The False Prophecy
Bitcoins will revolutionize the remittance industry!
This is the title of an article I read in late 2011, and it caught my attention because I was part of a family business which had a remittance company and it was at a time where I was conceptualizing about an e-wallet system that didn’t involve cash. As I got to understand the business of transmitting money, I couldn’t help daydreaming about ways the business can be done better and I was on a quest to achieve that dream.
The law of attraction was in full force as I ended up in SF and discovered a small bitcoin company that looked very interesting. Although most people didn’t understand what this company was or what it was doing, I understood it. And not only that, I wanted to invest in it and I had a small window of opportunity to pull the trigger. I was excited about it, but my partners were not. Let’s just say I messed up the opportunity by not pulling the trigger.
In the present day, that company is only worth a billion plus dollars now (😭) but its ok because I still have the .10 BTC in the company’s wallet that the companies founder Brian sent me to experiment with BTC. (Thanks Brian)
What this interaction allowed was a nontechnical guy like me to see the potential of cryptos and its underlying technology blockchain, when it was difficult for even tech-savvy people to comprehend. This didn’t come easy though so for those who still do not understand cryptos; let me break it down non-technically in the context of remittance and eventually the challenges I saw as we experimented.
Cryptocurrency is a concept of the twenty-first century which has taken a boost in the recent years especially with guys in the media who are riding around in Lamborghinis with crypto windfalls. Bitcoins are just a version of this cryptocurrency which stands out because it is the first ever decentralized cryptocurrency. This currency was released as on open-source software in 2009. It has become popular as a form of electronic cash which can work without a central bank or a single administrator.
This electronic currency is created as the output of a process called mining. Mining refers to a “record keeping service” done using a network of computers. The decentralized manner that this record keeping is done in consensus with the network is the real magic here. There are tons of videos and articles that go in-depth technically that I recommend you read if you want to stay on top of this breakthrough technology.
Try starting with this easy graphic explanation from Reuters
Beyond the lambos, on the face level, there a number of benefits of Bitcoin and blockchain technology in general.
These points include:
- Instant payment regardless of your location in the world
- Irreversible transactions irrespective of the reasons involved
- No involvement of third parties in any dealings you do (This is a huge win and why we are going to invest more resources into blockchain technology)
- Manipulation free transaction from any banks, governments or any organization. (Anyone knows where we are in the current debt cycle?)
These facts concerning bitcoins make it an attractive currency to deal with. However, the deal is not done just here. There is a lot more to this cryptocurrency which one should know about to get the complete advantage of dealing with them.
Bitcoins and Remittances
A major use case which is always mentioned alongside blockchain and bitcoin is remittances. The idea of cryptocurrency can affect ways money is used globally and in particular affect remittances to large scale. Looking at the claims stated earlier, bitcoins seem to be an attractive way to avoid a series of costs that come with the sending of money. Especially for overseas individuals who have to send money back home, it seems to be a chance that must be availed.
However, the many hurdles arise when actually using Bitcoin for the actual purpose of Remittance. Indeed, it happens due to several reasons which can be put down as:
- Costs
It is the benefit of the outlook while in reality both, bitcoin and the traditional method, involve processes that have some sort of conversion. For example, you still cannot buy a coffee at your favorite coffee shop or your mom cannot pay her bills in India with bitcoin. It needs to be converted from BTC to Rupees to do that transaction. This cost is somewhere between 2–4 percent and similar when converting Fiat CAD/USD/EURO to Crypto.
Moreover, traditional companies like my current company Remitbee, can make processes even easier and cheaper.
- Liquidity
Exchange of currencies through any corridor involves high fees which makes bitcoins an appealing alternative. However, within these corridors of money exchange are people who are willing to exchange the currency for bitcoins which fail the idea of cryptocurrency in itself. They need to exchange because you cannot “spend” bitcoin on a mass level. Currently, there is not enough fiat/crypto liquidity to bring down the cost when converting which increases the costs. Unless the next factor is addressed and businesses and others start accepting crypto without the need for exchanging it to fiat, then this problem will remain.
Habit, Technology Access, and Literacy
Another barrier is the lack of knowledge regarding the bitcoins which makes people uncomfortable about this cryptocurrency. It goes against their access and understanding at times which makes it seem out of reach to them. This makes it natural for people to stay away from it thinking its a scam or they will lose money. Naturally, like many technologies, it will take a long time before the general society starts accepting bitcoin as something legitimate before accepting them as payments. For example, the Chinese moved from coins to paper money in 600 B.C while the Europeans were still using coins up till 1600 A.D!
- Other Headwinds
Wild swings in prices and famous people bashing the cryptocurrency ecosystem don’t help the cause as well. Much more importantly, the difference of laws set up in various countries regarding cryptos provides a hurdle to scale at times as well which is not an issue for the traditional service providers.
Although Bitcoin and Cryptos alike have the potential to revolutionize the remittances industry, the situation with the above-mentioned points favors the traditional methods for the time being.
However, learning about the potential of the Bitcoin I came to see the inefficiencies in the traditional channels of remittance. Hence, I had set out on a journey to revolutionize remittance without Crypto.
The next two articles I will post about my Journey to create Remitbee and how we brought the costs down to below 1% and also talk about why I believe its the right time to invest resources back into blockchain as we scale our business.
Next Article:
2. Remitbee — a step forward