During last few weeks I got the chance to talk to people representing multiple opinions about the role of cryptocurrencies in today’s economic world. I also used Bitcoin for more operations and I witnessed the strengths and the weaknesses of the system. I am going to share some of my findings bellow, hoping that it may help people understand cryptocurrency operations better.
Initially I wanted to buy some Litecoin since I see it as a better currency compared to Bitcoin from the technological perspective. But it was so difficult to find an exchange allowing me to buy Litecoins using my card that I decided to purchase Bitcoin after all, thanks to the easier process offered by Bitcoin.com through Simplex. Easier process, but not cheap, since you have to pay 5% (min. 10 USD) of the invested value to Simplex as a commission. To my disappointment, it seems that Simplex’ 5% commission is one of the best on the market for the Customers who want to pay straight from the card to load their crypto wallet – pretty expensive from my perspective.
Please note that there is the choice of bank transfer payments accepted by other cryptocurrency sellers which can lower the commissions to around 3% in the best case. With this second option you may save some dollars, but you will have to wait few days till you will finally get your coins in the wallet.
Now coming back to the coin delivery term, I was a bit disappointed. Even when you purchase Bitcoins with your own card (or even with Cash at a Bitcoin ATM), you need to wait minutes or even hours until you will get your Bitcoins in your wallet, under your control. Not that fast for a pure electronic technology.
The delay in between the moment when you purchase the coins and the second when you get them is somehow explained by how Blockchain-backed currencies work. In one of my previous posts, I explained that all these currencies rely on the blockchain to store all transactions in data blocks which are generated every X minutes. For Bitcoin, this X is 10, and only if you pay a decent commission to the miner your transaction will actually be saved in the upcoming block. If you want to save on the commission, you may end up waiting hours or even days to see your bitcoins actually moving. How much is a transaction commission paid to the miners? Well, expect something around 1 to 3 USD for each transaction and the more you pay, the faster your money will move.
There are cryptocurrencies who offer faster block generation times (for Litecoin X is 2.5 minutes, faster than Bitcoin), thus promising also faster transaction times.
When does it make sense to use Cryptocoins?
From my perspective I see cryptocurrencies useful when you take advantage of their borderless system. The current banking system provides faster and cheaper transactions for all local services, for the moment, and I don’t think Bitcoin or the other crypto currencies have what it take to overcome this.
With my VISA or Mastercard card I can pay anywhere around the world instantly with commissions lower than what Bitcoin network charges me. It would be ridiculous to pay 3 USD as commission when I am buying food at the local supermarket just to make sure I am not waiting few hours there till my payment is cleared.
However, if you look from the perspective of people or businesses who need to send money from one country to another one, tables turn in Bitcoin’s favour. Current banking services take hours or days to move money around the world and charge much more than 3 USD as commission. So from this perspective, I see cryptocurrencies and the growing ATM network as a great way of shifting money around the globe with minimum delays and cheap costs. Plus that Bitcoin network works 24/7, so you don’t need to care about bank holidays anymore.
I feel like we’ve seen it before. Think about how internet and voice over IP (VoIP) communications changed the world of voice communication. We had fixed lines and mobile phones and people paid large prices for their calls, especially on the international calls. When internet became ubiquitous, people started to use VoIP solutions for their international calls to avoid the greedy Telecom companies, but they still use their mobile or fixed phones for calling their local friends, since it was faster and cheaper to do so. The lesson to learn is that while some adjustments were required, there was enough space under the sun for both parties.
From my perspective it is clear that Bitcoin cannot replace the banking system as it is today. Cryptocurrencies have the edge on the world wide level of transactions because their DNA is built for this. However, the multiple alternative coins coming up very frequently may bring something valuable to the market. Smart contracts and faster block generation times may improve the area where cryptocurrencies cannot yet overcome the banks – the local services.
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