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Author Topic: Bringing Bitcoin to the world-competing with Western Union  (Read 4076 times)
semaforo
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May 30, 2013, 09:26:16 AM
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Would anyone be interested in working with me in setting up a franchise style company to try to set up exchanges in high remittance receiving areas that exchange bitcoin into local fiat? I've read threads talking about trying to set up an exchange in Somalia that exchanges bitcoin for Somali shillings. Since Western Union has high fees as well as horrible exchange rates, this project could increase income for families in low income parts of the planet by billions. How about starting as skype is to big telecom, a bitcoin answer to western union?
      It would mean getting together packages of secure bitcoin recieving software and the profits would not be for transfer but for set up and tech support. I sepak french and spanish and have travelled in Latin America and Africa a lot- this work would basically mean going to different countries in Latin America and Africa at first, and teaching people about how to use bitcoin, and get the word out. People will flock to this when they find out they can get more money to their families, and the demand for bitcoin will increase. I think this would need to be an open source style project rather thana ruthless money making venture, in keeping with the spirit of bitcoin, but we could charge enough for a modest salary and travel expenses. Anyone want to see the world and spread the word about bitcoin?
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May 30, 2013, 10:36:19 AM
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Do you have thousands of dollars to invest into all the "legal aspects" of "being a money exchanger/minter/handler"... Including international lawyers, getting FDIC insured for transfered funds, reporting and recording all user info of all transactions over $10,000 USD... Ability to handle losses and gains from exchanges delayed by time. And over-all losses due to theft/laundering, which will NOT be "returned" to you by any insured agency.

Just saying...

Might want to leave the "big jobs" to the "big investors", who have many people below them to "absorb the losses".

If YOU are the "gateway", people will hunt you down and try to kill you, if you fail to "deliver" the "lost funds"... Are you prepared for that? The mafia, the greedy, the innocent who were "taken" through the use of your "system"... (But that is only worst-case scenario.)

I am sure someone sending $10,000 to family, will understand when you deliver it to the wrong person, and can't get it back... when you find that someone has taken that money without their consent, and given it to themselves in another account, and you can't track them down to get it back. I am sure that family will just "understand" and walk away... But a cartel-member might not, and they know where to find you... or, at-least... someone who operates that business.
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May 30, 2013, 10:39:20 AM
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Do you have thousands of dollars to invest into all the "legal aspects" of "being a money exchanger/minter/handler"... Including international lawyers, getting FDIC insured for transfered funds, reporting and recording all user info of all transactions over $10,000 USD... Ability to handle losses and gains from exchanges delayed by time. And over-all losses due to theft/laundering, which will NOT be "returned" to you by any insured agency.

Just saying...

Might want to leave the "big jobs" to the "big investors", who have many people below them to "absorb the losses".

+1 Can't say better than that..
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May 30, 2013, 10:53:22 AM
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I am not against spreading the word, and showing them how to use it...

I am against attempting to "put yourself in harms way", or others... by "claiming responsibility" for things beyond your control.

The idea has merit, using a POS terminal that gives "access" to wallets and funds, and ATM style machines to transfer to things like restaurant-tabs and store-purchases... etc... but to claim responsibility as an "exchange" is a LOT of work.

You realize that WU ONCE depended upon people "not claiming funds"... now the law says all unclaimed funds have to be sent to a special place, and held for 20 years, and if unclaimed, they go to the government, not back to WU.

That is why fees have risen over the past 20 years for WU. They also had to "refuse" certain high-volume transactions, which are suspect of "laundering", and those funds are also taken by the government, not WU. When you get into large-scale things, you need large-scale funds... not just open-source and group participation. That only works for "small-scale" things, where losses and risk are minimal. Being open-source opens you up to exploitation beyond your control, and places everyone who previously invested at risk. (Just like bitcoins do.)
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May 30, 2013, 01:41:36 PM
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I am not against spreading the word, and showing them how to use it...

I am against attempting to "put yourself in harms way", or others... by "claiming responsibility" for things beyond your control.

The idea has merit, using a POS terminal that gives "access" to wallets and funds, and ATM style machines to transfer to things like restaurant-tabs and store-purchases... etc... but to claim responsibility as an "exchange" is a LOT of work.

You realize that WU ONCE depended upon people "not claiming funds"... now the law says all unclaimed funds have to be sent to a special place, and held for 20 years, and if unclaimed, they go to the government, not back to WU.

That is why fees have risen over the past 20 years for WU. They also had to "refuse" certain high-volume transactions, which are suspect of "laundering", and those funds are also taken by the government, not WU. When you get into large-scale things, you need large-scale funds... not just open-source and group participation. That only works for "small-scale" things, where losses and risk are minimal. Being open-source opens you up to exploitation beyond your control, and places everyone who previously invested at risk. (Just like bitcoins do.)

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

   Appreciate the critical thinking. I do have thousands of dollars to throw down to get the approval of all the relevant authorities, and if ten or twenty like minded people get in on this and pool our organizational skills and networks, then we'd have hundreds of thousands of dollars to throw down. Besides, if bitcoin took even 5% of the global remissions market over(which could probably dramatically improve standard of living for millions of people just in the fees saved), the volume of trading would increase so much that the increase in bitcoin value would probably make up for the initial investment on its own.
    Besides, the regulation is mostly necessary in the hegemonic centers like the European Union, Russia, North America, Australia, etc.. Things are much more relaxed in the rest of the world. Look at the clothes factory in Bangladesh that collapsed- they were able to build five extra floors on a building without getting a building permit or consulting an architect. I'm guessing things are different wherever you live.
     So African immigrants working in the US or Europe can purchase their bitcoins through an already established exchange like coinbase or bitstamp, transfer them to the registered dealer certified by our organization- the dealer has a cap on transaction size based on his access to fiat. All we have provided is the knowledge- where is the part where the mafia comes after me? The beauty of bitcoin is in its efficacy at avoiding the oppression of governments. At most it would mean finding trustworthy people who already have the capital to invest. Lets say Mr.Entrepreneur in Senegal owns a few rental houses and grocery stores and is looking for an investment since he has 10 million CFA lying around. We set him up with a bitcoin wallet and have him tell his extended family of 600 people about bitcoin. They each tell their extended family of 600 people about bitcoin, and their relatives in Europe and the US go to coinbase or bitstamp instead of WU. Mr. Entrepreneur sets up each of his recipients with a bitcoin wallet to which only they have the passwords. Mr. Entrepreneur has 3 computers in his office, and they can make the exchange right there. As soon as the exchange is confirmed, he unlocks the back room, gets the cash out of the safe, and makes the exchange. If he rips anybody off he will be instantly out of business and probably brought to justice by a mob.
    Perhaps this is a project better suited to a non-profit. The potential is huge, especially for all of the countries that are cut off by registered and licensed banking institutions. This is the nature of the market- efficiency wins. Where there is the potential to work more efficiently, all the armies, lawyers, politicians, and bankers in the world can't stop it. If a non-profit did start trying to spread bitcoin as a remissions technology, we would all have incentive to donate it, because the more it is used the greater the size of the bitcoin ecosystem and thus the higher the value of bitcoin.
    
        
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May 30, 2013, 04:47:55 PM
 #6

Do you have thousands of dollars to invest into all the "legal aspects" of "being a money exchanger/minter/handler"... Including international lawyers, getting FDIC insured for transfered funds, reporting and recording all user info of all transactions over $10,000 USD... Ability to handle losses and gains from exchanges delayed by time. And over-all losses due to theft/laundering, which will NOT be "returned" to you by any insured agency.

Just saying...

Might want to leave the "big jobs" to the "big investors", who have many people below them to "absorb the losses".

+1 Can't say better than that..

I agree, this is a huge operation so if you get find someone with deep pockets to back this up go for it.
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May 30, 2013, 05:15:10 PM
Last edit: October 04, 2014, 04:59:35 PM by Stephen Gornick
 #7


Bitcoin essentially displaces hawala.  With hawala there is this set of transactions in two locations which is only possible due to a linkage of trust between the two parties facilitating the "transfer".  With bitcoin, a transfer of fiat is simplified into two domestic Bitcoin exchange transactions, each independent from the other.  One is the buying of bitcoins at one location and the other transaction is cashing out the bitcoins at another.

Every hawalador can essentially go independent and offer to do Bitcoin exchange services, ... up to a point.

At most it would mean finding trustworthy people who already have the capital to invest.      

The problem is the street-level hawalador agent handling the cash-out needs to quickly turn over the bitcoins received right back into fiat.   So the street-level hawalador needs a nearby low-cost exchanger who will buy the hawalador's bitcoins and pay out cash.  

So there is a capital requirement for providing this exchange service where held by the mid-level exchanger is an inventory of cash to be able to buy every bitcoin that the street-level hawalador wishes to sell.

When I see how there are 70,000 M-Pesa agents in Kenya who earn commission that supplements their income, (including many who earn so much from M-Pesa that they do it full-time now), it is a natural that individuals looking to earn a little money by providing bitcoin exchange will emerge in that role.  But what they need help with to get started is a way to turn the bitcoins they buy back into cash.

Down the road this will probably build some form of a hierarchy.  You'll have the street-level exchangers buying bitcoins and paying maybe 5% below spot.  That level may seem a little high but it is necessary due to the time involved to provide this service (arranging and meeting face-to-face is time consuming) and to protect against the risks -- exchange rate risk where the value fluctuates after the exchanger buys the coins after completing a buy from a customer but has not yet sold them.   Other risks include receiving counterfeit bills (though with proper training that risk can be lowered) and physical security (i.e., handling cash can be dangerous).

But then if that street exchanger can visit (or get a visit) from a broker-dealer/mid-level exchanger who will convert those bitcoins back to cash at about a 2% to 3% fee then the amount of money earned makes it worth it for the street exchanger to provide the service.   The broker-dealer itself might have a trusted party that the coins are flipped to immediately (wholesale, close to spot rate) so that there is no exchange rate risk exposure and exists is a fairly quick method of replenishing the dealer's inventory of cash.  

The reason the street-level exchanger doesn't just send the coins to an exchange is because that would involve the banking system, and either the costs or the settlement delays associated with the banking system are prohibitive.  And exchange is probably a regulated activity so the street-level exchanger wouldn't use a bank regardless.  Even the broker-dealer probably won't use the banking system either.  

So essentially, this eventually has just tiers like any supply chain.  The street-level exchanger buys coins from the public and sells them to a broker-dealer (the next level up in the hierarchy).  Then the broker-dealer trades those coins up to a wholesaler (who has the banking relationships and / or relationships with large buyers.)

But this hierarchy isn't necessary to get things started.  All that is needed are for the two parties (prospective buyer and prospective seller) to learn that each other exists.  These relationships can be learned from attending a local meetup, or from a classified ad on craigslist even.

LocalBitcoins is essentially the closest thing to a hawala network that exists with Bitcoin today as I can (and have) used that to do a three-party transaction.  Here's how that three-party transaction worked.   I as the seller contacted the buyer in a far away location.  The buyer met with my person who was to receive the cash.    My person sent me a text saying the buyer was there with the cash, I released the bitcoin funds, and the buyer then handed over the cash.     My recipient of the funds didn't know anything about Bitcoin, except that Bitcoin had made it possible for some person to show up at a certain time and hand over some cash -- no names, no phone numbers, no ID, no nothing.  The only technology that was needed at the hand over of the cash was a couple text messages between me and the person receiving the funds.

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semaforo
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May 30, 2013, 06:27:24 PM
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Bitcoin essentially displaces hawala.  With hawala there is this set of transactions in two locations which is only possible due to a linkage of trust between the two parties facilitating the "transfer".  With bitcoin, a transfer of fiat is simplified into two domestic exchange transactions, independent from each other.  One is the buying of bitcoins at one location and the other transaction is cashing out the bitcoins at another.

Ever hawalder essentially can essentially go independent and offer Bitcoin exchange service, ... up to a point.

At most it would mean finding trustworthy people who already have the capital to invest.       

The problem is the street-level hawalder agent handling the cash-out needs to quickly turn over the bitcoins received right back into fiat.   So the street-level hawalder needs a nearby low-cost exchanger who will buy the hawalders bitcoins and pay out cash.  

So there is a capital requirement is essentially for providing exchange service where held is an inventory of cash to be able to buy every bitcoin that the street-level hawalder wishes to sell.

When I see how there are 50,000 M-Pesa agents in Kenya who earn income to supplement their income, (including many who earn so much from it that's all they do), it is a natural that individuals looking to earn a little money by providing bitcoin exchange will figure it out.  But what they need help with to get started is a way to turn the bitcoins they bought back into cash.

Down the road this will probably be like a hierarchy.  You have the street-level exchangers buying bitcoins and paying maybe 8% below spot.  That level may seem a little high but it is necessary due to the time involved to provide this service (arranging and meeting face-to-face is time consuming) and to protect against the risks -- exchange rate risk where the value fluctuates after the exchanger buys the coins after completing a buy from a customer but has not yet sold them.   Other risks include receiving counterfeit bills (though with proper training that risk can be lowered) and physical security (i.e., handling cash can be dangerous).

But then if that street exchanger can visit (or get a visit) from a broker-dealer who will convert those bitcoins back to cash at about a 2% to 3% fee then the amount of money earned makes it worth it for the street exchanger to provide the service.   The broker-dealer itself might have a trusted party that the coins are flipped to immediately (wholesale, close to spot rate) so that there is no exchange rate risk exposure and exists is a fairly quick method of replenishing the dealer's inventory of cash.  

The reason the street-level exchanger doesn't just send the coins to an exchange is because that would involve the banking system, and either the costs or the settlement delays associated with the banking system are prohibitive.  And exchange is probably a regulated activity so the street-level exchanger wouldn't use a bank regardless.  Even the broker-dealer probably won't use the banking system either.  

So essentially, this eventually has tiers like any supply chain.  The street-level exchanger buys coins from the public and sells them to a broker-dealer (the next level up in the hierarchy).  Then the broker-dealer trades those coins up to a wholesaler (who has the banking relationships and / or relationships with large buyers.)

But this hierarchy isn't necessary to get things started.  All that is needed are for the two parties (prospective buyer and prospective seller) to learn that each other exists.  These relationships can be learned from attending a local meetup, or from a classified ad on craigslist even.

LocalBitcoins is essentially the closest thing to a hawala network that exists with Bitcoin today as I can (and have) used that to do a three-party transaction.  I as the seller contacted the buyer in a far away location.  The buyer met with the person who was to receive the cash.    That person sent me a text saying the buyer was there with the cash, I released the funds, and the buyer handed over the cash.     My recipient of the funds didn't know anything about Bitcoin, except that Bitcoin had made it possible for some person to show up at a certain time and hand over some cash -- no names, no phone numbers, no ID, no nothing.  The only technology that was needed at the hand over of the cash was a couple text messages between me and the person receiving the funds.

    Thanks for the reply...
   I guess bitcoin businesses require a different kind of thinking than traditional businesses. I am just trying to figure out how to get it to catch on to. Once one successful operation is set up it will probably spread like wildfire. How to do it... most of the bitcoin downloads so far seem to be concentrated in Europe, North America, and China. I suppose it's just a matter of time, I'm just thinking I'd be willing to throw down some time and coins to get this going, and I think most reasonable bitcoin enthusiasts would too.
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May 30, 2013, 07:03:04 PM
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If you do this you will likely get arrested, robbed or both.


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May 30, 2013, 09:30:48 PM
Last edit: May 30, 2013, 09:46:57 PM by semaforo
 #10

   Hi abdussamad,
     Your website looks really good. I know IT infrastructure is quite advanced in Pakistan, how would you go about starting a bitcoin exchange in neighboring Afghanistan.
    Do you think something like easy paisa could be done with bitcoin smartphone software?
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May 30, 2013, 09:54:57 PM
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I'm interested in starting a conversation about bitcoins in emerging markets. Don't have deep pockets but there has to be a better way for people to send money internationally without high costs. This is definitely worth exploring and speaking with people already making Bitcoin available in places like Argentina.
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May 31, 2013, 03:52:19 AM
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I'm interested in starting a conversation about bitcoins in emerging markets. Don't have deep pockets but there has to be a better way for people to send money internationally without high costs. This is definitely worth exploring and speaking with people already making Bitcoin available in places like Argentina.

   Yes, I also think there is a lot of potential there...I was thinking about it and the Western Union comparison is probably not a good one. I think any software or organization working with bitcoin should be decentralized and reflect the nature of bitcoin. Probably will involve used smartphones.
 
   I also realized that my proposition may have been offensive to abdussamad because now looking at it it sounds a little bit like missionary evangelism- i.e. "let's save the poor undeveloped countries by bringing them salvation in the form of bitcoin."
    Actually a friend of mine is sending money to his family in Somalia and paying fees as high as 10%, since there is no real banking infrastructure in Somalia at the moment, and I'm thinking that's gotta be a market gap.
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July 09, 2013, 02:11:42 AM
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This is definitely on the right track.

The main use of Bitcoin (and alternative currencies like it) is clearly for cross border exchange.

The big question is how to make it happen.

Probably one country at a time.

Providing the appropriate technology to allow people on the street to individually act like money changers.


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July 14, 2013, 04:18:11 PM
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I wrote this earlier, before I stumbled upon this topic,

https://bitcointalk.org/index.php?topic=88320.80

It seems like we're thinking in similar directions.  The big question is how to make it happen.
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July 14, 2013, 05:38:49 PM
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  Better check out kipochi... it would also be a good time for anyone with the funds and expertise to get into the same line of business kipochi is in.
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July 14, 2013, 06:46:32 PM
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Good reference there, I wasn't aware of Kipochi but that's the kind of thing I had in mind for the Philippines.  The key thing is ease of use.  If people find it easy to use and cheap, it will take off and word of mouth will do the work for you.  There's an entire local market structured around small loans called 6/5 that are purely cash but really expensive, plus the local agents like MHLuiller that charge 5% on transfers but handle small amounts as well as really large ones at the same rates.  What is really needed is a way to handle it on basic mobiles with limited internet functionality to make it really accessible and low cost.  There's the Pasaload system that allows you to pass mobile phone credit around with just a text message and Smart allow you to send money using text  messages.  Seems to me that something very similar might be possible with bitcoins, but the tricky bit might be connecting buyers and sellers and managing a wallet securely. I had images of a simple server based system that connected buyers and sellers using text messages maybe?
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July 14, 2013, 08:38:00 PM
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I'm interested in starting a conversation about bitcoins in emerging markets. Don't have deep pockets but there has to be a better way for people to send money internationally without high costs. This is definitely worth exploring and speaking with people already making Bitcoin available in places like Argentina.

I just read this:

Quote
A startup called artaBit, is attempting to take on Western Union in the money-transfer business, using Bitcoin as the transport currency between countries, with a focus on sub-$1,000 transfers to Southeast Asia. The artaBit system would accept user deposits in one currency, transfer it to Bitcoin for the overseas trip, then convert those Bitcoins into whatever other currency is needed on the other end of the transaction. Co-founder Ayoub Naciri believes the company can offer the service at rates as low as 3%, easily beating Western Union’s flat-rate service charges, which can range as high as 30%, he says, on small transactions.

“We’re removing exposure to Bitcoin to the customer,” Naciri said. “Neither the sender nor the receiver needs to know about Bitcoin or even be aware of its existence to use the service. We don’t want to have the barrier of having to explain to people what Bitcoin is.”

 - http://finance.yahoo.com/blogs/the-exchange/future-bitcoin-202631430.html
 - http://www.artabit.com <-- Indonesian language only

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July 15, 2013, 01:32:21 PM
 #18

  Bitcoin is exploding and we are witnessing the making of history.
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July 15, 2013, 06:40:01 PM
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It could work but you have to start at street-level. Western Union is well known and trusted brand name. If you want to compete, you need to open a shop in Mogadiscio, with a big Bitcoin logo, changing cash to bitcoin and vice-versa. I guess that calls for a significant investment. I've never been to Somalia, but I've been to neighboring Kenya and safety can be a serious problem if you're not in the good areas. Then, the unanswered question will be how much time it takes for bitcoin to convonce the man in the street. Imagine WU charges a 10% fee, and you charge only 3% for exchanging. Would that be enough for the average Somalian to make the switch?

X
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July 15, 2013, 09:18:12 PM
 #20

Would that be enough for the average Somalian to make the switch?

Perhaps since Western Union, nor any other bank-related entity associated with the western world will serve Somalia then the choice has already been made for the "average Somalian".

Those who provide hawala could add exchange of Bitcoin to their repertoire and make more profit from that method, since there is no need to split the commissions with any other party.

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