One of the big sticking points is liquidity, he argues, adding that family support payments can currently only be useful once converted to local fiat currencies.
“We’re a long, long way from sending momma in Mexico $240 each month or a Somali family in a refugee camp $200 each month in bitcoin that is held in a wallet for conversion to local fiat currency and spending as needed,” he suggests.
This is absolutely the case.
It's worth noting that there are tremendous opportunities for arbitrage in a market like that too.
Yes, it is the case right now, because the long-term balance doesn't help the person with short term needs.
Go to a Somali refugee camp in Kenya and attempt to exchange your Bitcoin at anything approaching international market rates.
This doesn't mean it will always be like that, though. The arbitrage opportunities (if nothing else) make it too attractive for that need to remain unserviced.
Western Union are sort of right. Bitcoin although more stable recently than it ever has been, is still pretty unpredictable and laws surrounding its use are somewhat untested in a lot of regions. When Silkroad shutdown it cast a new light on Bitcoin, people think Bitcoin is for buying illicit drugs anonymously and don't currently see it as a valid alternative to actual currency, at least not yet. Once more and more countries release their stance on the currency, then Bitcoin might be ready for the prime-time.
The biggest reason it is not ready for prime time: security. The regular user is very likely to get all their bitcoin stolen from them sooner or later. Heck, even the people running the exchanges and other bitcoin services get hacked all the time. There simply is no good way to secure bitcoin for the regular joe at this point in time.
I would say the largest existential threat to Bitcoin is scale. All the problems cited by WU are fixable; same with user security.
However, dumping even half of the Visa/MC daily tx volume would bring the network to a halt. The transaction fee scheme has issues as is, it needs to be reworked before it can handle even double the current daily volume. [need to find source, gavin mentioned it somewhere]
We could raise the block size, but that's no free lunch (makes it more costly to run a node, etc...), things could go off chain, we could use Ripple, etc... etc.
Point being, something will need to change before the big players come in, and it's more than just liquidity and user security.
Use offchain transactions for most things and onchain just to settle balances between service providers, and you could scale to major currency levels. Keep the number of transactions per block limited, and transaction fees could be maintained high enough to avoid the "bitcoin tragedy of the commons."
That doesn't seem to be the direction they're going, though.
Off chain is always a solution, but requires some form of trust in most situations.
In all honesty I see Bitcoin becoming more of a commodity in the long term, and it is traded sparingly, or other coins/digital currencies are built that allow you to peg the value of Bitcoin to them, as to move it faster. This is just speculation, of course.
> There simply is no good way to secure bitcoin for the regular joe at this point in time.
My coworker has a regular checking account. One day he noticed he had something like $20K missing. He called the bank, they have a long conversaton, put him on hold, long long hold, then they say "Your money is back, let's never talk of this incident again".
The ability to irretrievably lose massive sums of money with no recourse is a challenge for Bitcoin. Banks have insurance for just this sort of eventuality. Cash is relatively hard to steal in gigantic quantities.
> The ability to irretrievably lose massive sums of money with no recourse is a challenge for Bitcoin. Banks have insurance for just this sort of eventuality.
I find it funny that you pose the problem and give the solution in such close proximity. (In case you miss my meaning, the solution is to trust large wallets with third party companies that insure their holdings and guarantee your money even if they are successfully attacked)
Checking accounts shouldn't really be used for sums of money like $20k; they're intended for payments-out, so should be restricted to the buffer needed for one or two months' payments.
They are equivalent to DMZ servers; hold only what is necessary for the service and be prepared to drop them quickly if problems occur.
The real money ( such as received salary and savings ) should be in firewalled deposit-only accounts ( like servers in the secure internal network ). Push from the salary receiving account to checking when necessary. Don't accept any requests from the DMZ.
Users can't control their hardware, so they can't control their bits, coin or otherwise. Institutions cannot stomach the idea of a populous with powerful computers that don't answer to them. Trusted Devices being the only electronic devices in existence is one solution.
It's never just about the product. There's also the market, the logistics, and the peripherals. Even if it is the same product and "before its time", it's still before its time.
"For bitcoin to overcome these regulatory challenges, there are several 'areas of improvement,' he says. These include customer identification and due diligence, verifying ownership and control of wallet addresses, and transaction monitoring for fraud. Bitcoin institutions must prevent transfers that would violate OFAC (Office of Foreign Asset Control) sanctions or the UIGEA (Unlawful Internet Gambling Enforcement Act)."
If he's serious I don't think he understands much about bitcoin. (More likely, he's trying to preserve a role for Western Union.)
I think he understands it just fine. Those aren't a problem with Bitcoin itself, but they're very much a problem for any entity like Western Union that has to abide by legal and financial regulations in all its business.
Does anyone expect a company like Western Union to come out and endorse a currency that can be transferred nearly instantly for practically nothing???!!!
This is their biggest issue... They have no incentive to bootstrap and provide legitimacy to what would end up becoming their biggest competitor in the future.
They are stuck - they can see the short-term huge benefits and profits from being a trusted middleman, but once it takes off and becomes accepted in the mainstream they would be cut out of the picture (and forced to pivot again...)
Did you try using a bank wire transfer? I've transferred money from US to Russia via bank wire transfer and they had a flat fee ($45) which is perfect for large amounts.
the flat fee is not the only spot where money is made on these transfers. the big one is giving you a bad rate (so effectively the bank takes a percentage anyway). also they make money through holding your cash rather than transferring straight through.
> the big one is giving you a bad rate
Not sure about that, they gave a usual bank rate, I doubt you can get a much better rate when you transfer and convert money from/to bit coin exchange.
You'll have to go through the same know your customer at a Bitcoin exchange (twice if you go through two exchanges) and then the exchange may also randomly decide to decline your transaction due to "risk".
I can absolutely guarantee you that they screwed you over on the conversion rate. $45 is just a fee to distract you from 3-5% they take on the bad rate.
You don't have to wait a whole day. It takes 10-20 minutes to transfer bitcoins from one account to another. Add another 10 minutes to initiate the withdrawal. Bitcoin dosen't change that much in 30 minutes.
xe.com was the other option I considered, but they are very secretive about the wire transfer fees out of their account. I didn't want to risk getting ripped off.
The problem with wiring money is that it's oftentimes very cumbersome and difficult to do without involving all sorts of different parties. For instance, where I am from, most wire transfers get audited by the tax service and our local banks will often freeze funds until you can prove the source of the money and what it's for.
Here in Japan it's not so bad but when you get audited they generally have a list of all your inbound international wires and ask you to prove that the money is not taxable... otherwise you can get fined heavily.
It's a sad state of affairs when free people are not allowed to move their money as they see fit without explanations and justifications. It's yet another proof that fiat is not really your money and that it needs to go. Can't wait till Bitcoin becomes more ubiquitous.
You might also get lucky that the value will increase throughout the process - it might also drop.
With WU and XE and other exchanges at least you have certainty of the final converted amount you will end up with.
“We’re a long, long way from sending momma in Mexico $240 each month or a Somali family in a refugee camp $200 each month in bitcoin that is held in a wallet for conversion to local fiat currency and spending as needed,” he suggests.
This is absolutely the case.
It's worth noting that there are tremendous opportunities for arbitrage in a market like that too.