Bitcoin: the Stripe perspective

While regulation will always play a role in this, I would hesitate to say that this is "the" difficulty. Transferring dollars (say) electronically is complicated because you need to prove that no dollars are being created or destroyed. Though you could phrase this as a regulatory rule, it's really more of an accounting requirement.

The system as it stands (FedWire/CHIPS/SWIFT, and ACH on a consumer level) is very complex and tries to strike a balance between reasonable clearing times and limiting trust of individual actors.

The difficulties in an electronic money transfer system for fiat currency are, in my option, primarily technical and logistic, with the logistic aspect being maintaining the correspondence between specie and electronic balances.

That said, it's always hard to analyze success. Arguably, bitcoin does not solve the money transfer problem any better than previous schemes, like Chaum blind signatures or egold. The contribution of bitcoin to the electronic payment space is a little more nuanced than just "easy money transfers".

> Also, according to your response a domestic money transfer would suffer the same problems but these seem to work just fine (at least much better than international transfers).

Certainly they work better, but "just fine" is a much stronger claim and one I'd disagree with. I don't find myself spending money by wire transfer hardly ever, eg, and when I do it is a much larger affair then using cash. See also andrewla's comment here [1].

> Why does a mechanism that works just fine in between bank and customers and generally domestically just break down when country borders are involved?

Because banking systems and the regulations surrounding them are different in different countries, basically, and that adds lots of complications to an already extremely complex system. The bitcoin protocol is not different in different countries.

[1] https://news.ycombinator.com/item?id=8066251

These are good questions. Someone should write a primer on money transfers and cryptocurrencies (someone with better answers than my best guess, included below.)

My hunch is that the trust required to move money is very similar to the trust required to have an account with money at your bank, but the main difference is you pay for that trust in different ways.

If you write a remittance, you trust it will be remotely delivered upon request (ie, immediately). That trust is ensured by an organization that has access to ready capital in many locations (which involves some opportunity cost, Western Union could just be pooling all that money and investing it). You pay for that trust through fees.

When you deposit money at a bank, you trust that they will return it to you at any of their branches at some point in the future. That's a very similar sort of trust. Yet here, you really pay for it by foregoing the opportunity cost of lending your money to strangers. Though they pool your money with the money of others to smooth risk, so they're getting a better return / less risky return from lending than you could get on your own. But you're really paying through the difference between the return you would earn by loaning it out and the interest you earn. You're paying that gap.

Similar problems occur in domestic money transfers, so domestic money transfers still have fees. However, I would expect that establishing trust with international money transfers involves dealing with multiple currencies (possibly some of which are being inflated by a government), magnifying the costs. I would expect the fees would tend to be higher.

(Western Union doesn't suggest this is the case. Sending $1000 instantly seems to bounce between $86 and $95 no matter where I send it, domestic or international. They may be making some money by setting exchange rates, I'm not sure. Also, they sometimes gave me wildly outlier fee quotes, so I'm not sure those are their actual prices, or how stable they are, or if there's not a bug in the website. For comparison, World Bank says remittances average around 8.14%: http://remittanceprices.worldbank.org/en )

Banks often charge more for international wire transfers, but weirdly tend not to change their prices based on the amount sent. Here's a chart of some of their fees: http://www.mybanktracker.com/news/2013/04/18/wire-transfer-f...

Bitcoin offers some opportunities to bypass some of the required trust, possibly resulting in drastically lower fees. (You still have to trust the network won't implode though.) That said, I don't want to suggest remittance services are gouging anyone. I have no doubt it's costly to set up an international trust network with cash on hand all around the world. But I think there's an argument to be made that the infrastructure for a cryptocurrency scales a bit more easily than the infrastructure for a Western Union. (On the other hand, ensuring there are buyers and sellers of bitcoin in whatever two cities you're using as endpoints isn't trivial either.)

That World Bank link above talks about the "5x5" goal of reducing remittance fees by 5% (from 10%) over 5 years (beginning in 2010). Work anywhere in the developing world or on development economics and you'll get a sense of how critical remittances are to developing economies (often swamping the impact of foreign aid). It's conceivable that many humanitarian and development goals might be hit if we could use technology to lower barriers to easier money transfers.

If you had a large enough transaction base where you could simultaneously convert in and out of bitcoin chunks such that the transaction didn't suffer f/x creep (or if it did, it was tolerable via transaction costs) that would be a pretty interesting thing indeed.

There is too much venture capital money behind bitcoin for it to fail. EDIT: Don't underestimate the stubbornness of investors.