So it's now possible for two people to send and recieve local currency through coinbase without touching the blockchain? See what you can do when you have a money transmitter license, suddenly all the electricity spent computing and discarding hashes is no longer required.
No, it allows Coinbase users to send or receive money to/from anywhere without a long wait of fluctuating prices. I'm not a Coinbase user but I'm affected by this.
Previously, if you use the coinbase wallet to purchase BTC, then you would have to wait 6 days to get the BTC unless you transferred money to Coinbase Exchange and purchased them directly.
This simply removes that step and executes your buy order against the Coinbase Exchange presumably.
You're misunderstanding the feature. Coinbase has supported off-Blockchain transactions for a while now, and it does not require a USD wallet; it can be done with any transaction internal to coinbase.
Instant exchange let's you send bitcoin from your USD wallet, meaning you don't have to hold bitcoin to use it, because your local currency is "instantly exchanged" into bitcoin when you send it.
It has nothing to do with on/off Blockchain transactions.
But they don't have to. That's the genius of it all.
"You can also receive bitcoin and Coinbase will execute an instant sell in the background."
If I can use my money to send you bitcoins that'll be automatically sold and credited to you as your local currency... then how about secretly skipping the bitcoin step and just move money like Western Union or any other bank? ;) It'd be more profitable for them and lower risk, I think. Whatever transaction fee Coinbase charges, I'm sure it's less than what I pay Western Union to send money to my family in Nigeria.
but the only way for coinbase to actually move the money from Nigeria to the US or vice versa is to use legacy banking systems (which will charge for the privilege of using their system)or by using bitcoin. Using BTC they can send it for very little cost, the money actually moves from Nigeria to the US, and in the destination location it is converted to local currency.
Try to do that without bitcoin and you cannot do it instantly unless you want to assume the risk that the senders money doesnt arrive, or you make the person being paid wait 7 days for the international wire transfer to be completed.
In order to move BTC from the US to Nigeria, they'd need BTC buyers in Nigeria. Given that the two economies are asymmetric (particularly in terms of how much can be bought in BTC currently) that's a bottleneck.
By contrast, big banks offer large scale international currency transactions for fractions of a percentage assuming you maintain a minimum balance. Coinbase could profit by making the exchange rate advantage cover the bank's very small fee.
OK, just look at USD/GBP conversion. I send BTC to someone in the USA from here in the UK. They convert via coninbase and have USD in their account almost immediately.
Alternatively I send a wire transfer to a US bank, now I have to pay a fee (around about £25 flat fee plus a % on the exchange rate conversion from USD to GBP, or I send it in GBP and let the receiver worry about converting it to USD). The wire transfer takes 5 days to acheive what was achieved using bitcoin in a matter of minutes.
So they are not the same service unless coinbase wants to take on the risk of paying out immediately in USD to the recevier and the wire transfer not arriving or of a change in the exchange rate that results in a loss for them as they receive less USD than the GBP they received. Also they have to eat the £25 wire transfer fee as the bitcoin transaction has no fees.
So ultimately the bitcoin based exchange is faster, cheaper and more secure than the legacy banking system wire transfer.
Yes coinbase could profit a small amount on exchange rate fee but that comes with accepting a significant amount of risk and making the process as long winded as the current wire transfer system is. The pointof this is that it all happens pretty immediately and at little cost.
This is how i imagine bitcoin will ultimately succeed, we wont use it in day to day transactions (with the exception of online purchasing) but it will underpin the transfer of fiat currencies from country to country or person to person.
> Alternatively I send a wire transfer to a US bank, now I have to pay a fee (around about £25 flat fee plus a % on the exchange rate conversion from USD to GBP, or I send it in GBP and let the receiver worry about converting it to USD). The wire transfer takes 5 days to acheive what was achieved using bitcoin in a matter of minutes.
Right, but that's you as a small timer. Try holding a minimum balance of $250k in your Citibank account (which would be feasible for coinbase), and see what rates they give you for international transfers at that point. Hint: cents, not dollars, per transaction.
To be clear, they aren't offering to move money to Nigeria with this, they are only supporting local currency wallets (which are linked to a bank account) in USD, GBP and Euro.
I have no idea. It's just this phrase on their website "Coinbase will execute an instant sell in the background." could be false if they never bought any bitcoins to begin with. But I admit this is wild speculation based on nothing other than my opinion that it would be a sound financial decision for them just avoid bitcoin for those money transfers.
Right. The specifics of their participation in each transaction are very interesting to me, but I think it is worth being careful when talking about it. Reading your comment a second time, your phrasing is better than I had taken it to be when I wrote my first comment.
I looked at their support FAQ for a minute, I didn't find any clear statements about who participates in any given transaction.
i dont think you understand how transmitting money actually occurs if you think that this could occur in the same time span as a bitcoin transaction. Plus it would require coinbase to hold a lot of foreign currency reserves to be able to transfer without bitcoin.
I was assuming that if a user had "instant recieve" turned on and someone did an "instant send", it would go straight through their coinbase counterparty accounts. Other comments are now making me think this isn't quite true.
However, it's a set of interactions that presents a problem. Suppose two Coinbase accounts set up for instant recieve.
(1) Someone double-spends a transaction from a non-coinbase account to both accounts
(2) Both accounts immediately "instant send" their balance to a non-coinbase address.
(3) Some time later, the next blockchain confirmation goes through.
What happens? Either the transactions are not instant or Coinbase is defrauded.
