The issue is always the same: traditional banking is frictionless, very cheap and convenient for 99.9% of people out there.
Crypto isn't frictionless, it's not cheap and it solves problems that only the 0.1% has such as the need of transferring large amounts of "money", without tracing, in short times, across the globe but it undoes the benefits that the 99.9% has while bringing complexity.
Plus, nobody really wants a deflationary currency, they don't work, the incentive is to hoard and hold, not spend, which is why even Bitcoin's website dropped the currency narrative for the store of value.
People don't buy Bitcoin to trade or pay, but to sell at a higher price. Exception being drug dealers and few lunatic anarcho-capitalists.
I'm tired of hearing the "works on my machine" line about banks.
Here's a few issues I've run into in the last few years:
- I dissolved a corporation in Korea and it took nearly 1.5 years and $8k USD in lawyer fees to get ~$80k USD out of the country. My other option would've been to go back to Korea and buy Rolexes.
- I moved to an Eastern European country and spent several weeks providing KYC/AML docs after attempting to send $30k from the US to a local bank account while my funds were in limbo. Ended up having to use ATMs to pay rent and other expenses.
- Bought a house in said Eastern European country and almost lost the deal because of several bank delays. Seller was pissed and had to involve lawyers to calm him down. Technically I should've had to pay extra because of the delays, because of the way real estate deals are structured in that country.
- I moved to Latin America and went to probably 6 car dealers who all told me that purchasing a car would take up to 2 months because of the KYC/AML process involved in wiring money from the US. I ended up going various ATMs 40 times over the course of several weeks, withdrawing $500 at a time, so I could buy a used car off Facebook marketplace. Had to take over $20k in cash in a backpack to a lawyer's office to complete the deal. Spent way more time & money on my rental car than I wanted to.
- Earlier this year while visiting the US I went into a bank branch to withdraw $20k to purchase a used car for my dad and not only could the teller not help me, but it triggered a flag on my account that caused all of my funds to be frozen for several days until I was able to get it resolved. Ended up borrowing money from a friend so I could buy the car before I left the US.
- Sending even $500 to my bank account here in Latin America takes over a week with various questions from bank staff. Every time I worry if the funds will even arrive because it has to go through multiple intermediaries with various memos/notes to the intermediary receivers. From my US bank account to another bank in NY, credited to some European account holder to send to Europe with further instructions on how to get the money to me in Latin America. I bank with an institution that's run by the national government; I figured they'd have better international finance connections than any of the commercial banks, but apparently not.
- A couple weeks ago I decided I'd send $50k to my account here because I don't want to go through this processes every time I want to pay bills. 2 weeks later and my $50k is still stuck. The bank keeps coming back with more questions and requesting more documents every few days. Nobody at the bank can tell me how long it will take to release the funds.
I've got more stories like this, and I know many expats with similar stories. I'm fortunate that I even have US financial access, and that I'm not living in a country like Lebanon, Turkey, Argentina, Venezuela, or even worse Russia, Iran, Cuba, etc. Things are even more difficult in many other countries.
By the way, Western Union works great here and is super fast, but they take huge commissions. Funny how that works.
The traditional financial system works great if you live in a first-world financial bubble and all of your friends, family, business partners, etc. also live in first-world financial bubbles. Meanwhile some of us are still on the financial equivalent of dial-up while the typical HN poster is on gigabit fiber talking about how great all of the bloated 20MB web apps are for them. I'm sweating bullets every time I deal with a bank, while people on HN say "this shit is great!"
I'll be beyond happy if the Bitcoiners are right and the whole world eventually switches to a global permissionless currency.
Bitcoin has existed in the last few years. So I have to ask why it is that you haven't used it if you've had these issue moving money via traditional banks. Are the transaction fees too high (like Western Union).
I take part of my income in Bitcoin and spend it, both on-chain and Lightning Network, pretty frequently. I visit a number of local places that accept Bitcoin and use it for online purchases too. There are several Bitcoin ATMs in my city but they mostly have KYC with low limits and/or high fees.
For purchases like cars or real estate it seems like you'd have to be pretty lucky to find a seller unless you're not particular about what you're buying.
I've also started keeping more physical cash on-hand lately.
This is the real problem: if you did the same transactions in Bitcoin, that doesn't free you from the KYC/AML obligations. It just hides the fact that you're not checking.
- American banking is much worse than most of the world's (but not compared to crypto's risks of 'being your own bank'), especially for international transfers.
There is a perception that it's magic and untraceable. As you mention, there are obfuscation methods that seem sufficient that criminals have adopted crypto rather than 'Okay, you're gonna have to buy $100k in iTunes cards" to claim their ransomware bounties.
Unless finance institutions and laws can protect wallets and insure crypto, I will never use it. Currency is not just a number you move around, currency is deeply intertwined with how civilization works, and it requires a high amount of trust for people to use it.
Trust is rather a social concept that something you can really prove mathematically. It's collective trust. Unless you can DRASTICALLY reduce mis-use with bitcoin, no one with trust it ever without a lot of expensive protective measures.
A 1 hour lecture from a security professor on crypto currency:
I don't understand why this would be a serious impediment.
Suppose you go to an online exchange or Bitcoin ATM or local man with a crypto wallet, you hand over five $10 bills or transfer some money from your bank account, you get $50 in cryptocurrency.
Now you go to the adult bookstore's website and don't have to give them your name, you send $20 to your friend in a foreign country so she can get a cab to the airport without having to lose another $15+ to a wire transfer fee, or you just use it to pay for parking.
Even if you screw up entirely, the most you're out is $50. But then nobody is tying your literature preferences to your name, you can do your friend a favor more efficiently, and the credit card company doesn't have a database of where and when you park your car.
The trust issues come when you want to be a speculator holding a large amount of wealth in a form someone could steal by breaking into your computer, but what does that have to do with using ordinary amounts day to day as a currency?
$15 to transfer $20 to another country, the US really is a another world sometimes. Transfers are often free to cheap - substantially lower than the costs for transferring crypto in most cases.
US banks commonly charge ~$40 for an outgoing international wire transfer, even for small amounts. There are less expensive alternatives but they may not allow you to withdraw the funds the same day or be available to the recipient in that country.
The average transaction fee for Bitcoin is currently less than $1. For Bitcoin Cash it's less than $0.01.
The seller does not need to be anonymous, and customers would be less inclined to trust them if they are. At which point if they're ripping people off they would be subject to arrest for fraud, not to mention have immediate bad reviews.
More than that, sellers like repeat business, especially in low variable cost digital products. It costs them a tenth of a cent worth of bandwidth to actually send you the book, which is the only way they're going to get your money for the next book.
They want to give you your book, because they want your money.
With the introduction of CBDCs, FedNow, and platforms like TFA, it's starting to look like TradFi is getting the second-mover advantage. Cryptocurrency introduced programmable money, which is great, but it also came with other features like self-custody, extreme transparency & privacy, and immutability that have ended up being more than average users are willing to accept as a bundle.
TradFi entities now have the ability to pick what they like out of the mix and offer that to customers while also benefiting from the convenience of trust assumptions, something cryptocurrency eschews. TradFi is building atop thousands of years worth of UX improvements in how people can come to trust each other. It's difficult for cryptocurrency to compete there.
I still love the developer convenience of blockchain since it nicely combines serverless with auth with payments. But for the most part, given the existence of trust, these benefits could also come from a system like in TFA having a Wasm runtime and maybe a dash of WebAuthn. Like a mashup of Cloudflare Workers and Stripe.
You can build features like reversibility on top of Ethereum. A draconian government chain that solves none of the important grievances is not needed. I do not need big brother freezing my funds, deciding what I can and can't buy, etc.
Yes, I completely agree. There's plenty of tech available to achieve many of the goals of functionality, affordability, and privacy a motivated team of developers could have. Just that it's often unnecessarily difficult to build and use. Probably things will be much better in a(nother) decade, but the whole thing is still a work in progress. In the meantime, why pay the cost 100% of the time for avoiding a bad thing that happens 1% of the time? Cryptocurrency has its utility, but much less when minimizing trust isn't a requirement.
I put 100k EUR of Bitcoin into a wallet, but then I lose the private key. There has to be a way for me to recover access to my funds. The only way to do that is to delegate trust to a central authority. Crypto will never, can never, be an alternative to traditional banking for the general population.
You're right, this is a massive weakness in the cryptocurrency space and until this gets better solutions I doubt there will be more mainstream adoption (without centralised custodians). But I will say that this isn't only a problem in the cryptocurrency space, it's a general problem for cryptographic systems. We need better generic systems for managed cryptographic keys, with several levels of backups and recovery options, with minimum hassle. ERC-4337 standard goes in the right direction.
I think we already have a pretty good system for managing access to wealth/value, which has several levels of safety, and is relatively low-hassle. I think it's the existing banking infrastructure.
