I have a better analogy: Bitcoin has the same sort of issues as TCP/IP. It's weird that people are expected to interact with it on the protocol level.
I think the term "cryptocurrency" is the "Big Data" of 2018. The term itself has been somewhat tarnished, but the underlying technology is super useful and will find its way into a lot of applications.
And no, I don't mean "blockchain". I mean Bitcoin... it's rather nice as a business or individual to be able to send large amounts of money around the world without snaking through the nightmare that is international banking. Inherent in that idea is the notion that the coin itself has value independent of a particular application.
Most of the issues with "international banking" are infact just issues with North American banks.
I can transfer large sums of money around Europe and it will arrive in few days at the very latest. Within the same country transfers mostly arrive the same day (often it's under 1 hour), and sometimes that happens internationally too. Oh and I don't need to pay anything for that.
A few years ago I was working in the Middle East, and before I moved back I transferred my savings from there (~€50k) back to Europe without any questions from either bank. I just did the transfer online, and it arrived in a few days.
Now I'm working for a US company, and it took them a few weeks to setup paying me with their bank. It usually takes at least a week from when they tell the bank to pay me, until I receive the money in my account - to a USD account also in the US.
> Most of the issues with "international banking" are infact just issues with North American banks.
This. Whenever someone says that Cryptocurrencies solve money transfer problems, I look where they are based and 99% of the cases it is the US. In Europe, transferring money is the same internationally as it is nationally. Type in the IBAN and the name of the recipient and they get it the same day, or latest the next day. I made seven figure international payments that went through in 24 hours.
This is not a technical problem that Cryptocurrencies are somehow uniquely placed to solve. Technically, a money transfer could take miliseconds - updating a couple of database rows. National payments in Europe at least are actually pretty much instant since they are now fully automated. International payments can take up to a day due to an actual human checking the correctness (and perhaps doing due diligence for money laundering).
So? There's a huge amount of currency flowing to and from North America to Europe, Asia, etc. Just because the euro zone has standardized their banking system doesn't mean a) that America will ever do the same (cough the metric system cough), or b) that all movement of money across borders should be strictly the purview of banks.
In Canada alone people send $23.3B/year back to their country of origin in the form of remittances (China, India, the Philippines, etc.). Historically they've been massively overcharged for the privilege of doing so because they're held captive to our oligopolistic banking system - sometimes upwards of 20% because they regularly send smaller amounts to minimize risk.
Nobody mentioned the Euro Zone before you did; they're talking about Europe "as a continent", for the most part.
Living in the UK, national payments are instant, with very few exceptions. And having lived in both Switzerland (where they use CHF), and Germany (Euros), I can say it's much the same across Europe.
International payments within Europe are fast too; a couple of days if you're changing currencies, and faster if both sides are in the Euro Zone.
Banks don't have to be slow. The only real issue I have is that the bank's exchange rates are criminal!
> The only real issue I have is that the bank's exchange rates are criminal!
Exchange fees show up in a number of different places. I have a Capital One card that I got specifically for the advertised "no foreign exchange fees". In reality, it consistently charges me about 1% more than the official exchange rate at any given point. 1% doesn't seem like a terrible fee. I wish it would itemize it, though.
Many merchants will not bill the card in their local currency -- instead, because it's a US card, they refuse to bill it in anything other than USD. That means they end up making me pay extra to cover their exchange costs, which are always exorbitant, maybe 10 times as much. They appear to have something worked out with their local bank, where the bank accepts payment in USD and gives them payment in CNY or HKD. Here, the bank is teaming up with the merchant to screw the customer without even benefiting the merchant.
I recently ordered something from Amazon's Canada site, and they generously offered to let me have them bill me in USD -- they would cover currency exchange themselves. Left unstated was that they would charge, again, an order of magnitude more for the service than my card would. At least they gave me the option to say "no, bill me in CAD".
The best option I generally have for transacting in China is to pull cash from an ATM (paying Capital One's 1%ish fee), and pay cash even for very large purchases. It's quite possible that banks aren't where you're getting hit by exorbitant fees -- transact directly with a bank, and you should be able to get low fees.
> Living in the UK, national payments are instant, with very few exceptions.
Well, anything within the same bank is instant. There is a commonly used mechanism in business accounts called "Faster Payments" which tend to settle even across banks in the UK within 2h.
Very recently - as in, in the last 4-6 weeks - a system called "SMS" was rolled out. Despite the name, it has nothing to do with text messaging. It's a new cross-bank settlement mechanism which promises to settle the transfer in 20 minutes within UK.
The reality is that SMS transfers don't work reliably across all the banks. Our payments and customer service teams had a bad week after we enabled SMS payments. When a supposedly faster transfer takes 5-6 days and you have to chase the bank(s) about payment states, there's clearly a fault somewhere.
I love TransferWise. I live in Canada, and had 2k USD sitting in a Canadian bank account. I was going to convert it to CAD, but the bank's exchange rate is atrocious. So I opened a free US-based account with my bank's US division, transferred all my USDs there 1:1, then sent it through TransferWise to my Canadian account. A bit convoluted, but I saved close to $100 and it didn't take long to set up.
I see this point about remittance fees being made frequently. For payments from Canada to the Philippines, Xoom (bought out by Paypal) charges $2.99 to send $200 (1.5%) and $21.49 to send $1000 (2.2%). That's not anywhere near 20%.
I've worked in this industry in the past. Historically yes, poor people have been overcharged. The way they dealt with it was to develop networks of people who they could pay to carry the money with them on trips back home and set up a pickup. It's crude, but it's a system that persists in India and Pakistan, especially for unskilled migrants in the Middle East who don't have access to local banking services. Not really a target market for bitcoin given the steep learning curve.
For computer-literate migrants who work in developed countries and are OK with using banks, paypal etc, the fees are pretty reasonable.
How does your point relate to the usefulness of Bitcoin? I highlighted that the quagmire of international payments is not a problem that Bitcoin can uniquely solve. It is not a technical problem at all!
Bitcoin has nothing special about it that would allow these countries to make payments between each other smoother. That is apart from sidestepping the existing regulatory framework.
It might have the beneficial side effect of competition, but that's not a virtue of Bitcoin as a concept. Perhaps the space is ripe for a new fintech startup that streamlines payments between these destinations.
It's a distributed protocol with wide adoption and enough liquidity to be easily traded anywhere in the world.
That makes it great as a medium of common exchange... I can easily convert from Canadian Dollars to BTC in Canada, then convert from BTC to Pesos in the Philippines so long as there's enough liquidity on either end.
Both parties still have to act within their respective legal frameworks, but it sidesteps the need to add even more parties into the mix, each of which take their own fees. International wire transfers are a great example of how opaque, slow and costly that can be.
You can go customer -> Canadian Company -> Filipino company -> customer.
The traditional way would be customer -> Canadian Company -> Canadian bank -> Intermediary bank(s) -> Filipino bank -> Filipino company -> Customer
I'm simplifying somewhat... obviously banks are involved in any domestic fiat transfers, but they're not involved in international transmittal (which they usually charge quite a bit for).
It depends really. Transactions are usually processed based on the fee associated with them. If the network is exceptionally busy and you send a transaction with a low fee, yeah it'll take a while, but when creating the transaction you can adjust the fee (and most wallets will give you a few options) to make your transaction more valuable to miners, so it will be picked up more quickly.
Bitcoin from wallet A to wallet B usually only takes about 20 minutes but fiat -> bitcoin and bitcoin -> fiat can take a while, typically a day or so each and more if backlogged.
Cryptocurrencies have failed to make any inroads in this because A) People trust the existing services, and B) They're nowhere near as expensive as you say.
At this point it's just yet another talking point for enthusiasts, enthusiasts who have no idea about real-world use-cases.
An ACH transaction between two North American banks usually arrives on the next business day (if you place it before the cut-off time). In fact, ACH supports multiple settlements per day now so if that feature is supported by your bank ACH transfers can even arrive on the same business day. There are a few banks that are slower, but that's not the fault of ACH - don't use slow banks and you're not running into that issue.
That's very similar to SEPA transactions, with the exception that some European banks support real-time settlements for SEPA. For banks that don't support this yet funds usually arrive on the next business day.
Transfers between the US banking system and the European system are usually slow and expensive as those two systems aren't directly linked to each other. So you your bank needs to send the funds to a correspondent bank which forwards the funds to the final destination. But if you use 3rd party services such as TransferWise those transfers are significantly faster and cheaper. My last transfer from my US bank account to my European account (via TransferWise) arrived on the next business day and cost something like 0.36% on top of the mid-market rate.
But you cannot deposit money into any arbitrary U.S. bank account using ACH. For every account that you want to make transfers to, you first need to sign a bunch of forms. With the European IBAN system, no permissions or forms are needed to make deposits to a new arbitrary account.
Almost all of the US banks allow you to add other ACH accounts that you control. Just confirm the two trial deposits and you can push or pull money from that account.
A few banks also allow to send ACH transfers to third-party accounts that you don't control - for example with USAA that's possible. This still doesn't 100% match how transfers work in Europe (you first need to add the account, then wait 1-2 days, then you can send funds to it), but it's definitely better than "signing a bunch of forms".
> An ACH transaction between two North American banks usually arrives on the next business day (if you place it before the cut-off time).
I keep hearing this, but out of the many banks I've tried I've never once seen this happen. I just looked at a recent transaction; email shows I initiated it at 9:18am PST on Jan 30 (which could be past the cutoff if it was noon EST), the withdrawal account shows the money deducted on Jan 31, and the deposit account shows it landing on Jan 1--one business day, right? Nah, or at least I'm not informed of them on those days. I don't see them show up for another day or two. When the money does show up in the account, it's often "not available" for another day or two. I'm just one dude who happens to have a few different banks for savings and my wife's account and tries to pay bills on time. This was also a thing when I was pooling money for a mortgage downpayment. I can't imagine running a business.
It frustrates me that for a country that deifies financial markets and capitalism will ignore liquidity like this (even between accounts owned by the same entity). 1 business day (before the cutoff!) still isn't that great. The docs I found about same-day ACH said it was approved in 2015 and only rolled out last year...and it looks like they charge a fee per transaction[1][2]
Yup, same experience here. It takes at least 10 days to send a paltry 1000 USD for me and yes, there is a fee. The bank is probably making money on the exchange rate too, not sure. At one point, I was asked all kinds of documentation - passport etc. All this to send very small amounts of money (I don't remember sending more than 3K, 50K Euros without questions is amazing to me).
Edit: Many comments here mention that Europe is way ahead of the US i the money transfer space. Can someone talk about why the US is lagging behind?
If I would receive $50k in Kazakhstan from foreign country, they will be put on hold for a few months for security investigations and I'll have to provide all the documents about that money before I could have them. And even then someone corrupted might invent something to steal them from me. I definitely don't trust banks for anything but pocket money.
One surprise for me, as a European, is that in America people seem to regard bank account numbers as secret - I dwell on forums for landlords, etc, and people expect to collect cash/cheques from their tenants, rather than sharing bank details.
Unrelated to your alleged speed, but another odd perception of the American banking systems.
(Lots of other people in this thread seem to suggest you're an outlier; I don't know enough to guess either way.)
Your account number is on every checks. Checks are usually prefered because in the US you can cash them immediately and online.
Of course, YMMV. I've experienced both the US bank system and the EU (France) bank system. Even if Americans are very critical of our banks, no fee (usually) for anything, reduced red tape, and credit cards that are on your side won me over. When you take account of cash back and interests on checking, you've usually a cash positive relationship with you bank. Good luck finding that in Europe.
I have a better analogy. Bitoin has the same issues as Flooz. It’s a more complicated and convoluted solution to a nonexistent problem.
The only people who have problems with spending money the normal way that are serious enough to accept the horrible user experience and unreliability of bitcoin are those conducting illegal transactions or evading currency controls. The market has no reason to rise beyond that narrow use case despite mass speculation to the contrary.
That's just ill-informed. "If you don't accept the banking oligopoly you're clearly trying to launder money" is the kind of nonsense that tries to shut down legitimate concerns over self-determination.
Money is an essential input to freedom. If you can't make an income, pay rent, buy food, pay for transportation, etc. you are not very free. I'd also go so far as to say that the right to transact anonymously should be part and parcel to a free society.
You're arguing an is with an ought. People ought to be able to to transact anonymously and without any middle-men. In reality, most people are only willing to put up with the inconveniences of bitcoin because it lets them side-step the law.
I'm just a computer consultant trying to get paid. Bank payments to/from the US is an absolute, unmitigated train-wreck.
Even with the spectacular deficiencies of the Bitcoin/Ethereum user experience, it is already a vast improvement over the Bank transfer debacle.
The next generation of Cryptocurrencies (that solve most of the complexity/risk of creating, securing, managing and recovering public/private keys) and improve the transaction thruput and cost by 4+ orders of magnitude? These are going to kick the banks to curb.
> send large amounts of money around the world without snaking through the nightmare that is international banking
This has little to do with technology but with regulation. If you think bitcoin can solve this then you either envision a future where these regulations don't apply (in some sort of technologically independent anarchistic society) or you expect bitcoin to cause a reduction in the high regulation surrounding international asset transfers - which is very unlikely, regulators around the world are pushing for more stringent AML policies.
This is where a blockchain (the technology) could actually come in handy. If every asset is tokenized and controllable through some smart contract (and every transfer needs to be authorized by the responsible financial regulator) then such a system would make any kind of international asset transfer much more frictionless. But of course this runs contrary to the idea of most current crypto currencies (whose proponents mostly hope for the aforementioned scenario).
I would say Bitcoin has the same issues as TCP/IP in 1984. It's just 10 years old. Developers know what to do (Eltoo, Schnorr signatures, better multisig for hardware wallets, watchtowers, better routing, AMP, Lightning support for exchanges), but implemention speed is limited, and just simply adding more developers or even complaining about lack of UX won't make it faster. Also people with Bitcoin don't accept the ,,move fast and break things'' mantra, because it's money. I like the cautious speed of development, it helps build my trust in Bitcoin.
I don't understand the TCP analogy. TCP is incredibly straightforward and scales from a knowledge-required level of almost nothing to very advanced usage like paying attention to ECN markings. Most of the layers above TCP have, over the last 20+ years, had many many problems that related directly to people not wanting to understand TCP, from RMI and similar RPC schemes to things like BEEP/BXXP where the head-of-line blocking problem somehow surprised people.
In the end people working with technologies do need to understand their semantics. I don't mean you should be able to write a competent TCP implementation from scratch, but you do need to understand how the protocol layer makes itself an issue in every layer above it in practice.
A closer analogy might be credit card transactions, it's a protocol that tons of people use on a daily basis but the complexity has been wrapped up into a product offered by a several companies
I think the term "cryptocurrency" is the "Big Data" of 2018. The term itself has been somewhat tarnished, but the underlying technology is super useful and will find its way into a lot of applications.
And no, I don't mean "blockchain". I mean Bitcoin... it's rather nice as a business or individual to be able to send large amounts of money around the world without snaking through the nightmare that is international banking. Inherent in that idea is the notion that the coin itself has value independent of a particular application.