How to remit using Bitcoins and save time and even earn money
We have already discussed about Bitcoin and its monetary supply. Bitcoin is frictionless and global digital currency. The most beneficial and obvious use-case for Bitcoin (and Blockchain in general) is remittance of funds across geographies. Bitcoin’s implementation of Blockchain removes all the intermediaries, 3rd parties, clearance and settlement institutions and all other overheads including but not limited to time and money (in the form of transaction fees).
End to end process of Traditional Remittance Vs Remittance using Bitcoin
Following steps are involved.
Register your identity on Bitcoin exchanges
- Open an account in a Bitcoin exchange in both — local (source) and destination country. A Bitcoin exchange is an online marketplace to buy/sell bitcoins instantly. It is similar to websites like icicidirect.com (India) or itrade.com (Canada) where you can buy equity from regulated stock exchanges of that particular country
- The laws surrounding Bitcoin in any country are not completely clear and Governments are working on it but at least buy/sell from a Bitcoin exchange which follows AML/KYC norms.
- Typically you have to upload your identity documents, register mobile number etc.
Transfer funds to registered Bitcoin Exchange
- Depending on the country and the features provided by the Bitcoin exchange, transfer funds from the bank account of source country to your Bitcoin exchange account (of source country).
- Some exchanges (Eg: coinbase.com in North America) gives you the ability to buy Bitcoin with your Credit/ Debit Card (but transaction fee is a tad higher). In India, Unocoin has a tie-up with wallet service PayUMoney and you can transfer funds with your credit/debit card in this wallet and buy bitcoins via PayUMoney funds instantly.
- You can actually also buy Bitcoins from localbitcoins.com (support most countries around the world) and transfer, but in a little bit of risk is involved and I do not recommend for the first time buyer.
- One time Registration and transfer of funds typically takes about 1–2 weeks.
- Once funds are transferred then buying Bitcoins is as simple as downloading a paid app in Android/iOS app store
- Above screenshot is from Quadrigacx (Canada) and I have transferred funds worth 2000 CAD. The exchange takes 1% fee for immediate transfer (Called as interac in Canada) and hence total amount shown is 1980 CAD. Generally, for immediate fund transfer, the fees are 1–2% and bank wire transfer is even 0% in most exchanges.
- User Interface of almost all bitcoin exchanges (both web and app) mentioned in above table is extremely simple and easy to use. I just entered 1500 CAD worth of Bitcoins to purchase and clicked on BUY. The average price for 1 BTC is 1339 CAD (as of 12 Feb, 2017) and for 1500 CAD I received 1.11381429 XBT (XBT is the Unofficial currency code for Bitcoins)
- Most exchanges also give you the feature to buy at pre-defined limit price (i.e when the price reaches a limit set by you then the transaction gets executed automatically)
Deposit/ Fund Bitcoin account
If you already have Bitcoins and you have stored in some other exchange (Eg: Quadrigacx) or in a wallet then you can deposit these bitcoins for remittance. Your account with the Bitcoin exchange is a bunch of public key(s) and private key(s). Your private key(s) will never be displayed by the Bitcoin exchange for security purpose. However, there will be an option which displays your public key and when you deposit your bitcoins in the exchange-generated Bitcoin public key (or address) then you can view those bitcoins once you login to that particular bitcoin exchange. Eg: My public key of Unocoin account is 3Aa2VjJNrSLP3W557Tc5jqgNGvKBECPF6B. Once bitcoins are sent to this address then I can view them after I login to my Unocoin account.
Withdraw Bitcoin for secure storage or remittance
- Withdrawing is as simple as buying bitcoins.
- You just have to give the amount in Bitcoins (or some exchanges you just have to mention local currency and the exchange does the conversion of currency to Bitcoin) and the Address at which bitcoins need to be sent (In my example it will be Unocoin generated address of above step)
- Optionally, for security purposes, most exchanges will have a separate password/ pin
- I recommend to first test with a small amount (like 10$ worth BTC) at that address and once successful, then do higher amounts.
Monitor the Bitcoin transfer
- The ledger entries of the bitcoin blockchain are public and everyone can view every transaction.
- You can go to blockchain.info which is a Bitcoin explorer to view the particular transaction.
- Give the URL as blockchain.info/address/[Public-key-of-receiver]. So in my case it will be https://blockchain.info/address/3Aa2VjJNrSLP3W557Tc5jqgNGvKBECPF6B
- The Bitcoin mining process starts and lasts 10 minutes (Sometimes it may take more time since current Bitcoin backlog of transaction is ‘yuuuuge’ :))
- It will take a minimum of 10 minutes for your transfer to take place (or technically speaking: It will take 10 minutes for the transaction to be part of a valid block and the block being added to the existing blockchain)
- Initially it will be an “Unconfirmed transaction” and as more and more nodes validate the block, it will be a “Confirmed transaction”
- At the same time the transaction is generated in Unocoin account and displays it as “Waiting for confirmations”
- Generally after more than 3 confirmations, the transaction is said to be confirmed and you can now use your Bitcoins.
- You can see the Bitcoin balance reflected in Unocoin account
Sell Bitcoin in Destination currency
- Login to Unocoin and Go to the Sell Bitcoins page
- Input the total Bitcoins to sell and it calculates the tax and transaction fees.
- You can convert the Bitcoins and directly send money in INR to your registered bank or else keep INR in Unocoin account to buy bitcoins in future.
- There is always a difference in Buy and Sell price very similar to forex trade.
- Again, it will take around 10–30 minutes and your bitcoins will be first sold in the
Bitcoin vs traditional remittance — Savings in time and money
- The difference is negligible, but you have to understand that this is only for the scenario where you transfer from destination Bitcoin exchange to local currency immediately. If you check Bitcoin price for any historical week range then you can observe that there is a fluctuation of at least 1–3%. Once you transfer Bitcoins, then HOLD them in the destination Bitcoin address and put up a LIMIT PRICE on your SELL order such that once it crosses a limit of say 1% then auto-execute that order. In terms of remittance, 1% difference in conversion rate is really big.
- Depending on your risk appetite and urgency of transferred funds, you may want to hold Bitcoins for a longer time till they give you back upto 2–3 % returns
- Traditional remittance takes anywhere between 1 to 7 days depending on the number of different financial institutions and geographies involved.
- Bitcoin to Bitcoin transfer between any 2 public keys is 10 minutes. In rare cases it takes more than 30 mins.
- Transfer of Bitcoin exchange to Banks and vice-versa is entirely dependant on the country, regulations in that country etc. Typically it is 1–3 days.
- One time registration with Bitcoin exchanges takes upto 10 days.
Few Startups working in this space
Bitcoin is said to be frictionless. It means transfer of funds is bereft of any 3rd party institutions. However as of now, still a few frictions exist (Transfer from bank to exchange and vice versa etc) and Bitcoin exchanges still charge higher fees. A few startups are working towards reducing the friction and the fees and to be part of the multi-billion dollar remittance industry. Some of them are
Cons of Bitcoin remittance
- If you send Bitcoins to an incorrect public address then the funds can never be recovered. So you have to very careful. Before you start cursing it, think about it. Even if you input someone else’s mobile number for top-up/recharge then those funds are lost too. This is something similar
- Buying Bitcoins from unauthorized exchanges or in person always carries risk of fraud and scam
- Attempts are always made to hack Bitcoin exchanges. Never store your precious Bitcoin on an exchange. For holding it send it to a paper wallet.
- Rarely your bitcoin transaction is not picked up by any block and goes in the backlog list. Then there is no fixed time by which the transaction will be complete. However the system is designed in such a way that the transaction is NEVER LOST and will eventually be picked up by some future block but may take upto 24 hours.
- Poor customer support by most Bitcoin exchanges.
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