Using Bitcoin is not eliminating fees — unless exchanges are no longer required
_Disclaimer: I’m not expert/investor in Bitcoin. I see Bitcoin as a great opportunity and great replacement for traditional money. Want to know more about Bitcoin? Pay this a visit: http://www.reddit.com/r/bitcoin_
Recently more and more people talk about Bitcoin: Very convenient, fast, low fees, etc. Sounds fun, and it’s true, if you only consider Bitcoin transactions alone. By design, it’s very fast, irreversible, secure, completely verifiable and very low fees. However, let’s consider several scenario to see if it’s really true:
1. Online Purchases
With credit/debit cards, you don’t have to pay any processing fee. Merchants are the ones who pay processing fee to payment network.
With Bitcoin, no matter small or large transactions, you will be the one who pay fees.
2. Money Transfer (Domestic)
Almost all banks in US (and probably EU) have zero money transfer fee. For example, you can pay anyone without fee using Chase QuickPay, Wells Fargo SurePay, …
With Bitcoin, as title said, unless exchanges are no longer required, for instance Coinbase, you have to pay 1% + 0.15 USD to convert money to Bitcoin, 0.1 mBTC for transfer, 1% + 0.15 USD to convert Bitcoin back into money. So total is 2% + 0.3 USD + 0.1 mBTC. Pretty much!
3. Money Transfer (International)
International Money Transfer is a picky case. Most banks, payment transfer service like MoneyGram or Western Union charge a huge amount of fee. Processing time is from instant to 2-3 business days.
Think Bitcoin transaction is free? You bet. I’ve seen many posts on Reddit with something like:
“I’ve seen half a million to my friends around the globe. With 0.1 mBTC fee. Instant."
However, only 1/3 of this sentence is true, unless exchanges are no longer required.
Yes, with Bitcoin, you can send virtually unlimited amount of money to virtually anywhere on earth.
No, not with 0.1 mBTC fee. Have you consider the fee for converting money to Bitcoin and vice versa? Have you take into account the difference in exchange rate? Have you consider the availability of exchanges at the destination?
No, not instance at all. That’s what you think. If you have Bitcoin available, then your Bitcoin leaves you instantly. The receiver also receive Bitcoin almost instantly. However, in order to use it, unless exchanges are no longer required, is another story.
If you only have money, you first need to convert it to Bitcoin. It might take 3-4 days for Bitstamp or Coinbase. The receiver also have to wait the same amount of time to convert it back to money. So who says it’s instant?
So who will be the one taking advantage of Bitcoin?
- Exchanges. Of course.
- Merchants. They don’t have to pay processing fee.
Who else, unless exchanges are no longer required?