They are pretty much useless hassle and represent about 100 years step back in then banking industry.
I think this is a rather bold statement so let me elaborate.
I'm Average Joe. I earn a decent salary in Piresian Pesos (1 USD = 20 PIP). I have a bank account, a bank card and PayPal. I'm not into terrorism, money laundering or general shady business. I want to order an expensive, 300 USD coat from the US because I dig it and I can afford it.
My options:
PayPal: I pay 6100 PIP. The bank converts it to 300 USD and takes 5 USD on the conversion. Then PayPal takes about 10 USD on th transaction and about 10 USD more if the shop owner wants it in paper form. I paid 305 USD and the shop owner received ~280 USD. 25 USD was taken by the bank and the Paypal to provide the place of the transaction in a secure manner. The transaction is instantaneous. PayPal insures the transaction as well. If the coat doesn't live up the the sales pitch, I can place a claim and get my money back.
Bank Card: I pay 6260 PIP. The bank converts it to 300 USD and takes 13 USD on the conversion. The shop owner pays about 15 USD to the bank card scheme + yearly fees. The money is on the shop owner's bank account, so no extra fees on that. I paid 313 USD and the shop owner received ~285 USD. 28 USD was taken by the bank and the payment scheme provider to secure the transaction. The transaction is instantaneous. The schemes usually provide some fraud protection and get your money back if the coat failed to show up.
Bank wire: I pay 6600 PIP. The bank takes a conversion fee and a wire transfer fee or 600 PIP or 30 USD. The shop owner gets the 300 USD straight, no deductions because I set the wire transfer to take all expenses on my end. 30 USD was taken by the banks. The transaction is greatly delayed, up to a week to clear. The bank does provide some protection if the destination bank account address was entered incorrectly but does not care about the outcome of the order.
Cash in an envelope: The old but gold method. Your preferred choice if you want no bank involvement. I put 300 USD into an envelope and send it via a reputable courier. I endure a 12 USD exchange loss and pay 25 for the envelope, a total of 37 USD. The owner receives 300 USD. The transaction is not insured or secured in any way. If the envelope gets lost or the coat never shows up then it is gone.
Then I realize that the shop owner accepts ByteToken, the most popular crypto at the time with all the usual promises and capabilities. So
I want instantaneous transaction so I go to CoinBase and buy ByteToken using my bank card. Currently one ByteToken (BT) costs 1000 USD so I will need 0.3 BTs. Unfortunately, CoinBase likes to sell BTs with a 3% exchange markup. I have to pay 309 USD to get 0.3 BTs but then I realize that there is a transfer fee as well, which is 2% or 6 USD. That means I need to spend 315 USD to be able to get 0.3 BTs to the shop. But oh no, coinbase also pushes the 5% bank card fees to the buyer which is 15 USD. After all, I pay a total if 330 USD to get 300 USD through. So far so good, except my bank also does a PIP to USD conversion for 330 USD at the cost of 8 USD. I pay a total of 6760 PIP for that 0.3 BT to go to the shop owner. That is 38 USD in fees and conversions. Unfortunately, the fees do not stop there. If the shop owner would like to get that 0.3 BT into paper USD, he would need to pay 15 USD for the BT to USD conversion and the withdrawal. In total, of a 300 USD transaction, both paries endured a total of 53 USD fees. And for that, you get the same safety as sending cash in an envelope. If the coat does not show up, the bank will do nothing because their insurace stops at CoinBase and CoinBase gives no reversal. Also, if you somehow manage to mess up the address and the money gets lost, then it is gone.
The bottom line is: Using crypto managed to make the most expensive method, the Cash in an envelope, 40% more expensive with no added customer protection whatsoever. Practically, you pay the markup for an instant cash in an envelope transaction.
Now, why would I still want to go back hundreds of years in time and do this cash sending method?
- Because banks are evil and I give them no money! Fair point. Too bad, you need a bank account to send money to CoinBase and the bank will take its sweet conversion and transaction profit anyway.
- I don't want the Piresian Tax Authority to see my expenses! They will see that you spent 340 USDs. They will not know about your coat, but does that really matter? Coats are not outlawed or anything.
- It is more simple! Well you still enter the bank card details but you also need to register to an intermediary website and go some lengths to identify yourself. It takes a whole lot more time in reality.
- It is safe and secure! This is just non sequiter.
- It creates a unified currency system! No it does not. On the contrary, it adds an extra conversion. With normal means, it is PIP -> USD. With Crypto, it is PIP -> BT -> USD. It is about as useful as the Esperanto language. It was supposed to simplify conversations between foreigners. All it did was to add an extra language noone speaks.
And it gets worse. If you are the shop owner, you want your books nice and simple. You got the coat for 150 USD and want to hold on to 100 USD after the sale. The rest goes to tax and stuff. If the BT moves wildly around, +5% today, -15% tomorrow, +2% after etc then you must re-price the coat in every 2 hours to follow the currency movements. A currency must be steady and more or less plannable on the short and the long run. If you sold the coat at 0.3 BT today but then the price went down 5% by the time you cound convert to USD, you just lost 15% of your revenue. Just because you didn't cash in on time. So in order to avoid such losses, you add a 20% markup to buffer this out plus the conversion fees. You will sell at 335 USD instead of 300 and the buyer will eventually pay 375 USD for the 300 USD coat.
This leaves cryptos useless for the usual daily activities of Average Joe. A bank card is a nice and simple thing Joe can use quickly, easily and still have the protection of the bank. Meanwhile with a crypto, it is fees upn fees upon conversions upon insecurity and risks on the buyers side.
But hey, it is still good to save money into. Hm why is it better than any fiat money?
- It can be stolen easier and cleaner than normal cash.
- It has no backing, just like normal cash. The "consesus" is worthless. If we all agree that ByteToken is worthless, that is 100% consensus, but still makes BT worthless. The "hashing power" is worthless. Today there is 999999 TH in the system. Tomorrow, everyone turns it off and then there is 0 "hasing power". A BT worths as much as a +10 gilded broad sword in WOW. For a WOW player, that may worth 1000 USD. For someone who never played a sec, it has 0 value.
- It doesn't hold its value any better than normal currencies. Normal currencies rarely do the roller coaster ride cryptoes do.
- It is "limited". Kinda no. ByteToken declared that it will issue 100.000.000 tokens ever. Sounds fair until, 10 years later, Consensus comes up with a fork that doubles this number because it is nice. Or just forks a newer, better currency that phases the old ByteToken out completely. Also, "limited" doesn't really add value to something. There was a limited series BMW that was nice and all until the engine blew up at 100k. Since it was limited, the engine was limited as well. If the engines gives, there is no replacement part and your car is as good as dead.
As it stands now, the whole crypto scene is more like Wild West scenario with no law and order. This is the perfect place to make or burn money quickly with speculation, bullying, scamming etc. However, that is not development or advancement, that is 150 years regression into the lawless past.
Now please discuss. Prove me wrong.
