain an ongoing company to do so, which would again trigger KYC and downstream fees.

Cryptocurrency exchanges do fall under KYC in the US and only if you want to do certain things, like purchases over a certain volume or fiat withdraws. There's no reason someone in India, for example, would need to go through a KYC process simply to buy a small amount of cryptocurrency. There's also plenty of P2P networks like LocalBitcoins that fit this use case much better than an exchange.

> There's no reason someone in India, for example, would need to go through a KYC process simply to buy a small amount of cryptocurrency.

Except for local laws which explicitly require KYC for crypto transactions: https://bitcoin-india.org/kyc_aml_policy

That appears to be one exchanges policy, not law. There may be a law I'm unaware of but in any case this wouldn't come into play using something like LocalBitcoins. Exchanges need to do this in order to conduct transactions with banks—obviously something that isn't needed for unbanked populations.

You're not wrong, but LocalBitcoins will also require KYC now.

This and all other discussions of cryptocurrency being useful to the unbanked always fail to address the root of the problem - the unbanked don't have money. Get them steady reliable cash flow first, and bank accounts or other financial services will follow. Not vice versa.

Cryptocurrency won't help solve that root problem for poor people, only for VCs and technologists building themselves new money, exploiting the Cantillon Effect, and casting about for justifications to moon the market price.

To its credit this article came close to discussing this, it actually shows a chart comparing reasons why the unbanked don't have bank accounts. The main reason by far is, no money. But once that's established, then real question becomes - how do you solve that problem using cryptocurrency?

Nobody has an answer for that so they just conveniently skirt around it in these type of discussions.

Of course they have money, just not a lot of it. They use cash and mobile credits, both of which have drawbacks like value fluctuation and the inability to accumulate savings. There's a good argument to be made that these populations stay in poverty, at least in part, because of a lack of access to banking.

I basically agree.

The point I wanted to make isn't that cryptocurrencies is a solution for all, or even most, of the unbanked. But it may be a solution for some of them. Most cite no money as the issue, but a whopping 40% didn't. Even if it's only applicable to 1% of all unbanked, that's still 17 million people who might benefit.

> Get them steady reliable cash flow first, and bank accounts or other financial services will follow.

For some, but not all. For instance giving them more money won't necessarily increase their trust in possibly corrupt banks. And it doesn't magically mean they'll get an account since they might still not have the required documentation.

>For instance giving them more money won't necessarily increase their trust in possibly corrupt banks.

Yes, hence why I said “bank accounts or other financial services”. The latter could be either centralized or decentralized. Either way, they still need cash flow/income first.

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