23 ms·

El Salvador’s new Bitcoin wallets could cost Western Union $400M a year

181 points by xqcgrek2 5y ago

_red 5y ago
Jack Mallers strike.me app is the way forward. I predict lots of these legacy money transfer services will adapt Jacks model (ie. use Bitcoin network / LN and just worry about controlling the end-points). This is somewhat analogous to how originally we used PTSN copper-lines to host DSL signals to connect to internet...then eventually we inverted it and artificial "dial-tones" were played over native digital lines.
- ladyattis 5y ago
  As much as I'm a skeptic of cryptocurrencies I do think this is one aspect of them that makes sense. Having a blockchain ledger in place of creaky old bank databases that often are tied together with even more creaky legacy applications written in mostly unused languages like COBOL is a better solution. It just clears the clutter away with some simple protocols on top of the blockchain ledger platform. Although this doesn't guarantee we won't clutter up that program space in the future at least it'll make it less fragile.
  - ethbr0 5y ago
    This is the best point I've heard about crypto in the real world. I've never really thought about it that way, but it does make sense as a standardized transport API first, and everything else second. Sure, everyone does (things) using Bitcoin. But in order to do those things, they have to speak Bitcoin (simplifying). And once everyone speaks Bitcoin, new products can be created that target Bitcoin, that wouldn't have been feasible if everyone were using 100+ different bespoke systems. And from its network antecedents in PTSN -> packetized layered transport in data / voice, that seems optimistic about enabling innovation.
    - grey-area 5y ago
      If you were going to design a standardised protocol for transactions, I wouldn't start from bitcoin, which makes all the wrong choices around identity, authority, anonymity, where to place the load, how to verify transactions etc etc. Open banking is a much better approach to federated banking.
      - ethbr0 5y ago
        Obviously, but Open Banking has been pushed instead of pulled. For a lot of markets, that isn't ever going to fly given regulatory capture. Consequently, any standard has to also offer a compelling feature over the status quo.
    - AnIdiotOnTheNet 5y ago
      It would make a lot more sense if such a standardized API could exist without intentionally burning an increasing amount of computing resources. Unfortunately it would appear that if this sort of thing is the way things are going, we're stuck with Bitcoin and its appalling wastage. Frankly, it's becoming increasingly depressing have to watch as technology is continually employed to make the world worse, usually for the benefit of making some people rich.
  - 3434g34g34 5y ago
    You are right to be a skeptic of cryptocurrencies. All of them are garbage. Focus just on bitcoin, because it aims to solve the exact problem you have identified in the most secure, decentralized way possible. Any cryptocurrency that tries to bolt more onto its base layer will always sacrifice some level of decentralization which is where a lot of problems get introduced. cryptocurrency and bitcoin are not categorically the same.
    - gwicks56 5y ago
      All of them is a slight exaggeration. 999 out of every 1000, definitely.
    - bigcloud1299 5y ago
      Wait till you learn about solana.
- doomroot 5y ago
  I agree, it also forces interoperability. Regardless of what you think about bitcoin the asset, if it decouples the sender and receiver’s payment technology it might all be worth it.
bob229 5y ago
Sounds like what El Salvador needs is a functioning banking system that can receive normal international transfers not some mad cult blockchain nonsense whose value swings about madly
fnordfnordfnord 5y ago
One of the first real functional uses of Bitcoin in my family was as a way to send money to my nieces when they were in college. We used Coinbase accounts and moved money faster and cheaper than either the USPS or any money order company. We often made money on the transfers and never paid/lost more than the cost of a money order.
- spinax 5y ago
  Bitcoin valuation "crashed" -$4k USD (I think that's about 8-10%?) just two days ago on the 7th (and within the span of 4 hours, check the charts); if you had created your transfer that morning and they received it the next day to "cash out" to USD, you would have lost a lot of the valuation of your transfer.
  - djbebs 5y ago
    Why do you think it takes more than 20 minutes to transfer bitcoin?
    - el-salvador 5y ago
      I think they are using the Lightning network. It takes a few seconds for the transaction to clean off chain.
    - vlovich123 5y ago
      I would think op is talking about both the latency of any eventual transfer to fiat (and maybe some delay in doing so because humans are lazy).
      - angio 5y ago
        But the delay is after the bitcoins are converted to fiat, so even if it takes one day is not influenced by the price of bitcoin.
        vlovich123 5y ago
xvilka 5y ago
International bank transfers as well. Most of the time they are uber slow, depending on the country could take multiple days. Until banks start to seriously address this problem even Bitcoin would beat them effortlessly.
- Scoundreller 5y ago
  Transfer wise does a pretty good job of this. If your country is supported anyway. Basically they just have a bunch of accounts around the world.
  - toomuchtodo 5y ago
    TransferWise is the competent version of what El Salvador is attempting to do with Bitcoin.
- el-salvador 5y ago
  > International bank transfers as well. Most of the time they are uber slow, depending on the country could take multiple days. International bank transfers between the U.S. and El Salvador arrive on the same day if done before noon. The local currency is US Dollar and the US is one of the largest trading partners. So every bank that offers international bank transfers has U.S. correspondent bank accounts with the big banks like Citi, Wells or Bank of NY.
  - mateuszf 5y ago
    > International bank transfers between the U.S. and El Salvador arrive on the same day if done before noon. vs in seconds on Lightning Network
NikolaNovak 5y ago
I suppose I will remain ignorant of this until I actually try it but I don't dare: How's transfer "free" if average transaction fee is a few bucks? https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f...
- lugorrr 5y ago
  because they are using a layer 2 solution [1] [1] https://lightning.engineering/ https://lightning.engineering/
  - spyder 5y ago
    But even with lightning it's just cheaper but not free or is it?
    - kevinak 5y ago
      For all practical use-cases it is. Last time I used LN (earlier today) it cost me 0.05% to send some money.
    - lawn 5y ago
      Considering that you'll need at least one Bitcoin transaction to use LN, then yes it's still expensive. (You don't have to if you use more centralized solutions, which is what most use.)
- sudhirj 5y ago
  Think you’re looking for Bitcoin Lightning? From what I understand it’s another chain that collects and confirms transactions quickly and cheaply, then puts them on the main blockchain in batches.
  - Geee 5y ago
    No, it uses Bitcoin transactions that are updated interactively between participants. Transactions are signed with your private keys and can always be settled on blockchain.
el-salvador 5y ago
I'm not an economist, but I'm curious as to what may happen to the local banking system if all the remittances, (23% of the GDP), no longer enter the bank's accounts in dollars (or cash). And instead remains in crypto.
- clintonb 5y ago
  The answer depends on how many individuals had bank accounts to begin with. I suspect folks relying on remittances may not have been major account holders. Businesses will continue using the banking system, so those banks servicing them will be fine.
alkonaut 5y ago
$25 for an international bank transfer sounds really expensive. I probably pay something like that too if I wanted to do it physically, but it’s $5 online and free within the EU. If both ends of the transaction have bank accounts, and the sending end has internet banking (should be pretty universal even for expats in the EU at least, unsure about North America and elsewhere) then using Western Union seems like a complete ripoff.
- el-salvador 5y ago
  In El Salvador banks transfers within the same bank are free, and transfers between banks are free or cost less than USD 1. Depending on which network is used, they are instant or take less than an hour. One network is 24/7 and the other one works in banking hours. Remittances, like Western Union, just take a few minutes but have higher fees. Especially for smaller amounts. International bank transfers cost between USD 11 up to USD 40. Both the sender and receiver pay. They are only worth for larger amounts, for example between El Salvador and the U.S, if the transfers are done before noon and during a working day, they usually arrive on the same day. Depositing U.S. checks in El Salvador banks is free or cost less than USD 5. This is very slow though, and may up to 30 working days to clear. It may be faster now, but it depends on the bank.
- cibomahto 5y ago
  $25-40 is standard for international transfers via SWIFT, it's only cheaper between EU banks because of SEPA.
  - alkonaut 5y ago
    Not sure if there is a receiving end fee, I don’t think so, but again my fee for iban/BIC (formerly swift) is $0 within EU/SEPA and $5 otherwise. So I expect to be able to transfer to El Salvador for $5 if I read the prices table correctly.
    - el-salvador 5y ago
      Yeah, El Salvador is not connected to EU SEPA. We do have the similarly named SIPA for transfers between the SICA countries (Central America and Dominican Republic) Unfortunately SIPA is not that widespread. It costs about $7.
BurnGpuBurn 5y ago
I think it's a pretty smart move, considering this company has been (dare I say) stealing about 10% off of 25% of the GDP of the whole country for years. Good for them, I hope they succeed and become an example for a lot of others who are in the same boat.
- lotsofpulp 5y ago
  Why does another company not come in to steal 9% to 24% of the GDP of the whole country?
  - 3434g34g34 5y ago
    Because WU has a monopoly on remittance payments in multiple countries.
    - lotsofpulp 5y ago
      Interesting. Is there any reading material available for how this monopoly is maintained? Are the country’s leaders being paid a cut for allowing WU to be the only money transmitter or something like that?
      - haskellandchill 5y ago
        People gloss over what goes into money transfer. There is substantial risk, verification of identity of recipient, etc. With Bitcoin the services are simply not offered, so it's not really comparable. You get irreversible money transfer to an bitcoin address nothing more and nothing less. Western Union's services go well beyond that.
        lotsofpulp 5y ago
        I figured, I just thought I might ask for a source to lend credence to any conspiracy theory.
      - potiuper 5y ago
throwaway20875 5y ago
Good.
purple_ferret 5y ago
> “They have to take a bus to go to a physical location to pick it up, and there are gangs that hang out around those offices. They know what people are going there for, and they basically rob them > go to any of the 200 new Chivo ATMs the government has rolled out and withdraw U.S. dollars from his virtual wallet. Hmm, sounds like this particular problem isn't exactly solved The reliance on this "Chivos" platform seems like a big potential issue
- cma 5y ago
  The state Chivos app gets 1984 microphone permissions for some reason too.
- capableweb 5y ago
  "Chivo" is not a platform, it's a wallet like any other wallet, using the same technology as any other wallet. If you don't like Chivo, you can transfer your Bitcoins to any other wallet that supports Bitcoin.
- Geee 5y ago
  Well, they don't have to cash out any more. Chivo can be used to pay directly in stores, either with dollars or with bitcoin.
echopurity 5y ago
>El Salvador’s new bitcoin wallets could save Salvadorians $400 million a year FTFY.
gitfan86 5y ago
Check cashing, wire transfer, western union style money transfer are all overpriced because competition doesn't really exist. Lots of derivatives are only available to people on Wall Street or connected to wall street and also are very expensive. Coinbase providing retail people the ability to lend in scenarios with high yield. This is where crypto has actual value. Providing better financial services at lower costs. Coins going up in value just because they are scarce or first movers, is just like Pets.com being valuable because they have a good domain name. Cash flow and actual value are better investments in the long run over guessing what the next collector's items will be.
- lottin 5y ago
  > Providing better financial services at lower costs. How can anything than runs a blockchain offer a service at a lower cost? It can't. The only competitive advantage that crypto has over the financial sector is that crypto is by and large operating with disregard for financial regulations. Let's see how long it's gonna last.
  - carlosdp 5y ago
    It very much can, because these protocols can do the same things the traditional equivalents can (trading, lending, etc.) fully-automated with smart contracts. When you don't have to pay a ton of salaries to push paper around, you can make things extremely efficient. And like OP said, a lot of the prices for financial services are artificially high due to lack of competition as it is.
    - lottin 5y ago
      A "smart contract" is nothing new, it's simply a computer program, and computer programs are already widely used in the financial sector. So that cannot be it.
      - nybble41 5y ago
        A smart contract is much more than "simply a computer program". It's a computer program which is intimately linked to a distributed ledger such that the output of the program directly determines who is allowed to make use of the assets. The "distributed" part is important since it means that you're not dependent on particular party to enforce the contract—the entire distributed system does that.
woodruffw 5y ago
Eliminating Western Union’s vice grip on international remittance seems like a good thing to me. But to ask the obvious question: why does El Salvador need Bitcoin to do it? It’s not clear to me that the settlement system laid out in TFA necessitates a cryptocurrency scheme, since it all boils down to a locally denominated network of ATMs. Is there some technical reason for this that I’m missing? Without one, it feels like burning tires to accomplish a financial task that any non-failed state (certainly one that can roll out apps and ATMs) should be able to accomplish with ordinary means.
- robot_no_419 5y ago
  How do you send money from the US to El Salvador without Bitcoin or WU? That's the whole point of remittance; I'm not sure how a network of ATMs local to El Salvador will help people send money internationally to the country.
  - woodruffw 5y ago
    You do exactly what Chivo does, except without using Bitcoin for clearing and settlement. You instead use a bank, or, because this is an entire country we’re talking about, use the national bank or carve out a special rule for financial remittance for your app.
    - robot_no_419 5y ago
      So basically your solution is to give everyone in El Salvador a bank account and for the government to subsidize their remittance fees. Because if you're using banks, someone is paying fees. Someone from the US still has pay a fee to wire money from their bank to some endpoint in El Salvador. The banks are literally the problem that Bitcoin solves, not the solution. Banks = fees and censorship.
    - whywhywhywhy 5y ago
      If you can just do that then why does WU exist?
PragmaticPulp 5y ago
Moving money from point A to point B quickly is the ideal use case for cryptocurrency. It’s interesting to see that even their example use case results in the transferred Bitcoin being converted back to dollars right away: > “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation. I suspect this will be the default behavior for Bitcoin remittances: Buy Bitcoin, send it immediately, then other side sells it as quickly as possible to get back to cash. Bitcoin dropped 20% in the span of minutes on the big launch day in El Salvador. I doubt many people are going to want to hodl their remittances in a highly volatile currency. It’s also interesting that the costs haven’t actually gone to zero for the Bitcoin model, but they have been obscured and shifted to other parties. This says the receiver can withdraw BTC as cash “without a fee” but what does that mean? Is it like those currency exchange stations at the airport that have “zero fee” but they more than make up for it with unfavorable exchange rates? If not, who is paying to operate and maintain the foreign exchange infrastructure, which isn’t free? Also, they make use of L2 networks for transfers, but at the end of the day those are still rolled up on to the Bitcoin blockchain, which is unbelievably expensive to run due to the energy requirements that register as a significant fraction of humanities energy usage. That energy must be paid for somehow, which is currently a a mix of block rewards (technically, inflationary money printing) and transaction fees, which are at least amortized across L2 transactions. There may be uses for cryptocurrency yet, but I hope this isn’t the end game because it’s still an inefficient mess. Maybe if we can get away from PoW block chains and also wise up and jettison the arbitrary speculative tokens then maybe we can make some progress.
- dom96 5y ago
  At that point why don't they just send Tether or USDT (or another stable coin), why even risk playing with such volatility, can't these stable coins be transferred with few fees as well?
  - deleted 5y ago
    [deleted]
endisneigh 5y ago
Even if you believe in crypto - why Bitcoin and not a stablecoin? I'm also not sure why people are comparing Bitcoin to Western Union. Western Union is way more than just sending money.
- mateuszf 5y ago
  > why Bitcoin and not a stablecoin? Because stablecoins are not as decentralized. Why depend on third party if you don't have to?
  - endisneigh 5y ago
    If you're using an official El Salvadorian wallet it's not "as decentralized" anyway, though.
    - mateuszf 5y ago
      Sure, but you don't have to. I see it as a necessary step in early adoption.
    - billytetrud 5y ago
      But it would be worse if they used a centralized currency. It's an additional risk. Those risks add up. And el Salvadorians can individually opt out of the government app whenever they want to. It's a lot harder to opt out of a currency you've decided to make legal tender 2 years in. Also stable coins are exactly what they don't want - they're trying to insulate themselves from rampant inflation and instability risk of the dollar.
      - rchaud 5y ago
        > they're trying to insulate themselves from rampant inflation and instability risk of the dollar. So instead of controlling their own monetary policy by issuing their own currency, they are now at the mercy of the US federal reserve and a coterie of Chinese cryptomining syndicates.
korginator 5y ago
Cryptocurrency discussions aside, $25 for a remittance sounds way off. As an example, I can transfer the maximum permitted $5,000AUD via Western Union from Australia to El Salvador which costs $12AUD in transfer fees. That's still expensive. Online inter-bank transfers across countries costs me $0 and I don't recall paying my bank for this service, ever.
- PragmaticPulp 5y ago
  Agreed. The article even gives different fee examples at different points. I’m all for lowering fees and increasing competition, but this article seems to be exaggerating the wire transfer fees while ignoring the costs of the Bitcoin option (exchange rate fees on both ends, etc)
- kevinak 5y ago
  When I look at WU for sending that amount to El Salvador from Sweden it's closes to $250. Are you sure it's only 12 AUD? There's a hefty fee baked into the exchange rate.
- rchaud 5y ago
  It's possible the fees are lower because the remitter can offer a sub-market exchange rate that allows them to take some of the difference in profit. Because El Salvador uses USD, there is no profit opportunity in exchange rate arbitrage.
G4BB3R 5y ago
Nano cryptocurrency is much more efficient for this purpose, they will keep paying very high fees for transfers with bitcoin.
- poontang1 5y ago
  lol - nano had a spam attack that locked up the entire network for months.
- stiltzkin 5y ago
  Not with lighting network.
- billytetrud 5y ago
  Currencies like nano are cheaper, not "more efficient". They're the bargain bin of cryptocurrency. Nanos design has no breaks and then people are surprised when it has enormous problems like spam attacks.
frankbreetz 5y ago
perhaps a noob question, but why not just allow a bank to open for people with a joint account with one person in US and one in El Salvador? Person in US deposits money, person in El Salvador withdraws money. This seems much simpler then making BTC a national currency.
- billytetrud 5y ago
  You might want to think through the logistics of having a person or a group of el Salvadorian government officials living in every foreign country in the world handing out cash to people. What you're talking about is recreating an international banking network. That's not exactly easy peasy
- betwixthewires 5y ago
  OK, so person a deposits cash, person b in another country withdraws cash. Eventually bank location a will have an excess of cash and bank location b will have a shortage of cash. How do you square that? Now think about the fact that 25% of el Salvador's GDP is remittances from the US. Country wide, banks have a shortage of cash deposits every Friday. Bank location a will need to eventually ship that cash to bank location b, and maintain a channel to keep the money flowing. It's not that simple, if it were that simple that's how banks would do it. There are logistics involved.
- rchaud 5y ago
  The bank would need to have branches in both El Salvador and the US for this to be doable, would it not?
  - el-salvador 5y ago
    U.S. banks usually require foreigners to visit a branch for opening an account. For Salvadorans getting a US tourist visa is a complicated and expensive process. About half of the applicants get denied. And the application costs about the half of a monthly minimum wage. Salvadorans who depend on income sent by a US relative would have even less chances to get a visa approval.
pelorat 5y ago
Don't these people have bank accounts?
- Sargos 5y ago
  If this is the Blizzard meme then bravo
pessimizer 5y ago
Is it strange to think this is a hopeless venture instituted by a terrible, corrupt government, but to also be rooting for it to succeed? If I lived in El Salvador, I would be protesting this as a risky waste of time while enthusiastically participating in it.
rootsudo 5y ago
Good. Western Union should die and go the way of the telegraph and telegram.
jweir 5y ago
I am confused and ignorant. If someone in Salvador receives a BTC and then they sell it how do the dollars actually get into El Salvador? Does a party transfer the dollars into my local bank account without any fee?
- neither_color 5y ago
  If they have their Chivo app set up they can: a) convert to dollars within the app or go withdraw at an ATM. Or b) buy things directly with btc. There are videos on social media of people there buying coffee, food, etc. El Salvador already has the dollars by the way. They dollarized ~20 years ago. It’s the only currency in circulation, besides Bitcoin.
  - jweir 5y ago
    You say the state already has the dollars, but it will need more as BTC flows into the country. Does the state handle the conversion - ie I sell my BTC to the state and it imports the dollars? This is the part I don’t understand is what part brings in new dollars at a lower cost than Western Union.
    - smorgusofborg 5y ago
      How El Salvador keeps it's physical cash in flow with a foreign mint is an interesting question but it is somewhat decoupled. Unless people are hoarding US dollars, the banks are getting them back as later deposits so the amount of physical dollars has very little to do with incoming and outgoing digital payments.
    - imtringued 5y ago
      https://www.quora.com/How-does-physical-money-transfer-occur-for-purchase-from-another-country https://www.quora.com/How-does-physical-money-transfer-occur... By the way, when El Salvador imports products from USA it most likely doesn't pay with cash so the net transfer of physical currency might be very close to zero. How do they do electronic payments? Regular bank wire transfers. The fees are merely unattractive for small amounts. Western Union is a service for the unbanked. https://www.quora.com/Can-you-transfer-money-from-El-Salvador-to-the-USA https://www.quora.com/Can-you-transfer-money-from-El-Salvado...
billytetrud 5y ago
CNBC loves to frame Bitcoin as evil. The headline is unbelievably disingenuous. Western union losing business to a better system is not bitcoin damaging western union in any way that anyone should be upset about. Just like when tesla comes out with a new car, the headlines don't read "teslas new car could cost ford $3 billion per year".
- SkipperCat 5y ago
  I looked at it the exact opposite way. To me, the headline was flattering. It shows that Western Union sucks $400MM out of people while providing a service that is easily moved to cryptocurrency. I see it as a declarative win for Bitcoin by showing how it actually saved Salvadorians a lot of money. Its also common knowledge that Western Union and their ilk have been exploiting and sucking dry people who live on the margins of our financial system. Any article that says they're loosing money to a competitor is fine by me. Even as someone who hates the crypto hype, I have to say this time the crypto-win is legit.
  - chuckSu 5y ago
    This
  - billytetrud 5y ago
    I guess you're right, the article is pretty pro bitcoin. Still an odd choice of headline if you ask me.
    - mig39 5y ago
      The person who writes the article often doesn't write the headline.
    - bellyfullofbac 5y ago
      Seems like it's your bias filter doing that. I read it and my bias filter said "It's going to cost the company that's usually associated with 409/Nigerian scammers because they allow for untracable thefts, and otherwise overcharge migrants to send money back home? Good."
Milkman128 5y ago
There are already other ways to do this. im confused.
simonebrunozzi 5y ago
Bitcoin is terrible for remittances. It just costs too much. There are way better alternatives, including stablecoins which don't have any volatility.
- twostorytower 5y ago
  They use the lightning network. Look up the Strike app. They are sending bitcoin at no cost to them.
gigatexal 5y ago
Good. Western Union sucks. If there was ever an entity that needs to be destroyed by modern tech even crypto it’s those money sucking lames.
pkulak 5y ago
I'm starting to wonder if Bitcoin's extremely high fees are a feature and not a bug, at least for national governments. Sure, you can spend $10 to send $5 with your non-custodial wallet... or, you can just let your friendly government institution hang on to those Bitcoins for you, and then your transactions are free.
- rchaud 5y ago
  I suspect that's what's happening here. This is a state-backed HODL play that puts deposits into the government's hands. Bukele himself is not formally educated beyond high school, and has no background in finance, which would be needed for an initiative as large as this. Additionally, the US State Department has some of his close colleagues on a list of corrupt officials [0]. I wonder what protections are in place that would prevent Bukele from pulling the rug and boarding a private jet with nothing but a seed phrase. [0]https://www.reuters.com/world/americas/us-names-bukele-aide-el-salvador-corruption-list-2021-05-18/ https://www.reuters.com/world/americas/us-names-bukele-aide-...
foolzcrow 5y ago
More fake news from a prolific fibber with an agenda to push. Reality be damned.
deleted 5y ago
[deleted]

181 points by xqcgrek2 5y ago

_red 5y ago

Jack Mallers strike.me app is the way forward. I predict lots of these legacy money transfer services will adapt Jacks model (ie. use Bitcoin network / LN and just worry about controlling the end-points). This is somewhat analogous to how originally we used PTSN copper-lines to host DSL signals to connect to internet...then eventually we inverted it and artificial "dial-tones" were played over native digital lines.

ladyattis 5y ago
As much as I'm a skeptic of cryptocurrencies I do think this is one aspect of them that makes sense. Having a blockchain ledger in place of creaky old bank databases that often are tied together with even more creaky legacy applications written in mostly unused languages like COBOL is a better solution. It just clears the clutter away with some simple protocols on top of the blockchain ledger platform. Although this doesn't guarantee we won't clutter up that program space in the future at least it'll make it less fragile.
- ethbr0 5y ago
  This is the best point I've heard about crypto in the real world. I've never really thought about it that way, but it does make sense as a standardized transport API first, and everything else second. Sure, everyone does (things) using Bitcoin. But in order to do those things, they have to speak Bitcoin (simplifying). And once everyone speaks Bitcoin, new products can be created that target Bitcoin, that wouldn't have been feasible if everyone were using 100+ different bespoke systems. And from its network antecedents in PTSN -> packetized layered transport in data / voice, that seems optimistic about enabling innovation.
  - grey-area 5y ago
    If you were going to design a standardised protocol for transactions, I wouldn't start from bitcoin, which makes all the wrong choices around identity, authority, anonymity, where to place the load, how to verify transactions etc etc. Open banking is a much better approach to federated banking.
    - ethbr0 5y ago
      Obviously, but Open Banking has been pushed instead of pulled. For a lot of markets, that isn't ever going to fly given regulatory capture. Consequently, any standard has to also offer a compelling feature over the status quo.
  - AnIdiotOnTheNet 5y ago
    It would make a lot more sense if such a standardized API could exist without intentionally burning an increasing amount of computing resources. Unfortunately it would appear that if this sort of thing is the way things are going, we're stuck with Bitcoin and its appalling wastage. Frankly, it's becoming increasingly depressing have to watch as technology is continually employed to make the world worse, usually for the benefit of making some people rich.
- 3434g34g34 5y ago
  You are right to be a skeptic of cryptocurrencies. All of them are garbage. Focus just on bitcoin, because it aims to solve the exact problem you have identified in the most secure, decentralized way possible. Any cryptocurrency that tries to bolt more onto its base layer will always sacrifice some level of decentralization which is where a lot of problems get introduced. cryptocurrency and bitcoin are not categorically the same.
  - gwicks56 5y ago
    All of them is a slight exaggeration. 999 out of every 1000, definitely.
  - bigcloud1299 5y ago
    Wait till you learn about solana.
doomroot 5y ago
I agree, it also forces interoperability. Regardless of what you think about bitcoin the asset, if it decouples the sender and receiver’s payment technology it might all be worth it.

bob229 5y ago

Sounds like what El Salvador needs is a functioning banking system that can receive normal international transfers not some mad cult blockchain nonsense whose value swings about madly

fnordfnordfnord 5y ago

One of the first real functional uses of Bitcoin in my family was as a way to send money to my nieces when they were in college. We used Coinbase accounts and moved money faster and cheaper than either the USPS or any money order company. We often made money on the transfers and never paid/lost more than the cost of a money order.

spinax 5y ago
Bitcoin valuation "crashed" -$4k USD (I think that's about 8-10%?) just two days ago on the 7th (and within the span of 4 hours, check the charts); if you had created your transfer that morning and they received it the next day to "cash out" to USD, you would have lost a lot of the valuation of your transfer.
- djbebs 5y ago
  Why do you think it takes more than 20 minutes to transfer bitcoin?
  - el-salvador 5y ago
    I think they are using the Lightning network. It takes a few seconds for the transaction to clean off chain.
  - vlovich123 5y ago
    I would think op is talking about both the latency of any eventual transfer to fiat (and maybe some delay in doing so because humans are lazy).
    - angio 5y ago
      But the delay is after the bitcoins are converted to fiat, so even if it takes one day is not influenced by the price of bitcoin.
      - vlovich123 5y ago

xvilka 5y ago

International bank transfers as well. Most of the time they are uber slow, depending on the country could take multiple days. Until banks start to seriously address this problem even Bitcoin would beat them effortlessly.

Scoundreller 5y ago
Transfer wise does a pretty good job of this. If your country is supported anyway. Basically they just have a bunch of accounts around the world.
- toomuchtodo 5y ago
  TransferWise is the competent version of what El Salvador is attempting to do with Bitcoin.
el-salvador 5y ago
> International bank transfers as well. Most of the time they are uber slow, depending on the country could take multiple days. International bank transfers between the U.S. and El Salvador arrive on the same day if done before noon. The local currency is US Dollar and the US is one of the largest trading partners. So every bank that offers international bank transfers has U.S. correspondent bank accounts with the big banks like Citi, Wells or Bank of NY.
- mateuszf 5y ago
  > International bank transfers between the U.S. and El Salvador arrive on the same day if done before noon. vs in seconds on Lightning Network

NikolaNovak 5y ago

I suppose I will remain ignorant of this until I actually try it but I don't dare: How's transfer "free" if average transaction fee is a few bucks? https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f...

lugorrr 5y ago
because they are using a layer 2 solution [1] [1] https://lightning.engineering/ https://lightning.engineering/
- spyder 5y ago
  But even with lightning it's just cheaper but not free or is it?
  - kevinak 5y ago
    For all practical use-cases it is. Last time I used LN (earlier today) it cost me 0.05% to send some money.
  - lawn 5y ago
    Considering that you'll need at least one Bitcoin transaction to use LN, then yes it's still expensive. (You don't have to if you use more centralized solutions, which is what most use.)
sudhirj 5y ago
Think you’re looking for Bitcoin Lightning? From what I understand it’s another chain that collects and confirms transactions quickly and cheaply, then puts them on the main blockchain in batches.
- Geee 5y ago
  No, it uses Bitcoin transactions that are updated interactively between participants. Transactions are signed with your private keys and can always be settled on blockchain.

el-salvador 5y ago

I'm not an economist, but I'm curious as to what may happen to the local banking system if all the remittances, (23% of the GDP), no longer enter the bank's accounts in dollars (or cash). And instead remains in crypto.

clintonb 5y ago
The answer depends on how many individuals had bank accounts to begin with. I suspect folks relying on remittances may not have been major account holders. Businesses will continue using the banking system, so those banks servicing them will be fine.

alkonaut 5y ago

$25 for an international bank transfer sounds really expensive. I probably pay something like that too if I wanted to do it physically, but it’s $5 online and free within the EU. If both ends of the transaction have bank accounts, and the sending end has internet banking (should be pretty universal even for expats in the EU at least, unsure about North America and elsewhere) then using Western Union seems like a complete ripoff.

el-salvador 5y ago
In El Salvador banks transfers within the same bank are free, and transfers between banks are free or cost less than USD 1. Depending on which network is used, they are instant or take less than an hour. One network is 24/7 and the other one works in banking hours. Remittances, like Western Union, just take a few minutes but have higher fees. Especially for smaller amounts. International bank transfers cost between USD 11 up to USD 40. Both the sender and receiver pay. They are only worth for larger amounts, for example between El Salvador and the U.S, if the transfers are done before noon and during a working day, they usually arrive on the same day. Depositing U.S. checks in El Salvador banks is free or cost less than USD 5. This is very slow though, and may up to 30 working days to clear. It may be faster now, but it depends on the bank.
cibomahto 5y ago
$25-40 is standard for international transfers via SWIFT, it's only cheaper between EU banks because of SEPA.
- alkonaut 5y ago
  Not sure if there is a receiving end fee, I don’t think so, but again my fee for iban/BIC (formerly swift) is $0 within EU/SEPA and $5 otherwise. So I expect to be able to transfer to El Salvador for $5 if I read the prices table correctly.
  - el-salvador 5y ago
    Yeah, El Salvador is not connected to EU SEPA. We do have the similarly named SIPA for transfers between the SICA countries (Central America and Dominican Republic) Unfortunately SIPA is not that widespread. It costs about $7.

BurnGpuBurn 5y ago

I think it's a pretty smart move, considering this company has been (dare I say) stealing about 10% off of 25% of the GDP of the whole country for years. Good for them, I hope they succeed and become an example for a lot of others who are in the same boat.

lotsofpulp 5y ago
Why does another company not come in to steal 9% to 24% of the GDP of the whole country?
- 3434g34g34 5y ago
  Because WU has a monopoly on remittance payments in multiple countries.
  - lotsofpulp 5y ago
    Interesting. Is there any reading material available for how this monopoly is maintained? Are the country’s leaders being paid a cut for allowing WU to be the only money transmitter or something like that?
    - haskellandchill 5y ago
      People gloss over what goes into money transfer. There is substantial risk, verification of identity of recipient, etc. With Bitcoin the services are simply not offered, so it's not really comparable. You get irreversible money transfer to an bitcoin address nothing more and nothing less. Western Union's services go well beyond that.
      - lotsofpulp 5y ago
        I figured, I just thought I might ask for a source to lend credence to any conspiracy theory.
    - potiuper 5y ago

throwaway20875 5y ago

Good.

purple_ferret 5y ago

> “They have to take a bus to go to a physical location to pick it up, and there are gangs that hang out around those offices. They know what people are going there for, and they basically rob them > go to any of the 200 new Chivo ATMs the government has rolled out and withdraw U.S. dollars from his virtual wallet. Hmm, sounds like this particular problem isn't exactly solved The reliance on this "Chivos" platform seems like a big potential issue

cma 5y ago
The state Chivos app gets 1984 microphone permissions for some reason too.
capableweb 5y ago
"Chivo" is not a platform, it's a wallet like any other wallet, using the same technology as any other wallet. If you don't like Chivo, you can transfer your Bitcoins to any other wallet that supports Bitcoin.
Geee 5y ago
Well, they don't have to cash out any more. Chivo can be used to pay directly in stores, either with dollars or with bitcoin.

echopurity 5y ago

>El Salvador’s new bitcoin wallets could save Salvadorians $400 million a year FTFY.

gitfan86 5y ago

Check cashing, wire transfer, western union style money transfer are all overpriced because competition doesn't really exist. Lots of derivatives are only available to people on Wall Street or connected to wall street and also are very expensive. Coinbase providing retail people the ability to lend in scenarios with high yield. This is where crypto has actual value. Providing better financial services at lower costs. Coins going up in value just because they are scarce or first movers, is just like Pets.com being valuable because they have a good domain name. Cash flow and actual value are better investments in the long run over guessing what the next collector's items will be.

lottin 5y ago
> Providing better financial services at lower costs. How can anything than runs a blockchain offer a service at a lower cost? It can't. The only competitive advantage that crypto has over the financial sector is that crypto is by and large operating with disregard for financial regulations. Let's see how long it's gonna last.
- carlosdp 5y ago
  It very much can, because these protocols can do the same things the traditional equivalents can (trading, lending, etc.) fully-automated with smart contracts. When you don't have to pay a ton of salaries to push paper around, you can make things extremely efficient. And like OP said, a lot of the prices for financial services are artificially high due to lack of competition as it is.
  - lottin 5y ago
    A "smart contract" is nothing new, it's simply a computer program, and computer programs are already widely used in the financial sector. So that cannot be it.
    - nybble41 5y ago
      A smart contract is much more than "simply a computer program". It's a computer program which is intimately linked to a distributed ledger such that the output of the program directly determines who is allowed to make use of the assets. The "distributed" part is important since it means that you're not dependent on particular party to enforce the contract—the entire distributed system does that.

woodruffw 5y ago

Eliminating Western Union’s vice grip on international remittance seems like a good thing to me. But to ask the obvious question: why does El Salvador need Bitcoin to do it? It’s not clear to me that the settlement system laid out in TFA necessitates a cryptocurrency scheme, since it all boils down to a locally denominated network of ATMs. Is there some technical reason for this that I’m missing? Without one, it feels like burning tires to accomplish a financial task that any non-failed state (certainly one that can roll out apps and ATMs) should be able to accomplish with ordinary means.

robot_no_419 5y ago
How do you send money from the US to El Salvador without Bitcoin or WU? That's the whole point of remittance; I'm not sure how a network of ATMs local to El Salvador will help people send money internationally to the country.
- woodruffw 5y ago
  You do exactly what Chivo does, except without using Bitcoin for clearing and settlement. You instead use a bank, or, because this is an entire country we’re talking about, use the national bank or carve out a special rule for financial remittance for your app.
  - robot_no_419 5y ago
    So basically your solution is to give everyone in El Salvador a bank account and for the government to subsidize their remittance fees. Because if you're using banks, someone is paying fees. Someone from the US still has pay a fee to wire money from their bank to some endpoint in El Salvador. The banks are literally the problem that Bitcoin solves, not the solution. Banks = fees and censorship.
  - whywhywhywhy 5y ago
    If you can just do that then why does WU exist?

PragmaticPulp 5y ago

Moving money from point A to point B quickly is the ideal use case for cryptocurrency. It’s interesting to see that even their example use case results in the transferred Bitcoin being converted back to dollars right away: > “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation. I suspect this will be the default behavior for Bitcoin remittances: Buy Bitcoin, send it immediately, then other side sells it as quickly as possible to get back to cash. Bitcoin dropped 20% in the span of minutes on the big launch day in El Salvador. I doubt many people are going to want to hodl their remittances in a highly volatile currency. It’s also interesting that the costs haven’t actually gone to zero for the Bitcoin model, but they have been obscured and shifted to other parties. This says the receiver can withdraw BTC as cash “without a fee” but what does that mean? Is it like those currency exchange stations at the airport that have “zero fee” but they more than make up for it with unfavorable exchange rates? If not, who is paying to operate and maintain the foreign exchange infrastructure, which isn’t free? Also, they make use of L2 networks for transfers, but at the end of the day those are still rolled up on to the Bitcoin blockchain, which is unbelievably expensive to run due to the energy requirements that register as a significant fraction of humanities energy usage. That energy must be paid for somehow, which is currently a a mix of block rewards (technically, inflationary money printing) and transaction fees, which are at least amortized across L2 transactions. There may be uses for cryptocurrency yet, but I hope this isn’t the end game because it’s still an inefficient mess. Maybe if we can get away from PoW block chains and also wise up and jettison the arbitrary speculative tokens then maybe we can make some progress.

dom96 5y ago
At that point why don't they just send Tether or USDT (or another stable coin), why even risk playing with such volatility, can't these stable coins be transferred with few fees as well?
- deleted 5y ago
  [deleted]

endisneigh 5y ago

Even if you believe in crypto - why Bitcoin and not a stablecoin? I'm also not sure why people are comparing Bitcoin to Western Union. Western Union is way more than just sending money.

mateuszf 5y ago
> why Bitcoin and not a stablecoin? Because stablecoins are not as decentralized. Why depend on third party if you don't have to?
- endisneigh 5y ago
  If you're using an official El Salvadorian wallet it's not "as decentralized" anyway, though.
  - mateuszf 5y ago
    Sure, but you don't have to. I see it as a necessary step in early adoption.
  - billytetrud 5y ago
    But it would be worse if they used a centralized currency. It's an additional risk. Those risks add up. And el Salvadorians can individually opt out of the government app whenever they want to. It's a lot harder to opt out of a currency you've decided to make legal tender 2 years in. Also stable coins are exactly what they don't want - they're trying to insulate themselves from rampant inflation and instability risk of the dollar.
    - rchaud 5y ago
      > they're trying to insulate themselves from rampant inflation and instability risk of the dollar. So instead of controlling their own monetary policy by issuing their own currency, they are now at the mercy of the US federal reserve and a coterie of Chinese cryptomining syndicates.

korginator 5y ago

Cryptocurrency discussions aside, $25 for a remittance sounds way off. As an example, I can transfer the maximum permitted $5,000AUD via Western Union from Australia to El Salvador which costs $12AUD in transfer fees. That's still expensive. Online inter-bank transfers across countries costs me $0 and I don't recall paying my bank for this service, ever.

PragmaticPulp 5y ago
Agreed. The article even gives different fee examples at different points. I’m all for lowering fees and increasing competition, but this article seems to be exaggerating the wire transfer fees while ignoring the costs of the Bitcoin option (exchange rate fees on both ends, etc)
kevinak 5y ago
When I look at WU for sending that amount to El Salvador from Sweden it's closes to $250. Are you sure it's only 12 AUD? There's a hefty fee baked into the exchange rate.
rchaud 5y ago
It's possible the fees are lower because the remitter can offer a sub-market exchange rate that allows them to take some of the difference in profit. Because El Salvador uses USD, there is no profit opportunity in exchange rate arbitrage.

G4BB3R 5y ago

Nano cryptocurrency is much more efficient for this purpose, they will keep paying very high fees for transfers with bitcoin.

poontang1 5y ago
lol - nano had a spam attack that locked up the entire network for months.
stiltzkin 5y ago
Not with lighting network.
billytetrud 5y ago
Currencies like nano are cheaper, not "more efficient". They're the bargain bin of cryptocurrency. Nanos design has no breaks and then people are surprised when it has enormous problems like spam attacks.

frankbreetz 5y ago

perhaps a noob question, but why not just allow a bank to open for people with a joint account with one person in US and one in El Salvador? Person in US deposits money, person in El Salvador withdraws money. This seems much simpler then making BTC a national currency.

billytetrud 5y ago
You might want to think through the logistics of having a person or a group of el Salvadorian government officials living in every foreign country in the world handing out cash to people. What you're talking about is recreating an international banking network. That's not exactly easy peasy
betwixthewires 5y ago
OK, so person a deposits cash, person b in another country withdraws cash. Eventually bank location a will have an excess of cash and bank location b will have a shortage of cash. How do you square that? Now think about the fact that 25% of el Salvador's GDP is remittances from the US. Country wide, banks have a shortage of cash deposits every Friday. Bank location a will need to eventually ship that cash to bank location b, and maintain a channel to keep the money flowing. It's not that simple, if it were that simple that's how banks would do it. There are logistics involved.
rchaud 5y ago
The bank would need to have branches in both El Salvador and the US for this to be doable, would it not?
- el-salvador 5y ago
  U.S. banks usually require foreigners to visit a branch for opening an account. For Salvadorans getting a US tourist visa is a complicated and expensive process. About half of the applicants get denied. And the application costs about the half of a monthly minimum wage. Salvadorans who depend on income sent by a US relative would have even less chances to get a visa approval.

pelorat 5y ago

Don't these people have bank accounts?

Sargos 5y ago
If this is the Blizzard meme then bravo

pessimizer 5y ago

Is it strange to think this is a hopeless venture instituted by a terrible, corrupt government, but to also be rooting for it to succeed? If I lived in El Salvador, I would be protesting this as a risky waste of time while enthusiastically participating in it.

rootsudo 5y ago

Good. Western Union should die and go the way of the telegraph and telegram.

jweir 5y ago

I am confused and ignorant. If someone in Salvador receives a BTC and then they sell it how do the dollars actually get into El Salvador? Does a party transfer the dollars into my local bank account without any fee?

neither_color 5y ago
If they have their Chivo app set up they can: a) convert to dollars within the app or go withdraw at an ATM. Or b) buy things directly with btc. There are videos on social media of people there buying coffee, food, etc. El Salvador already has the dollars by the way. They dollarized ~20 years ago. It’s the only currency in circulation, besides Bitcoin.
- jweir 5y ago
  You say the state already has the dollars, but it will need more as BTC flows into the country. Does the state handle the conversion - ie I sell my BTC to the state and it imports the dollars? This is the part I don’t understand is what part brings in new dollars at a lower cost than Western Union.
  - smorgusofborg 5y ago
    How El Salvador keeps it's physical cash in flow with a foreign mint is an interesting question but it is somewhat decoupled. Unless people are hoarding US dollars, the banks are getting them back as later deposits so the amount of physical dollars has very little to do with incoming and outgoing digital payments.
  - imtringued 5y ago
    https://www.quora.com/How-does-physical-money-transfer-occur-for-purchase-from-another-country https://www.quora.com/How-does-physical-money-transfer-occur... By the way, when El Salvador imports products from USA it most likely doesn't pay with cash so the net transfer of physical currency might be very close to zero. How do they do electronic payments? Regular bank wire transfers. The fees are merely unattractive for small amounts. Western Union is a service for the unbanked. https://www.quora.com/Can-you-transfer-money-from-El-Salvador-to-the-USA https://www.quora.com/Can-you-transfer-money-from-El-Salvado...

billytetrud 5y ago

CNBC loves to frame Bitcoin as evil. The headline is unbelievably disingenuous. Western union losing business to a better system is not bitcoin damaging western union in any way that anyone should be upset about. Just like when tesla comes out with a new car, the headlines don't read "teslas new car could cost ford $3 billion per year".

SkipperCat 5y ago
I looked at it the exact opposite way. To me, the headline was flattering. It shows that Western Union sucks $400MM out of people while providing a service that is easily moved to cryptocurrency. I see it as a declarative win for Bitcoin by showing how it actually saved Salvadorians a lot of money. Its also common knowledge that Western Union and their ilk have been exploiting and sucking dry people who live on the margins of our financial system. Any article that says they're loosing money to a competitor is fine by me. Even as someone who hates the crypto hype, I have to say this time the crypto-win is legit.
- chuckSu 5y ago
  This
- billytetrud 5y ago
  I guess you're right, the article is pretty pro bitcoin. Still an odd choice of headline if you ask me.
  - mig39 5y ago
    The person who writes the article often doesn't write the headline.
  - bellyfullofbac 5y ago
    Seems like it's your bias filter doing that. I read it and my bias filter said "It's going to cost the company that's usually associated with 409/Nigerian scammers because they allow for untracable thefts, and otherwise overcharge migrants to send money back home? Good."

Milkman128 5y ago

There are already other ways to do this. im confused.

simonebrunozzi 5y ago

Bitcoin is terrible for remittances. It just costs too much. There are way better alternatives, including stablecoins which don't have any volatility.

twostorytower 5y ago
They use the lightning network. Look up the Strike app. They are sending bitcoin at no cost to them.

gigatexal 5y ago

Good. Western Union sucks. If there was ever an entity that needs to be destroyed by modern tech even crypto it’s those money sucking lames.

pkulak 5y ago

I'm starting to wonder if Bitcoin's extremely high fees are a feature and not a bug, at least for national governments. Sure, you can spend $10 to send $5 with your non-custodial wallet... or, you can just let your friendly government institution hang on to those Bitcoins for you, and then your transactions are free.

rchaud 5y ago
I suspect that's what's happening here. This is a state-backed HODL play that puts deposits into the government's hands. Bukele himself is not formally educated beyond high school, and has no background in finance, which would be needed for an initiative as large as this. Additionally, the US State Department has some of his close colleagues on a list of corrupt officials [0]. I wonder what protections are in place that would prevent Bukele from pulling the rug and boarding a private jet with nothing but a seed phrase. [0]https://www.reuters.com/world/americas/us-names-bukele-aide-el-salvador-corruption-list-2021-05-18/ https://www.reuters.com/world/americas/us-names-bukele-aide-...

foolzcrow 5y ago

More fake news from a prolific fibber with an agenda to push. Reality be damned.

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