“Banking the unbanked” is much discussed in international development circles. Around 2013, Bitcoin advocates started claiming that Bitcoin could help with this problem. Unfortunately:
* The actual problems that leave people unbanked are the bank being too far away, or bureaucratic barriers to setting up an account when you get there.
* Unless they use an exchange (which would functionally be a
bank), they’d need an expensive computer and a reliable
Internet connection to hold and update 120 gigabytes of
blockchain.
* Bitcoin is way too volatile to be a reliable store of value.
* How do they convert it into local money they can spend? Pretty much nobody accepts bitcoin.
* 7 transactions per second worldwide total means Bitcoin
couldn’t cope with just the banked, let alone the unbanked as well.
* A centralised service similar to M-Pesa (a very popular
Kenyan money transfer and finance service for mobile
phones) might work, but M-Pesa exists, works and is trusted
by its users – and goes a long way toward solving the
problems with access to banking that Bitcoin claims to.
Advocates will nevertheless say “but what about the unbanked?” as if Bitcoin is an obvious slam-dunk answer to the problem and nothing else needs to be said. But no viable mechanism to achieve this has ever been put forward.
"How do they convert it into local money they can spend? " As Bitcoin adoption increases, there is less and less need to convert it. Today 160k+ merchants accept it. 8 years ago it was 0.
"* 7 transactions per second worldwide total means Bitcoin couldn’t cope with...*" This limit is obviously not set in stone and will increase one way or another: segwit, block size increase, payment channels, etc.
> Unless they use an exchange (which would functionally be a bank), they’d need an expensive computer and a reliable Internet connection to hold and update 120 gigabytes of blockchain.
Some of your points are well thought out, but I couldn't leave this one alone.
The vast majority of bitcoin users don't use a bitcoin exchange to store their coins. They also don't download the entire blockchain.
SPV wallets exist (like electrum or the android bitcoin wallet) that give the user complete control over their private keys without needing a copy of the blockchain or using substantial bandwith.
Thanks for being curious. I scraped around to find some numbers to back up my wild claim--I think I did a fairly decent job of it. I do warn you--my numbers are pretty rough.
Blockchain.info claims to be the most popular web wallet with 10M users and users have control of their own keys without needing to run a node. Their android app has 1-5M downloads.
The Mycelium wallet for android has 100k-500k downloads.This is an SPV wallet like electrum, where users have control of their keys without needing to run a node.
Bitpay's wallet for android also has 100k-500k downloads, which is an SPV wallet.
The generic bitcoin wallet for android (also SPV) has 1-5M installs.
Multibit (also SPV) is the only desktop client that posts statistics but it claimed 1.5 million downloads in 2014. Now that multibit is discontinued (and bitcoin has gotten more popular since 2014) it's fairly safe to assume that electrum has numbers quite a bit higher than that. I suspect (although I can't prove) that electrum is more popular than all of the android wallets--It's even packaged in TAILS by default.
For comparison, the only popular wallet where users DON'T have control of their keys is the coinbase wallet with 9 million accounts. Other exchanges exist, and may have higher volume, but they don't market themselves as wallets to users.
There are less than 10,000 full nodes running at any given time--and a large amount of that is running 24/7. Its safe to say full-chainers are in the minority if you do some guesstimation.
I got most of these figures from the google play store.
“Banking the unbanked” is much discussed in international development circles. Around 2013, Bitcoin advocates started claiming that Bitcoin could help with this problem. Unfortunately:
* The actual problems that leave people unbanked are the bank being too far away, or bureaucratic barriers to setting up an account when you get there.
* Unless they use an exchange (which would functionally be a bank), they’d need an expensive computer and a reliable Internet connection to hold and update 120 gigabytes of blockchain.
* Bitcoin is way too volatile to be a reliable store of value.
* How do they convert it into local money they can spend? Pretty much nobody accepts bitcoin.
* 7 transactions per second worldwide total means Bitcoin couldn’t cope with just the banked, let alone the unbanked as well.
* A centralised service similar to M-Pesa (a very popular Kenyan money transfer and finance service for mobile phones) might work, but M-Pesa exists, works and is trusted by its users – and goes a long way toward solving the problems with access to banking that Bitcoin claims to.
Advocates will nevertheless say “but what about the unbanked?” as if Bitcoin is an obvious slam-dunk answer to the problem and nothing else needs to be said. But no viable mechanism to achieve this has ever been put forward.