Originally posted at https://news.ycombinator.com/item?id=26238410>.
Slightly edited.
If you live in a country with a highly functional banking system and
no kleptocracy, Bitcoin is probably a bit puzzling unless you have
family in Cuba. But it’s not puzzling at all for those of us who live
somewhere in the middle of the broad spectrum between Switzerland and
Somalia, because most places have a little kleptocracy. Argentina
is a stable democracy, far from being “a failed state,”† but if you
want to send US$500 abroad via non-Bitcoin means it’s basically
impossible, and the only broadly available savings vehicle is real
estate (“ahorrar en ladrillos”). This of course grossly inflates
real-estate prices, with a substantial part of the capital city
occupied by empty apartments someone bought “as an investment”.
Historically, Argentines have saved by buying dollars, but that’s
limited to US$200 a month now, and then only if you have a
non-under-the-table job (about a third of total employment is under
the table):
https://www.ambito.com/finanzas/dolares/cronologia-del-cepo-...
You can see that in September 02019 when this measure was imposed the
price of a dollar was AR$63.50; now it’s AR$139. So whatever savings
you had in pesos in 02019 have lost 57% of their value to peso
devaluation.
In 02001 a lot of Argentines had saved dollars in their
dollar-denominated bank accounts. This did not preserve their savings
through the financial crisis that year; the cash-strapped government
limited withdrawals to a trickle, then converted dollar deposits to
pesos at a one-to-one rate, then released the exchange-rate peg, at
which point peso went overnight from being worth US$1 to being worth
US$0.25 before settling at about US$0.31 for the next few years. The
US did something similar in 01933.
Some might suggest using “alternatives to banks like credit unions
where customers—as owners—hold more power,” but Credicoop depositors
suffered the same two-thirds confiscation of savings as depositors in
for-profit banks. And they pay the same 3% tax on bank transactions
including checks. That’s more than a fast Bitcoin transaction fee of
US$15 for transactions over US$500 (though see below for data on current
transaction fees).
This month there's a new development: every eligible person or company in Argentina (about 12% of the population, and about 20% of the bank-account-having population) gets locked out of their bank accounts until they comply with the government's new
"economic census" program. At 5 days from the deadline
there were still 700'000 depositors who hadn't complied:
https://www.cronista.com/economia-politica/que-es-el-censo-n...
https://archive.fo/Os91S
But we’re not a failed state. There are no gangs of bandits roving
the streets in Argentine cities (though there are some pretty bad
slums where you’ll get robbed if you wander in without knowing
anybody). Courts, free public hospitals, and roads continue to
function, though there are more potholes than a year ago. Argentine
infant mortality is 10 per 1000 live births, down from almost 20 in
the late 01990s and the same as the late 01980s in the US; life
expectancy at birth is 77 years, worse than Switzerland’s 84, but the
same as China and Hungary, and better than Saudi or Mexico. (Somalia
is 54.)
Most of the world is worse off than Argentina, although not
necessarily in such a statistically transparent fashion. About one
fourth of the people in the world are unbanked, 51% here in Argentina;
even advanced countries like Russia, Hungary, and Uruguay have roughly
a quarter of the population unbanked:
https://www.gfmag.com/global-data/economic-data/worlds-most-...
And if your family lives in a country like Iran or Venezuela subject
to US sanctions, and you live in the US? Good luck sending them an
ACH, instant or otherwise!‡ It’s well known that Bitcoin is very
popular in Venezuela, which kind of is a failed state, so one of the
Venezuelan governments is trying to tax Bitcoin remittances at 15%.
https://archive.fo/ZRXzS
Bitcoin handles a few billion dollars per year in such
remittances. This might seem like a trivial amount of money to someone
in a rich country, but in poor countries, it’s enough to keep several
million people alive.
Even in the US, it’s common for the police to confiscate large amounts
of paper currency just because they can (“civil forfeiture”); US bank
accounts are probably fine for US$100K but probably somewhat risky for
US$10M if the bank thinks you don’t seem like the kind of person who
ought to have it. US$10M in US$100 bills fits in a box you can wheel
around on a dolly, but Bitcoin is a lot more practical. (And of course
US$10M in dollar bills loses about US$200k per year to inflation.)
Transaction fees are high enough that you wouldn’t want to use Bitcoin
to pay for a can of Red Bull or even a restaurant dinner. But it’s
extremely practical as an alternative to Western Union or US$100 bills
or gold, even with the current very high transaction fees. At the
moment, the break-even point where the Bitcoin transaction fee is less
than the 3.4% spread you’d pay to a jeweler or black-market money
changer is around US$3000, because the median Bitcoin transaction fee
in the last block was 1.7 millibitcoins, which is US$100:
https://btc.com/0000000000000000000ae1cdc00169e5fb6931d10584...
A month ago it was 0.31 millibitcoins:
https://btc.com/00000000000000000000476ab57eea9be8ada36e2680...
But there were transactions that made it into the last block with a
transaction fee of only 0.082 millibitcoins, or US$5:
https://btc.com/81032a76e7ced9678996446ea05c91329d028af2fbfe...
So, Bitcoin doesn’t have to be a cypherpunk utopia to be a big
improvement on the status quo ante. For those of you living in
stable countries where your worries are things like “instant and
extremely low-fee ACHs” and “decentralized utopia”, this may be very
confusing, but try to remember that most of the world lives in places
with much more pressing concerns, concerns that Bitcoin helps a lot
with. And you may live there too, soon—the loyal subjects of Kaiser
Wilhelm in 01913 certainly didn’t expect that in 15 years they’d be in
the middle of a hyperinflation episode that remains legendary a
century later.
____
† We’ve remained democratic since 01983, electing presidents from
three different political parties (UCR, PJ, and PRO), and there’s no
serious insurgency. It’s the economy and government policy that
are ruinously unstable, to a point that seems satirical to anyone
accustomed to the US, but is lamentably common worldwide. Rich people
sometimes say they don't know of legitimate uses of Bitcoin outside of
“failed states”.
‡ Family remittances are specifically exempted from the US sanctions
on Iran, but good luck finding a US bank that’s willing and able to
take that risk:
https://www.wiggin.com/wp-content/uploads/2019/09/26580_advi...