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Comment by BurnGpuBurn | Hacker News Reader

"Bitcoin is positioned to disrupt the remittances industry in El Salvador, estimated at about $5 billion annually. Most families in towns like El Zonte do not have bank accounts, and rely on services such as Western Union WU +0.5%, which take 5-10% in fees. The closest Western Union is approximately one hour by bus, requiring the recipient of the cash transfer to take the bus back with cash on hand, creating a safety issue." [0]

[0] https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-...

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It's important to note that El Salvador's currency is the US dollar. WU doesn't even need to convert currency. They are simply taking up to 10% from a low-earning demographic group in the US just because they can. Even if bitcoinization itself "fails", if it forces WU to lower its fees it'll do net good.

Among U.S. Hispanics and Salvadorans, the median annual personal earnings for those ages 16 and older was $25,000.

Salvadoran Americans, even those who are poor, have an incentive to send money to family and friends in El Salvador because a U.S. dollar buys much more there than in the States. In all, they send approximately $800 million back home per year—close to $1000 per person

1000 bucks per person is not some exorbitant amount, it's some people's yearly starbucks budget.

https://www.everyculture.com/multi/Pa-Sp/Salvadoran-American....

https://www.pewresearch.org/hispanic/fact-sheet/u-s-hispanic...

Interestingly Bitcoin can’t really “fail” in the conventional sense. It won’t go bankrupt and isn’t beholden to profits. It will be an interesting experiment

I think if it plummeted to fractions of a dollar it would be considered a failure. Especially if they spent millions on something now worth a few dollars.

Of course it can. The people maintaining the network can decide it's not profitable to do so and the value could drop to near worthless.

According to the article, the town didn't even want to use Bitcoin.

An anonymous donor gifted them a large amount of Bitcoin on the condition that they must learn how to use Bitcoin and advocate for the use of Bitcoin:

> After meeting with several philanthropies in the region, all of which wanted to take the funds and convert them into fiat to cover the community's immediate needs, the donor partnered with Michael Peterson, a San-Diego native that spends up to 9 months of the year volunteering in El Zonte. Michael was given the opportunity to administer the Bitcoin on one condition - he would not cash it out. Beneficiaries of the digital currency had to learn how to use the Bitcoin itself, creating a Bitcoin economy

In other words, a wealthy Bitcoin holder gifted Bitcoin to one of the poorest towns he could find on the condition that they don't cash it out.

They basically forced a poor town to use Bitcoin in exchange for free Bitcoin and now try to use it as an organic success story.

Seems legit to me. It worked. There was no reason for them to want to cash out apart from resistance to change.

Meanwhile whoever donated it is seemingly furthering adoption of it helping solidify the unnecessary increasingly large wealth transfer from later adopters to earlier adopters - a promise where the money is only worth the artificial price if enough of society adopt it to allow early adopters to be made whole again without crashing the price..

So what. That guy helped the poor people, and helped himself even more. However on absolute terms, everyone involved is better off. If you are unhappy on how he did it, maybe you can donate your funds to poor people in a no-strings attached way. I don't see however why that would be much better for society.

This is the same argument Facebook made for giving free internet to facebook.com but charging for every other website

There are hidden costs to economically disrupting developing economies even if it's "for the poor people". For facebook, it was decimating any local ISP growth by snatching their market. For this, there could be any other number of normal payment systems that are squashed even as this BTC patron moves on to pumping bitcoin elsewhere.

> For facebook, it was decimating any local ISP growth by snatching their market

When the hated big guys move, there is always the suspect that somehow, somewhere, somebody else could have done it better, or with less externalities or with less publicity or with less branding or in a way that it's local.

It's not the act itself which troubles people. People will always find a way to hate on Zuckerberg, Bezos, Brin or Gates.

Now that Netscape went belly up everybody suddenly imagines a world where if only Microsoft was broken up then we'd all live in a Jetsons type future with flying cars and tubes carrying us around, all thanks to Netscape

If we dismiss all corporate criticism as just another inevitability, then corporations will run unchecked without any criticism. I'm also not sure what Netscape has to do with decimating a developing country's economic infrastructure either.

It's well known that free models, like those of Tom's Shoes, hurt developing economies more than they aid them, so much that even Tom's eventually switched their model.

https://knowledge.wharton.upenn.edu/article/one-one-business...

> If we dismiss all corporate criticism as just another inevitability, then corporations will run unchecked without any criticism

Who needs criticism when you are in control of B2 bombers? Let corporations play, let them compete and give them free reign, while remaining chill knowing that you always have the last resort option to tame them: violence in the form of B2 bombers

I'd be worried much more about the public officials who are in control of the aforementioned B2 bombers and should use them for the benefit of Americans.

He only helped the poor if the MLM-Ponzi scheme doesn't collapse and the poor aren't left holding the bag - which requires the remainder of society to be stupid enough to be the latest adopters, holding the bag, and then giving up a substantial amount of their buying power - in part because they're now competing with the extra money earlier adopters have because of the wealth transfer. Otherwise the poor then have transferred their actual money to earlier adopters who sold them the Bitcoin at an ungrounded-artificial price - which they're not going to get back and their Bitcoin then is arguably worthless, which it becomes when no one's willing to put more money in - or once there's a bank run and there aren't billions of USD in reserve from large institutions to try to counter a crash of future bank runs.

Also, the person, let's say they bought Bitcoin at $100 - and they gave it to them at $20,000 - then what they gave is 5% of that amount - and the full amount is actually realized/then paid for/"donated" by others; sure they potentially gave up 90% of the Bitcoin if they could have even realized a significant amount of that without influencing the price too much.

You don't seem to understand bitcoin. You're talking about cashing out. Why would anyone cash out from bitcoin? Ok, you get some dollars. What do you do with them? They lose >10% yearly, whereas BTC has gained >200% yearly over the past 10 years.

Instead you hold it. And if you need money you borrow against it.

Likely the poorer people won't be able to save & hold much bitcoin at least in the beginning. But the government can keep their reserves (and pension funds for example) in BTC and thus benefit everybody.

This is all currency though. The difference is that if you adopted Bitcoin you wouldn’t get poorer as time went on.

Sounds like what a typcial Silicon Valley startup would do - and historically it worked pretty well.

Keyword is "immediate needs," another community that only focused on "immediate needs"? Easter Island.

It's evil.

Just wait until you hear about how we give money to low income families on the condition that they don't cash it out for alcohol and tobacco.

This one time a guy offered to give me $5k, but I had to give him my car.

There are sick people everywhere, I simply said "No, thank you" but clearly I should have called the cops on him.

The humanity!

I've had some experience with this myself, although I haven't gotten robbed outside a WU yet; I wrote a little about my Argentine experience in https://news.ycombinator.com/item?id=27448744.

It's important to remember that WU's fees are so high in large part because WU is assuming risks (of identity fraud, of regulatory blockage, and of cash theft) that Bitcoin largely avoids.

WU incurred $41.3 million in "non-credit related losses," which includes fraud in 2020[1] which is only maybe 1% of their revenue. It had another ~$40 million in expected credit losses (primarily from agents), so I think ~2% of the fee goes to losses.

Since their gross margins are consistently 40% and their operating margins are ~20% I think barriers to entry/international government regulations better explains the high fees.

[1] 2020 10-k (ctrl-f for 41.3)

Thanks for digging that up. Yeah, I suspected that the "regulatory blockage" thing there might account for more of the risks than armed robbery :)

The WU fees are likely so high because they can be. If there's no competition, why not rake profits? I'm curious what the fees will be in a few weeks.

If you are the only financial service for a large population, why not take them for all they're worth?

Because you push the government to legislate an alternative on an immediate country-wide level. At their scale they could've been taking smaller profit for many years without poking the bear.

I think you misunderstand. I was rephrasing your statement "Why not take profits" to reflect the reality of WU's role in El Salvador.

Not only that, but handling cash is expensive

Yeah, operating a cash-heavy business _in El Salvador_ probably has some costs.

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