[Bakkot]

The answer to basically all of your questions is that to transfer money, you need to move money. This can be basically a promise of money, as with wire transfers, or physical, as you'd do by transporting bullion or cash.

The problem with using a promise to move money is that you have to trust whoever's promising. That works alright if there's a central authority, like a bank, but less well if you don't want to trust the authority, don't have access to the authority, or are unable to comply with the rules of the authority. Also it's kind of a shitty experience, as is. (You wouldn't pay for all of your Amazon purchases with wire transfers, I'd imagine.)

The problem with moving physical money is that it's difficult to do over long distances or en masse.

In order to solve the problems with existing money transfer, then, bitcoin needs to be able to do without a central authority and without using a physical representation of money. Which it accomplishes by allowing you to store money - not just a representation or promise thereof - digitally.

[rsp1984]

Thanks for your answer. However I still don't fully understand the problem I'm afraid. How is the trust required to move money cross borders different to the trust required to have an account with money at your bank? That acct is just a "promise" of money as well isn't it?

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).

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

[Bakkot]

> 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

[XorNot]

This is absurd. I spend money by wire transfer all the time. A good 80% or so of my ebay shopping would be wore transfers to merchants in Hong Kong via Paypal. This is a big enough issue in Australia that we've had retailer associations complain about it on occasion. Overseas money transfer is not at all difficult on a consumer level.

[elithrar]

> This is absurd. I spend money by wire transfer all the time. A good 80% or so of my ebay shopping would be wore transfers to merchants in Hong Kong via Paypal.

It's worth noting that EFTs (Electronic Funds Transfers) between domestic banks in Australia is nearly always free, and that in your case you're not transferring money overseas at all.

You are transferring money to PayPal Australia, who is then communicating to PayPal Hong Kong that all is well - so that PayPal Hong Kong can pay the merchant. Both entities can transfer to/from local bank accounts because they have explicitly set up B2B interfaces (and met regulations) that allow them to do so.

In this case, PayPal is the bank, and they are a bank seeking to specifically facilitate money transfers between countries. You could not, for example, transfer money to a merchant in (e.g.) Siberia - they wouldn't be able to get that money out of PayPal into their regular bank account, because PayPal has no local presence/connection to the banks there.

[XorNot]

This is the exact same thing involved in Bitcoin funds transfer.

[ncallaway]

The article explicitly notes that PayPal is offering a very similar service. They argue that the open nature of Bitcoin is a competitive advantage to the network in the long run.

From the article: "This would not, of course, be the first global payments network. One obvious comparison is with PayPal. The fundamental advantage a Bitcoin gateway ecosystem has over PayPal is that it’s open".

[brownbat]

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.

[rors]

There is a primer on money transfers and crypto currencies: http://gendal.wordpress.com/2013/11/24/a-simple-explanation-...

tldr: Even transfers within a single country are very complicated. Your bank just hides the complexity from you.

[dublinben]

You might be interested in the Hawala system[0] of money transfer. It has existed for hundreds of years, and allows efficient international money transfers with no central authority.

[0] https://en.wikipedia.org/wiki/Hawala

[nathan7]

Hawala has fascinated me to no end, as essentially an anarchistic peer-to-peer web-of-trust banking system. It has existed for a long time, and keeps functioning even where traditional banking systems have broken down. As cool as Bitcoin is, I have more hope for a system akin to Hawala than some proof-of-work based system. Guerilla banking that depends on having more (computational) power than your enemies isn't too realistic. PGP'd remittances are much more cryptographically robust, and depend just on the one factor that any real monetary system relies on anyway: human trust.

[battani]

If your money transfer model includes gateways, then trust is involved. You have to trust the gateways (local banks or exchanges) to make the conversion.

The gateways on each end would also want to take a fee.

Add to that the (MASSIVE) cost of compliance globally, and the costs of the model described by Stripe may not be much better than that of existing services (TransferWise, Western Union, etc.).

It's just an absolutely mind-bogglingly large, long, and costly endeavor, and the end results may not be worth it.

[megablast]

> The answer to basically all of your questions is that to transfer money, you need to move money.

Is that true? I everyone around the world is moving money around, then most trades can be covered by not moving any money around, just between people in the same country.

If I want to move $1000 to France, and someone else wants $1000 from France, we just swap money, and two people in France do the same.

What is left is keeping track what everyone has put in, and what they have taken out.

[lambda]

> What is left is keeping track what everyone has put in, and what they have taken out.

And that's exactly what Bitcoin is; a secure digital ledger. It's a way to securely and globally record "person A has 10 BTC, gave person B 5BTC, then person B gave persone C 3 BTC" in a way that doesn't allow person A to simultanously have given those same 5 BTC to person D (who, given the anonymity of the internet, may also be person A).

That's all Bitcoin does; it provides a secure way to record such transactions without having a trusted third party who must trust to increment and decrement the right accounts in the right way.

[lifeisstillgood]

So is that not an impressive solution - if Alice wants to move 100 USD to France and Bob wants to move 100 USD out of France (let's say both want to buy a new textbook) then one could envisage a peer to peer money transfer system.

A site allows bob and Alice to find each other, agree a shared amount to transfer, agree to which end point they will onwards transfers (hmmm this might be the breakdown point) and then record that in the block chain

I think oddly there is still an enormous amount of trust involved - trust that Alice will complete the final important step of giving the money to Bobs silver haired grandmother or whatever

[Natanael_L]

You can actually achieve the same thing with Coinjoin if all involved parties agree. Instead of a bunch of individual transactions, they collectively generate and sign one.