Bitcoin's comeback: should Western Union be afraid? | Hacker News Reader

Bitcoin's comeback: should Western Union be afraid?

arstechnica.com

86 pointsevo_976 comments

I can't dispute the author's concession that falling 90% against the dollar in a short period of time is a sign of an unstable currency.

On the other hand, I most heartily dispute the author's assertion that rising 90% against the dollar in a month is a sign of a stable currency.

I really like the concept of "metacurrency" that this article talks about. This is exactly the area I think Bitcoin will be most successful. I don't ever see it replacing the dollar, or even credit cards. The one thing that Bitcoin really excels at is the instantaneous transfer of unlimited amounts of money from one place in the world to another. Rick Falkvinge talks about this a bit in his "four drivers" series: http://falkvinge.net/2011/06/18/bitcoins-four-drivers-part-t...

I think eventually Bitcoin will compete with (or maybe replace) Paypal/Dwolla. But its killer app is long-distance point-to-point money transfer.

Not sure why you're getting downvoted for this, especially since this is the main idea of the article.

So what's to keep a loose network of independent merchants from popping up around the globe to undercut Western Union?

> Not sure why you're getting downvoted for this

There's a portion of internet users who have decided that they really really hate Bitcoin and go out of their way to denigrate it and downvote anyone who doesn't share their views. I can understand the people who are skeptical, because Bitcoin definitely has its problems, but this seething hatred mystifies me...

Well, it did get a little crazy this summer with all of the articles and meta-observation about how viable the currency was vs "is HN being used to pump and dump the value".

It still was a fascinating thing to think about from a software point of view, IMO.

That already exists: http://en.wikipedia.org/wiki/Hawala I'm a little surprised the article didn't mention this.

Yes but Hawala requires that the agents trust each other. A Hawala-like network could be built by agents who do not trust each other. Users of the network would not have to deal with Bitcoin at all.

I don't know if such a system will come into being but it seems like most of the pieces are already in place. The biggest problem would be converting local currencies into and out of Bitcoin.

Problem is, PayPal et al work in government-backed currencies. You can expect that when someone pays you $1 over PayPal, you'll get $1 worth from it (regardless of how many Euros you'd get for that dollar). However, with Bitcoins you'd be running into the issue of a double exchange. First you'd have to trade your dollars for Bitcoins, transfer the Bitcoins, then trade them back into dollars. You'll always get 1BC when someone sends you 1BC, but from the time that BC is bought to the time it's converted back to dollars, the currency could be worth a lot more (or a lot less).

Dollars are not inherently better, but at least I can immediately spend one and get a soda from the gas station. Until Bitcoin reaches that point, people will be sending dollars over Paypal.

That's why I said "eventually", the user-base isn't quite there yet. I could see people just keeping $50-$100 in Bitcoin permanently to use for small transactions, much like I always have $100-$200 in cash in my wallet for small purchases, or $1000-$3000 in my bank account just as a buffer.

I don't see that happening anytime soon though with the huge volatility.

Needing two exchanges instead of one is a disadvantage in the short term, but a big advantage in the long run, because the receiver of money can whatever exchange they prefer, rather than they expect to be most popular with their audience. In essence, Bitcoin is an open protocol for electronically transferring wealth.

"The one thing that Bitcoin really excels at is the instantaneous transfer of unlimited amounts of money from one place in the world to another."

I'm being somewhat pedantic here but Bitcoin is absolutely terrible at this, because Bitcoins are inherently not unlimited.

On a less pedantic note, I'm not sure Bitcoin is any better than the alternative of a Bitcoin-free world for your example usage. Lots of "real" US Dollars these days are little more than bits in a database that can be transferred easily across the world, and that's true with or without Bitcoin.

Bitcoins are inherently unlimited - they can be divided down to 8 decimal places for a total of 2.1 quadrillion units.

Do you mean "effectively unlimited"? They're not inherently unlimited in the current implementation; quite the opposite in fact!

I don't think they are "effectively unlimited" either, perhaps closer to "effectively dividable forever", which might not be true, not sure. However, once they are in full circulation they will be a deflationary currency, and giving someone a sliver of a bitcoin that's worth as much as what a full bitcoin was worth at X time in the past is not the same as adding more bitcoins.

I remember one of my economics professors always pre-pending "All other things being equal" before, relating any theories. I keep that in mind every time I start thinking about anything to do with economics, the pile of assumptions on how things are going to work is usually problematic.

That's still not unlimited (tempted to quote Princess Bride here, but you're not the OP, so it wouldn't quite fit).

Unlimited for the purpose of moving currency. Right now just trying to move a million dollars by Bitcoin will move the market significantly and likely one party will get screwed.

Bitcoin now is like the internet was in 1985. There is a huge stack of infrastructure yet to be built in order to deliver on the early pre-hyped promises. I don't think anybody understands this domain well enough to predict the outcome; it's very clearly in an experimental phase. It may well be ridiculous to believe Bitcoin will replace the dollar (much as some believed the internet would replace all manner of things which still happily co-exist), but surely more ridiculous to dismiss it when the experiment has barely begun.

This is a neat analogy. The biggest hurdle to using Bitcoins now is the (lack of) ease of use. There's a potential startup culture here that takes transaction fees from Bitcoins, and presents them in a easier formats to use and transfer. Once that problem is solved (and the adoption of the internet had to solve the exact same problems), then the audience will follow.

I disagree. The biggest hurdle is that the use of Bitcoins as currency probably either already is or will be made illegal.

In my country I'm pretty certain it's already illegal (there are some provisions regarding electronic currency). It's even worse in countries with exchange controls (like Argentina).

Edit: our laws are so badly redacted that Linden Dollars, Facebook Coins and all that are probably illegal as well, but nobody cares, unless they get popular. The fun of selectively enforced laws ...

To compare with the internet is to compare with the 1% of these kind of ideas that actually succeeds. To me it feels a lot more about the Second Life hype of the early 2000s - we heard stories about people paying millions of dollars for "virtual land", companies held events there, some people were saying it would be the next internet and at the same time a horde of detractors were saying it was all pointless. And then it gradually just faded from view.

30 billion is a rounding error in world finance so saying you need sound fundamentals to back up a currency worth 30 million for a month after a crash is silly. Bitcoins's apparent stability over the last month simply means people are not willing to sell them for less than 1/10th of what they where worth a few months ago which may or may not be rational but means little.

"The original run-up in prices could easily be explained as a speculative bubble, and the subsequent decline as the popping of that bubble. But if that were the whole story, then the value of Bitcoins should have continued to decline"

What a stupid statement to make. By definition, a bubble grows, then bursts, then things are back to normal. Similarly, the stock market did not indefinitely continued to decline after the dot com bubble... It is like the author is saying "the price of this stock should decline in the future because it has declined in the past".

Stocks are valuable because they're a claim on a stream of future dividends. Bitcoins, in contrast produce no dividends and aren't intrinsically useful. So the question is why are they valuable at all?

Also, the name-calling isn't necessary.

That's not the reason stocks have value. For one thing, many stocks don't return dividends. They are valuable because legally a stock owner owns a piece of the company, therefore a piece of its assets (and future revenus which will help grow its future assets.)

Secondly, Bitcoin's decentralized nature, unfrozable assets, etc, is inherently valuable because unmatched by any other system.

I don't have much to add that hasn't been said in the other comments here, but a currency with a "market capitalization" of $30 million can never be stable. A single wealthy person could easily move the market a significant percentage.

Western Union (Business Services) employee here.

I disagree with the author on many levels:

1. Government regulations. Wire transfer industry is a HIGHLY regulated industry. There is no way BitCoin will be able to operate without complying with AML (AntiMoney Laundering) and AntiTerrorist regulations. Many names/countries/organizations are on OFAC list. Thus, the minute you transfer a wire to Mohammad or to someone in Iran it raises a flag and you will spend days if not weeks investigating. Note: I didn't even mentioned all the licences that you need to obtain.

2. FX transfers. Author mentioned transferring bitcoin to India and getting rupees. It's not that easy. Foreign Exchange transfers depend on day of transfer. Thus, waiting or talking to a qualified trader may save you money. This takes time and people. Not sure how bitcoin (1 currency) can solve the process that requires 2 currencies.

3. There are MANY other services that provide better and faster solutions to transfer funds internationally. We were one of them and got acquired by Western Union :)

Finally, bitcoin is a currency. Western Union is a service. That brings us to the major flaw of the article. Western Union facilitates the transfer, while bitcoin is just a medium. WU already uses medium to "transfer" the wires. It's called SWIFT.

I've transferred several thousand dollars worth of bitcoins in the last few weeks to a Chinese bank account - the exchange I bought them on didn't know what I wanted the bitcoins for. And the Chinese exchange I sold them on didn't know where I got them from. The act of buying the bitcoins contains no information about their future use. The fees were much lower than Western Union, and since Bitcoin prices are volatile I actually made money on most of the transfers. Bitinstant.com already allows you to send money to anyone in the world using paypal via bitcoin anonymously.

Edit - the point is that bitcoin makes it possible for individuals or small companies to move funds to virtually anywhere in the world. A big multinational corporation facilitating this becomes unnecessary. At some point it will occur to people just to move the bitcoins and not bother converting them to a local currency.

I don't think you understand what bitcoin is...

The point (mentioned in the article) is that while such regulation does exist, there's absolutely no way to apply it to bitcoin, if used properly.

I'm guessing you didn't meant to come off as bigoted but I have a lot of friends named Mohammad, none of whom have any legal issues, nor are any of them members of terrorist organizations. If the attitude towards me sending money to one of them for any number of legitimate reasons is baseless suspicion, maybe many people like me will wind up looking for alternatives - like bitcoin.

At the expense of karma, allow me to add that in an odious legal atmosphere where prosecutors consider photographing chicken coops as terrorism, it won't just be people with funny terrorist-sounding names winding up using Bitcoin.

I'm not the poster, but I also work for a regulated industry, and I have to comply with those regulations, which I certainly don't agree with (and even campaigned against). I also guess that Smirnoff didn't mean it that way either.

So, it's probably not Western Union who's to blame when sending money to Mohammed (or José Rodriguez which is an extremely common name here) is a big hassle for all parties involved, it's the regulators. The only thing WU can be blamed for is for working within the rules. It's not bigotry by WU.

As he said, if services start providing money transfers (using Bitcoin or whatever) without complying with regulations, they'll probably will have to be based somewhere outside the US's influence, and will eventually be blocked and impeded in the US (see: online poker, only worse)

Of course, right now Bitcoin also serves a fraction of the number of countries that Western Union does. Basically, unless you're in Europe, North America or Australia you almost certainly don't have any way of exchanging money for Bitcoins. Even with Bitcoin only available to a limited number of countries, AML regulations are causing problems for users already.

Bitcoin's design (limited amount of coins) attracts the wrong kind of people - investors and speculators - there is no wonder the "value" is fluctuating heavily.

A real virtual currency must attract buyers and sellers of actual goods, not just get-rich-quick speculators. Maybe an easy change to the way bitcoins are mined would be enough to get it on the right track. If the amount of coins is determined democratically and not by a magic constant (chosen by the programmer God), things could be different...

Volatility is high because of low market depth and low liquidity, if the market had a billion dollars in small players it wouldn't be very volatile.

Having investors is a bad thing now?

What's kind of crazy to me is that people don't think that if bitcoin really gets successful companies like paypal, visa, google etc. won't just come out with their own 'coins' backed by more user friendly software and possibly other incentives while maintaining anonymity.

Big corporations are in the inverse business of anonymity, they don't even want you to have a nickname (Google+?) and they want to get all the information they can from you (what you like, your address, etc). Plus, they have to respond to the US government/law.

So i don't think someone would trust anonymity to any of those big corporations.

'cept for the clever marketing.

These are all centralized companies - if they go out of business what happens to your money? What if the company decides to print more of this money for itself? Napster went out of business becasue the government shut it down. Bittorrent is still going strong. Bitcoin is p2p like bittorent. There is no central point of failure.

'Cept it being replaced by something more useful.

The article suggests that government can't get rid of bitcoins. But given the upper limit on the number, couldn't the government simply buy them all?

They can only buy those that people are willing to sell. Theoretically they could do it, but the act of buying all of them would likely make many people rather rich.

And then once they did it, people could just start a new chain anyway.

And how will they buy them? If they started buying them all the price would skyrocket and people would be more likely to hold onto them. And which government? The Chinese, The Russian the US? We'd see all nations suddenly rushing to buy bitcoins, and I'd be a billionaire.

>This presents a bit of a puzzle for Bitcoin skeptics.

Uh, no, it presents absolutely no puzzle at all for those of us who believe Bitcoin will follow a boom-bust cycle without ever providing a truly stable currency.

Wonder what will last longer, the euro or bitcoin.

I don't think that's an analogy you really want to draw.

The Euro's current problems are due to governments with Euro-denominated debt being unable to take the easy way out of servicing their debt by printing money. One of Bitcoin's defining features is that it's impossible for governments to devalue the currency by just printing money.

Since both currencies behave the same way in this regard, a Bitcoin economy would feature the exact same Achilles heel that is causing such trouble for the Eurozone right now.

Oh, no. The governments which will borrow more in bitcoin than will be able to pay back, will just default. When Argentina/Russia defaulted on their debts denominated in dollars, how bad was that for the dollar?

So... Bad for them (governments), bad for their foolish creditors but a matter of trifling importance for bitcoin as protocol and store of value.

So I think there's a reason they call the time when Russia defaulted the "Rouble crisis".

"Easy way out of servicing their debt" is a facile misrepresentation of the problem.

The problem for a country like, for instance Spain, is that their current account balance has gone highly negative. This can be due to government overspending or private overspending and contraction.

In fact Spain didn't have a big public debt problem before the crisis. Their problems stem mostly from contraction of the private sector.

If Spain had its own currency, the current account deficit would create a surplus of peseta on the international markets and drive up the price of imports for Spain, while making products produced in Spain cheaper and easier to export. Devaluation would cause short term pain as Spaniards find themselves unable to afford foreign goods but long term prosperity as it would allow their economy to require its footing through favorable export terms.

The Euro itself won't be devalued as long as Germany retains a current account surplus. Ironically a very substantial part of Germany's surplus is exports to the so-called "PIIGS."

In the US we have examples of winner and loser regions due to our common currency. Witness: Michigan vs. Georgia. The situation here is different though because money can still flow into a loser state like Michigan through the federal government (social security payments, for instance, and highway funds). And most importantly Americans are highly mobile; Michiganders can head off to Chicago or Atlanta so while the prospects for Michigan itself remain bleak, people aren't trapped.

The people in the "PIIGS" countries are facing a truly bleak future. The Euro system has denied their countries the tools needed to recover on their own. And the practical realities of (the lack of) labor mobility in the Euro zone mean the people are trapped.

This is an excellent summary. Some minor points:

Spain not only didn't have a public debt problem, it was running a surplus on a debt of 60%. And Spain understood the risk of the asset bubble and tried to stop bad property lending by reforming its banks - no help at all, since German banks stepped in to provide inadequately covered loans to finance the bubble... Now PIIGS countries must not default so that foolish non-PIIGS banks don't have their balance sheets destroyed.

The simple morality tale that many try to weave does not survive a closer look at events.

While I agree with your characterisation of the problem, devaluation is no panacea since (i) it tends to cause inflation, (ii) it only works as advertised if there is adequate global demand, and (iii) the devaluation is equivalent to a default from the point of view of creditors. I lean towards some sort of Eurobond supported by an intra-Eurozone investment programme to support trade imbalances.

Finally PIIGS is an awful acronym, who came up with it? PIGIS would be much better, and could be pronounced "piggies".

And most importantly Americans are highly mobile; Michiganders can head off to Chicago or Atlanta so while the prospects for Michigan itself remain bleak, people aren't trapped.

Hmm, don't Spaniards legally have the same ability to move to Germany to take work on equal terms with Germans? What prevents this from happening in practice? Language barrier, prejudice, or ... ?

Generally you have to jump through some number of extra hoops to work legally in a nation of which you are not a citizen. Different nations have different numbers of hoops, but they all have at least a few, to my knowledge.

Correct, the Schengen agreement only allows you to stay (and work, usually) for up to 3 months without a visa.

For longer periods, you need a visa or a work permit (but it is usually much simpler to obtain if you come from the Schengen area).

EU nationals do not need a work permit to work in another EU country and live there for that purpose.

http://ec.europa.eu/youreurope/citizens/work/migrant-worker/...

The Schengen Agreement only defines the region within which there are no borders, it does not define who can work where and for how long.

In addition, any EU citizen is free to work in any EU member country with no restrictions. For example, as a UK citizen I can choose to work in Germany without needing a visa, despite the UK being outside the Schengen Area.

http://en.wikipedia.org/wiki/Freedom_of_movement_for_workers

Moving from Ireland to the UK, all I had to do was register for a national insurance number. Took all of 10 minutes.

I would wager the bitcoin. I can't believe the euro will last that much longer. Bitcoin's downfall of not being tied to any other currency or institution is also a huge reason to adopt it for the same reason. Because code and ideas behind it are so solid, it won't ever completely lose value. It just needs to stabilize. I can't say the same for the Euro.

If Bitcoin were nothing but the pyramid scheme its detractors say it is, it should not have recovered. Collapsed pyramids don't reassemble themselves.

There are various groups of Bitcoin detractors and to lump all of them into one is a pretty clear straw man.

My preferred quip is that Bitcoin isn't a pyramid scheme. Technically, it's a 'pump-and-dump'. ;)

I wouldn't say never, but I agree there will be smaller booms and busts for a while, at least until all 21 million Bitcoins are made so there is no more mining, and until Bitcoins starts to be used in regular stores.

There's nothing wrong with someone buying a WoW character and then selling it at a profit later.

Bitcoin is the same principle, more or less. It's an unreal, digital commodity that might or might not have value, depending on the perceiver. That bitcoins even exist are proof to me of the human ability to create and recreate stores and transfers of value, no matter how ridiculous those stores may seem to some:

http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...

No.

Next question, please.

I haven't read the article, but I think I can surmise the correct answer from reading the title: No.

I share your skepticism of bit coin. But if you haven't read the article, don't comment.

Articles that end in question marks are universally answered "no".

Someone should write an article: 'Are articles that end in question marks universally answered "no"?'.

The Halting Problem: Thought Experiment or The End of Computer Science?

I think Western Union is probably more afraid of lawsuits that seek to invalidate its protectionist legislation.

http://dockets.justia.com/docket/california/candce/5:2011cv0...

You've managed to post in nearly every thread related to money changing hands for the past couple months. While I applaud your persistence, the world does not center around you, your startup, your causes, etc. It's incredibly irritating, it's off-topic in effectively every case, and it does nothing to promote healthy conversation.

Sorry you feel that way. Obviously I don't think the world revolves around me. As for relevance and usefulness in terms of discussion, I clearly disagree on all counts, otherwise I wouldn't post.

According to the article, Bitcoin's significance is that it "allows low-cost and regulation-free transfer of wealth." I am seeking to achieve many of the same objectives in the context of a high-cost and poorly regulated environment, just in a different manner. As it so happens, that manner might impact the legality of some uses of Bitcoin.

Furthermore, behind the shadow of its lobbying group, Western Union is one of the main sponsors of the legislation directly in question that it and other companies use to maintain an oligopoly. No one else seems to be discussing that point, though it seems rather significant, both in terms of Bitcoin and other startups wishing to enter the market.

There's a reason no-one else is discussing this angle; this thread isn't about you.

The tactic you're employing here and on every other money thread is so common that Wikipedia has a name for it: "coat-rack arguments".

You're using HN threads about money transactions as coat-racks for comments that are nominally germane (ie, "Bitcoin allows low-cost and regulation-free &c and ...") but really about your personal drama ("... and that's what I'm trying to do with my [totally unrelated scheme]").

I hope you're starting to notice that HN people aren't going to let you keep doing this without calling you on it, and that off-topic comments are therefore a poor promotional vehicle for your pet controversies. Either way, please stop.

First, I won't stop; certainly not because you and your colleague say I should.

Second, I didn't post an advertisement, or a job offer, or a discussion about a random topic. I posted a federal lawsuit about money transmission that is directly related to Bitcoin's purported goals and the title of this article.

Enough people have contacted me, some of whom read Hacker News, and some of whom do not, who fully support what I am doing, that I believe your viewpoint to be both in the minority and in this particular case, incorrect besides.

I posted a federal lawsuit about money transmission that is directly related to Bitcoin's purported goals and the title of this article.

Just to point out to others reading: The lawsuit thinkcomp posted is one filed by his company.

FaceCash or FacePalm?

News at 11.

You really should stop though. You have but one reputation and you're wrecking it.

In that case, go write up an article about your viewpoint and post that to HN. Don't just comment on any semi-almost-kinda-related article.

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