I recently transferred money to someone in exchange for Bitcoin and had that a-ha moment. Anytime you need to transfer a large sum, or wire money internationally, your money gets stuck in the hands of middlemen for what can seem to be a huge amount of time.
Why are domestic wire transfer not instantaneous? Why do international wire transfers take 2-5 days? When I went to make a withdrawal from Wealthfront why does that take 2-3 days?
Most of these questions have simple answers:
- The bank is confirming identities and ensuring against fraud. This is a good thing.
- Sometimes banks keep your money those extra days just to collect a little bit of interest. Not a lot on your money but multiply it by all the money they have and the pennies add up. The Office Space scheme.
- Companies like Wealthfront are trading to liquidate cash to you which I guess takes time (how can I confirm really?)
- Ultimately banks often delay payments because they send them in chunks and this lowers risk for them. But it doesn’t get you your money any faster.
So, this is where blockchain comes in. It cuts out the middle man, and it also cuts down on fraud in the transfer process because transactions are confirmed as the blockchain grows. Because the ledger is distributed and permanent it is also transparent and not as unable to be changed or defrauded.
Here is a link to a blog post about how Blockchain technology could revolutionize supply chain for one of the most highly fraudulent industries – diamond mining and sales. Food for thought.
So blockchain technology and Bitcoin sound like a cure-all, right? Well, read this article about how Shark Tank’s Kevin O’Leary explains how when he went to buy something with a large $$ amount of bitcoin, he immediately ran into trouble.
Simple explanation: I am buying a car from you that is worth $16,000 ($1 Bitcoin). I transfer the $1 Bitcoin to you, and tomorrow Bitcoin is trading at $12,000. Someones bound to get the raw end of the deal until the price stabilizes.