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Author Topic: Stop saying Bitcoin is good for money transfer. It isn't.  (Read 7794 times)
vongesell
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September 12, 2013, 04:59:41 PM
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Bitcoin has many immediate benefits including 0-friction ecommerce (no user accounts), low liability and fees in a purely Bitcoin enclosed market, micro payments and real escrow, just to name few. But the prophets peddling the idea it will have a huge impact on banking and commerce, how it is so much more efficient for international money transfer, are just downright misleading and actually distract people from fixing the problem.

This video touts how low the fees are for transfering money internationally with Bitcoin but limits itself to the example of $1000. All the benifits fall apart once the amount is >$5k. Let me give a real example.

I have a family member in the US that is part owner of company. A majority owner was leaving and so that presented an opportunity for me, in the EU, to send them $50k to invest. I could take profits from BTC as an early adopter or I could dip into FIAT savings. The former seemed ideal and seemed to be perfect for BTC according to the prophets. So I started looking into how to do it. On the US end MtGox can be used but with a long delay for 4 to 8 weeks and some marginal fees (0.5% exchange fee, $10 transfer fee). A bit ridiculous. But the other exchanges are worse, in a different way. For example Coinbase has 2 to 3 day transfer but a daily limit of 50BTC. That means it would take at least 9 days to sell enough BTC to convert into $50k. Assuming all these abstraction layers work out it would take 2 weeks to get the money with some fees for exchange (1%). CampBx doesnt really state their BTC sell limits clearly but do state a $1000k per day withdrawl limit. 50 days is nuts. Guess there is a wire transfer option but not knowing the BTC limits its just not clear if this would work. A p2p exchange such as #bitcoin-otc would have a 5% margin from my experience so this also seems a bit much. Localbitcoins and in fact most of the other exchanges have such low volume this also has to be considered.

So no, Bitcoin is just not good for money transfer (unless you are sending to Japan or China). In the end FIAT>FIAT internationally was way less of a headache, less time, and nearly the same or less fees than using Bitcoin in the BTC>FIAT route.

Is Bitcoin broken?
Well no. The other non-money transfer benefits are huge and will bring real growth. But they are limited to the sub $1k realm. The prophetic windfall from large commerce is not coming soon. It makes no sense for Paypal or Western Union to utilise Bitcoin. If exchanges have to reduce volume and limits or incur huge delays you could only imagine the volumes that these players would need and be unable to obtain stably with Bitcoin. They of course *could* solve them as Paypal did in the early days. But they would have to take upon themselves a huge headache that the exchanges already have. (It'd be a Heisenburg like headache but where all the cash is legal.) One can expect they will stay far away from it until this is solved. So if you see posts or comments from large players considering to utilise it for anything other than micro or <$1k payments, forget about it. It's several years away.

Conclusion: It seems to me that to fulfil the prophecies Bitcoin will either have to become completely regulated at the exchange level AND more or the community will have to stop living in the fantasy that the problem is solved and focus on innovating on the p2p exchange models. Bitcoin.de had a potentially working model before they paired with a bank and limited activity to german citizens alone (edit: limited to citizens of several EU countries, not just germany). Each user makes that transaction directly between their banks. Exchange only escrows BTC to ensure transaction and reputation. A better system could avoid the whole user verification entirely, or find ways to obtain additional trust without taking on the liability of enforcement.

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September 12, 2013, 05:29:12 PM
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Localbitcoins and in fact most of the other exchanges have such low volume this also has to be considered.

The trader (listed on localbitcoins and craigslist) who I deal with always offers to conduct larger exchanges with me.  Much larger.

He deals in gold, silver, and now Bitcoins.

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September 12, 2013, 05:31:43 PM
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I think what you mean is that Bitcoin is not a good way to get large amounts of fiat to someone right now. That's fairly obvious and missing the point. Bitcoin is, in fact, a fantastic way of transferring value. It's just that your family member apparently denominated his/her investment terms in dollars, not BTC.

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September 12, 2013, 05:38:46 PM
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I think that Bitcoin itself is a brilliant way to transmit money but the exchange services Fiat/ BTC are not good enough yet. If you do some research you will find that the Fidor Bank is planing to implement a bank account which can do the exchange in real time. This would make Bitcoin a really nice tool for conducting transactions as an alternative to Western Union and similar money transfer services.

On top of that it could easily replace paysafe cards since you could just change the Fiat given into bitcoin and print out a paper wallet. If you can change that into Fiat in real time then paysafe card and similar trashy services would be obsolete...

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Piper67
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September 12, 2013, 05:41:47 PM
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I use Bitcoin to transfer money to my family overseas all the time (literally, at least once a week). I buy them through either Virtex or Coinbase, then transfer them to a localbitcoins.com contact in the city where my family lives and he hands them local currency. I used to use Western Union, but between the ridiculous WU fees and the even more ridiculous exchange rate controls in the country my family is in, I was losing over 40% of the original amount. With Bitcoin the transfer is instantaneous and I lose less than a fraction of 1%.

So how is this not working as a money transfer again?
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September 12, 2013, 05:53:50 PM
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I use Bitcoin to transfer money to my family overseas all the time (literally, at least once a week). I buy them through either Virtex or Coinbase, then transfer them to a localbitcoins.com contact in the city where my family lives and he hands them local currency. I used to use Western Union, but between the ridiculous WU fees and the even more ridiculous exchange rate controls in the country my family is in, I was losing over 40% of the original amount. With Bitcoin the transfer is instantaneous and I lose less than a fraction of 1%.

So how is this not working as a money transfer again?

Can you tell us which country this city is in?

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vongesell
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September 12, 2013, 05:55:39 PM
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I use Bitcoin to transfer money to my family overseas all the time (literally, at least once a week). I buy them through either Virtex or Coinbase, then transfer them to a localbitcoins.com contact in the city where my family lives and he hands them local currency. I used to use Western Union, but between the ridiculous WU fees and the even more ridiculous exchange rate controls in the country my family is in, I was losing over 40% of the original amount. With Bitcoin the transfer is instantaneous and I lose less than a fraction of 1%.

So how is this not working as a money transfer again?

I think you missed my premise. I'm talking about larger transfers. I don't know the limts at Virtex but at coinbase they make it near useless for larger quantities.

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September 12, 2013, 05:59:24 PM
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Western Union- Taking 40% of the money that hard working people send home to feed their family. A really honorable business- NOT

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vongesell
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September 12, 2013, 06:04:18 PM
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Bitcoin is, in fact, a fantastic way of transferring value. It's just that your family member apparently denominated his/her investment terms in dollars, not BTC.

In the 17th centry tulips were also a great way to transfer wealth as well. For the foreseeable future most will need BTC>FIAT exchange.

If you do some research you will find that the Fidor Bank is planing to implement a bank account which can do the exchange in real time. This would make Bitcoin a really nice tool for conducting transactions as an alternative to Western Union and similar money transfer services.

True but this just illustrates that the road to solving the issue of larger transfers is dependent on regulation. I believe it can be augmented also by unregulated but better p2p exchange. The Fidor Bank plan is exactly the thing that turned a great open p2p exchange into a highly regulated and thereby highly limited one (to german citizens only) that I mentioned: bitcoin.de. To be clear, I'm not apposed to this but it has a slow adoption rate and will be many years before it removes the headache of >$1k transfers. So, with that now we have China, Japan and Germany able to exchange relatively easily between them. Only 190 more to go.

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September 12, 2013, 06:08:29 PM
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do not ever user tulips when comparing to bitcoins. that is honestly a very stupid irrelevant comparison that gets tossed way too much. why not just talk about some other irrelevant item like sea shells or shark's teeth.
you have valid points - you are right it  isn't the easiest to do today

however, just don't bring up tulips. thank you

ok
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September 12, 2013, 06:17:57 PM
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Bitcoin is, in fact, a fantastic way of transferring value. It's just that your family member apparently denominated his/her investment terms in dollars, not BTC.

In the 17th centry tulips were also a great way to transfer wealth as well. For the foreseeable future most will need BTC>FIAT exchange.

do not ever user tulips when comparing to bitcoins. that is honestly a very stupid irrelevant comparison that gets tossed way too much. why not just talk about some other irrelevant item like sea shells or shark's teeth.
you have valid points - you are right it  isn't the easiest to do today

however, just don't bring up tulips. thank you

Then I would also request people not use arguments that require a purely bitcoin world where all of a business or persons costs are denominated in this. It makes only as much sense as the tulip comparison I used as a response to it Wink

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September 12, 2013, 06:18:12 PM
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Right now you are right. However in the future I expect that you could be able to open a bank account denominated in bitcoin, in which case it will be the ideal currency to keep your savings. And you can just convert whatever you need to spend in local currencies.
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September 12, 2013, 06:19:57 PM
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Exchanges are dead to me in the US since Gox broke. I don't feel confident the USG won't be seizing my funds (in an exchange), having my bank (or Dwolla, a payment processor suggested to file for $2.5k transactions instead of the usual $5k) file SARs against me every time I twitch, or otherwise impeding transactions. Local BTC<->cash exchanges, I've found, are most convenient, low-to-no fee, lowest-hassle, and always fun.

Finding trustworthy people looking to buy or sell all over the world isn't a big issue, but it's a much more "uncertain" process than following a rigid exchange procedure, and you have to work with someone else's schedule.

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September 12, 2013, 06:21:46 PM
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Yeah, there isn't any listed in amarillo in localbitcoins.com, and i do not feel safe with bank transfers or exchanges.

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September 12, 2013, 06:26:33 PM
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I use Bitcoin to transfer money to my family overseas all the time (literally, at least once a week). I buy them through either Virtex or Coinbase, then transfer them to a localbitcoins.com contact in the city where my family lives and he hands them local currency. I used to use Western Union, but between the ridiculous WU fees and the even more ridiculous exchange rate controls in the country my family is in, I was losing over 40% of the original amount. With Bitcoin the transfer is instantaneous and I lose less than a fraction of 1%.

So how is this not working as a money transfer again?

Can you tell us which country this city is in?

I'd tell you, but then I'd have to send someone after you  Grin Grin Capital and exchange rate controls... been in the news and the forums quite a bit lately.
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September 12, 2013, 06:27:45 PM
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LocalBitcoins rates are very fair, 1% off of the top for escrow, but chances are you are selling above the Bitstamp price (but below the Mt Gox price) with an established account in a populated area, you would have had zero problems converting $50k in BTC to $50k in USD. The thing is, you werent prepared. You could have transferred the BTC to your uncle, he could have done the KYC verification with CampBX and also had cash pretty quickly.

When we say that BTC is good for moving money cheaply, the money we are talking about is BTC, not government fiat. After you move the money, you go through the same hassles to convert BTC to local currency as you would with any obscure foreign currency, in many places there simply are not a lot of options, and the options that are available are subject to extreme regulation.
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September 12, 2013, 06:33:50 PM
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LocalBitcoins rates are very fair, 1% off of the top for escrow, but chances are you are selling above the Bitstamp price (but below the Mt Gox price) with an established account in a populated area, you would have had zero problems converting $50k in BTC to $50k in USD. The thing is, you weren't prepared. You could have transferred the BTC to your uncle, he could have done the KYC verification with CampBX and also had cash pretty quickly.

When we say that BTC is good for moving money cheaply, the money we are talking about is BTC, not government fiat. After you move the money, you go through the same hassles to convert BTC to local currency as you would with any obscure foreign currency, in many places there simply are not a lot of options, and the options that are available are subject to extreme regulation.

The location for exchange in the EU and US are both major cities with populations >1m. In both cities the localbitcoin.com limits are too low and would likely require a couple weeks to disperse and then acquire $50k worth. I've also used local exchanges and yes they are great. Just not enough volume for larger quantities.

I agree BTC is amazing when transferring and using only BTC. It's just not a realistic outlook though for day to day life and wont be for many years to come. So much so that if someone says "bitcoin is great for money transfer" I consider this misleading. Should be "bitcoin is great for bitcoin transactions". It will be years before someone can say the former without a disclaimer

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September 12, 2013, 06:42:22 PM
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As a side note: this issue illustrates pretty clearly why alternative coins will be at a constant disadvantage. 3 of 193 countries have easy bank/money <> bitcoin services. As that increases it embeds this currency even more. As has been stated elsewhere (Quora CEO: Do other crypto-currencies have a chance or is Bitcoin too far ahead?) unless an alt currency provides seriously strong features over bitcoin (ahem, better anonymity??) then the infrastructure of bitcoin will be near impossible to compete with. The headache of BTC users trying to live in a FIAT world and depending on various tools and regulations to allow this is a huge advantage that is growing.

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September 12, 2013, 06:43:55 PM
 #19

over 3Kusd, not need use bitcoin, paypal, WesternUnion.
Just use swift international bank wire.
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There is more to Bitcoin than bitcoins.


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September 12, 2013, 06:53:11 PM
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I am sorry for your trouble. My experience is quite the opposite. I have been using Bitcoin for international transfer for several years now. Not for the sake of using it, but because it works better than alternatives.

When MtGox started having problems with Dwolla, I was forced to look around for another USD option, and Bitstamp has been great.

Things you complain about have nothing to do with Bitcoin technology, but with exchanges you are using and not using, and with the current state of adoption. It's like complaining that TCP-IP is broken because your internet provider sucks or because somebody infected your PC with a virus.


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