In February I got to attend the distributed markets hackathon and after spending 24 hours hacking our way through The Coffee Chain we won some bitcoin and got third place! If you want to learn more about our experience read Tony's post here. Due to our efforts, we continued on to the conference and were graced to learn about blockchain use cases from many panelists across different tracks. I want to discuss three of the tracks I attended and I'm going to break this up into three parts. The first being Cross-Border Payments and Remittances, the second, Debt Markets and P2P Lending and the third Token Sales and ICO Funding models. If you need a primer in blockchains, see this article from Brian Forde.
Cross-Border Payments and Remittances
One of these tracks was cross-border payments and remittances. One of the first things we realize in this space and existing systems is that costs are high. See this guardian article that describes the huge profits extracted on oversea money transfers. At times that can rise into the double digits. When a worker in one country wants to send money to his family in the Bahamas, a double-digit fee can take a significant bite out his pay. The other issue is that the transfer can be inefficient. It can take days or weeks to settle and requires the use of many intermediaries to arrive at settlement.
This brings us to bitcoin and the blockchain and it can potentially offer nearly a trillion dollars in savings on these types of transactions. It allows, for a much smaller set of fees and near instant settlement. The issue arises really on the edges of this system where the end users have to convert and deal with their individual fiat currencies. In some realms, it is relatively easy to convert and transfer bitcoin to a fiat currency, in others it is prohibited by central banks. This is where one of the company and individuals directly focused, Gabriel Abed of bitt.com. They took the Barbados dollar and made it digital, the Barbados Digital Dollar. They are doing a lot of the hard legwork with central banks, foreign banks and trying to build true trust amongst the public. There are a lot of questions that remain, but many positives that can be achieved.
So, what are the barriers to adoption at present to moving cross-border and remittance transactions into this new digital blockchain realm? As mentioned building trust is probably the first component. There is a cultural stigma to the digitization of cash that is real and present and this must be addressed to gain end-user mass adoption. For now, depending on the friction involved in the transaction, many users will opt for the digitized version if it is easy to use.
This brings us to another high priority issue which is ease of use, dealing with private keys, PHPthe highest priority is ease of use. Crypto-Markets can be complex and understanding cryptographic keys, PGP and more, can all be a bit much for an end user to handle. This is something many gladly pay to have abstracted away in the existing system and don't even know it. This is where something like netki can aid with the abstraction, working to break down the ease of use case.
Another barrier is the lack of standards in the blockchain space. This is where enterprises like ul.com can play a role. Having been involved in payments for many years, recently doing functional testing of EMV cards, standards increase trust, especially amongst B2B intermediaries. UL actively sees a role for standards and will aid in pushing this forward.
Traditionally counterparty and systemic risk have been a large issue in this marketplace. When viewed from a crypto-market lens, the glasses can get quite rosy. That is not to say that counterparty and systemic risk do not exist, they do, perhaps, in this case, it could be the underlying trust in the network itself, as opposed to a counterparty risk.
In the future, remittance and global money transfer may become as cheap and fast as sending an SMS message to your friend in another part of the world. There may come a point where there is a proliferation of cross-border payments as they become near-free and the ease of use cases are adopted.