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It's true that some banking systems are improving in terms of speed. I don't think it's a coincidence that it's happening now that crypto has been around for 8

by beaner 9y ago

It's true that some banking systems are improving in terms of speed. I don't think it's a coincidence that it's happening now that crypto has been around for 8 years, and is increasing in size. Most immediate US-based sends and receives are virtual, based on 2nd-layer systems like Venmo and PayPal, not actually moving money but updating the numbers in your account before funds land. Unfortunately for the Fed, speed and fees are not the whole story. There are still the problems of it not being global, not being private, inflating away, and not actually being owned by the people. (See the Cyprus banking haircut.) These are small factors in most people's daily lives, but are important enough at a large scale to have money flow in the direction of crypto, and as a result all money will flow towards it until everyone has these advantages.

grey-area 9y ago
Since FPS (2009) in the UK Payments take seconds, not days. I'm not sure what you mean by virtual payments - all payments are entries in a ledger nowadays, they don't move physical money around. Re the Cyprus banking haircut I wouldn't be so sure you are protected from this kind of action - exchanges, developers and miners all have leverage and have already used it to fork entire currencies, and force changes on users, impose currency controls, impose local laws (KYC etc) if you want to spend and exchange the currency. I think on balance I prefer a slightly inflationary currency with low fees, few middlemen, and trusted counterparties and agencies to hold money (i.e. banks). Happy to ditch government control and our current system of money management though for deterministic inflation. I also prefer one which is not at the mercy of developers or miners, and does not attempt distributed anonymity, which places severe constraints on speed, energy usage and consistency, and did not have high fees. At present Bitcoin is completely unsuited to global trade and unlikely to improve soon. I think if you were a little more clear-eyed about the downsides of current cryptocurrencies, you'd make a would be more convincing case.
JumpCrisscross 9y ago
> I don't think it's a coincidence that it's happening now that crypto has been around for 8 years, and is increasing in size Fedwire is run directly by the Federal Reserve [1]. It traces its history to the first electronic funds transfers, which started in 1915. It started doing automated transfers in the early 1980s. Until the 1980s, it was free; after that it costs between 3 and 80¢ for member banks. Almost every American bank will waive their mark-up (or even the whole fee) for accounts with over $15 to 50 thousand. Internationaly, there are numerous RTGS systems including but not limited to SWIFT, CLS, et cetera. > See the Cyprus banking haircut See the MtGox haircut. [1] https://en.wikipedia.org/wiki/Fedwire https://en.wikipedia.org/wiki/Fedwire
- beaner 9y ago
  Maybe you can elaborate on the reasons why fedwire is not more popular than, say, ACH? I suspect there is a reason that stems from its centralization.
  - JumpCrisscross 9y ago
    > why fedwire is not more popular than, say, ACH? To understand this, we have to compare two classes of systems: real-time gross settlement (RTGS) [1] and net settlement [2]. Suppose you and I are banks. At 9AM I send you ten dollars, at 10AM you send me ten dollars, at 3PM you send me another ten dollars and finally, at 4PM, I send you ten dollars. At the end of the day, we're back where we started (minus transaction costs). If we actually moved the cash between our banks, that would be RTGS. It's as fast as funds can travel. It results in a lot of paperwork and means we must have the cash for potential transfers immediately available. No exceptions. We grab a beer and say "let's settle, on the net, at the end of the day." The same transfer instructions come in. This time, though, no cash moves intraday. At the end of the day, we tally everything up and find we're balanced. We move money around internally an call it a day. Much easier, and therefore, cheaper. Moreover, between when I deducted the funds at 9AM and may have had to settle at 4PM, I might have made a margin loan. This is net settlement. The next day, at net settlement, I owe you ten more dollars than I have. We grab a beer and say "let's settle the day after. That way, we can sell or borrow if we come up short." This is net settlement with delayed settlement. From top to bottom, the system gets slower and more profitable. Many of these costs, e.g. intraday liquidity and risk management, don't go away with cryptocurrencies. Net settlement will always be cheaper than real-time settlement, and delayed settlement cheaper still. Payers prefer ACH because it gives them time to scramble, if needed. Receivers prefer to receive by wire because it produces immediately-available funds. What gets chosen depends on negotiating leverage. I struggle to see the advantage of a crypto-currency based RTGS, which is less reversible than EFTs, slower than wires, and more expensive than both for most participants. [1] https://en.wikipedia.org/wiki/Real-time_gross_settlement https://en.wikipedia.org/wiki/Real-time_gross_settlement [2] https://en.wikipedia.org/wiki/Net_settlement https://en.wikipedia.org/wiki/Net_settlement
paulmd 9y ago
> Most immediate US-based sends and receives are virtual, based on 2nd-layer systems like Venmo and PayPal, not actually moving money but updating the numbers in your account before funds land. This is really only the case in the US. Most of the rest of the world can have bank transfers that are cleared in seconds, for free. The US is just way behind on this, it's a solved problem for Europeans.
- beaner 9y ago
  Actually, most of the rest of the world does not have any access to traditional finance at all.

by beaner 9y ago

grey-area 9y ago

Since FPS (2009) in the UK Payments take seconds, not days. I'm not sure what you mean by virtual payments - all payments are entries in a ledger nowadays, they don't move physical money around. Re the Cyprus banking haircut I wouldn't be so sure you are protected from this kind of action - exchanges, developers and miners all have leverage and have already used it to fork entire currencies, and force changes on users, impose currency controls, impose local laws (KYC etc) if you want to spend and exchange the currency. I think on balance I prefer a slightly inflationary currency with low fees, few middlemen, and trusted counterparties and agencies to hold money (i.e. banks). Happy to ditch government control and our current system of money management though for deterministic inflation. I also prefer one which is not at the mercy of developers or miners, and does not attempt distributed anonymity, which places severe constraints on speed, energy usage and consistency, and did not have high fees. At present Bitcoin is completely unsuited to global trade and unlikely to improve soon. I think if you were a little more clear-eyed about the downsides of current cryptocurrencies, you'd make a would be more convincing case.

JumpCrisscross 9y ago

> I don't think it's a coincidence that it's happening now that crypto has been around for 8 years, and is increasing in size Fedwire is run directly by the Federal Reserve [1]. It traces its history to the first electronic funds transfers, which started in 1915. It started doing automated transfers in the early 1980s. Until the 1980s, it was free; after that it costs between 3 and 80¢ for member banks. Almost every American bank will waive their mark-up (or even the whole fee) for accounts with over $15 to 50 thousand. Internationaly, there are numerous RTGS systems including but not limited to SWIFT, CLS, et cetera. > See the Cyprus banking haircut See the MtGox haircut. [1] https://en.wikipedia.org/wiki/Fedwire https://en.wikipedia.org/wiki/Fedwire

beaner 9y ago
Maybe you can elaborate on the reasons why fedwire is not more popular than, say, ACH? I suspect there is a reason that stems from its centralization.
- JumpCrisscross 9y ago
  > why fedwire is not more popular than, say, ACH? To understand this, we have to compare two classes of systems: real-time gross settlement (RTGS) [1] and net settlement [2]. Suppose you and I are banks. At 9AM I send you ten dollars, at 10AM you send me ten dollars, at 3PM you send me another ten dollars and finally, at 4PM, I send you ten dollars. At the end of the day, we're back where we started (minus transaction costs). If we actually moved the cash between our banks, that would be RTGS. It's as fast as funds can travel. It results in a lot of paperwork and means we must have the cash for potential transfers immediately available. No exceptions. We grab a beer and say "let's settle, on the net, at the end of the day." The same transfer instructions come in. This time, though, no cash moves intraday. At the end of the day, we tally everything up and find we're balanced. We move money around internally an call it a day. Much easier, and therefore, cheaper. Moreover, between when I deducted the funds at 9AM and may have had to settle at 4PM, I might have made a margin loan. This is net settlement. The next day, at net settlement, I owe you ten more dollars than I have. We grab a beer and say "let's settle the day after. That way, we can sell or borrow if we come up short." This is net settlement with delayed settlement. From top to bottom, the system gets slower and more profitable. Many of these costs, e.g. intraday liquidity and risk management, don't go away with cryptocurrencies. Net settlement will always be cheaper than real-time settlement, and delayed settlement cheaper still. Payers prefer ACH because it gives them time to scramble, if needed. Receivers prefer to receive by wire because it produces immediately-available funds. What gets chosen depends on negotiating leverage. I struggle to see the advantage of a crypto-currency based RTGS, which is less reversible than EFTs, slower than wires, and more expensive than both for most participants. [1] https://en.wikipedia.org/wiki/Real-time_gross_settlement https://en.wikipedia.org/wiki/Real-time_gross_settlement [2] https://en.wikipedia.org/wiki/Net_settlement https://en.wikipedia.org/wiki/Net_settlement

paulmd 9y ago

> Most immediate US-based sends and receives are virtual, based on 2nd-layer systems like Venmo and PayPal, not actually moving money but updating the numbers in your account before funds land. This is really only the case in the US. Most of the rest of the world can have bank transfers that are cleared in seconds, for free. The US is just way behind on this, it's a solved problem for Europeans.

beaner 9y ago
Actually, most of the rest of the world does not have any access to traditional finance at all.