By Maxine Ryan | Even with bitcoin’s popularity, the cryptocurrency is being replaced or not considered at all by payment businesses seeking to use blockchain technology. My company Bitspark – a cash-in, cash-out blockchain remittance platform – announced its surprising switch to next-generation blockchain Bitshares late last year after experiencing high fees and transaction congestion on the Bitcoin blockchain.
The switch came after Bitcoin no longer gave the company its competitive edge as a cheaper and faster way to send money internationally. Bitspark looked to Bitshares as a replacement for several reasons – including access to decentralized smart asset creation, giving the company the ability to create 180+ fiat-pegged cryptocurrencies, as well as faster transactions at the fraction of the cost of Bitcoin transactions.
Why Bitcoin Is Being Rejected
The focus on Bitcoin’s price, which hit an all-time high last year, shadowed its original intention as a financial equalizer that promised quick and cheap peer-to-peer (P2P) transfers, and perhaps for good reason.
Questions about Bitcoin’s scalability soon cropped up as an uptick of Bitcoin transactions from recent market adoption formed a bottleneck, and transaction execution began to slow down or be rejected completely due to the size limit of the blocks – the component that cryptographically conceals transactions in ‘blocks’ every 10 minutes forming the Bitcoin blockchain.
The effects of transaction congestion inevitably were higher fees as transactors had to bid for their place in line, raising the network fee to unprecedented heights. While the intention of the 1Mb block size limit was to prevent system attacks, the system’s reaction highlighted Bitcoin’s weaknesses as an alternative payment system for large volume use – especially when considering it for a US$600 billion remittance market as Bitspark did.
The Bitshare Alternative
So what’s the alternative to Bitcoin for businesses? Well, the answer lies in the reason a business needs a blockchain. Since Bitcoin’s inception, it has paved the way for a new industry of blockchains with 1,000+ cryptocurrencies built on top of them all with unique use cases ranging from privacy, governance, finance and data transaction.
With this, startups and organizations began researching, developing and implementing its use case (some in practice and others in testing) with particular focus on cryptocurrencies as a means to transfer transactions internationally for a fraction of existing prices.
Put simply, as cryptocurrencies possess the qualities of money with better specifications such as fungibility (interchangeable units), divisibility and transactability on a quick and secure data infrastructure as the blockchain, it changes how value is transacted between parties. If a blockchain is built to support heavy transaction load for low cost, opportunities open wide for the future of payment technology and better services.
Bitshares is superior to Bitcoin for payments due to what is needed in cracking the remittance industry with blockchain. Besides having an expansive cash-in, cash-out network, predictability of fees, fast transfer speeds and access to liquid exotic currencies outside of major FX pairs is not something that Bitcoin can provide.
The landscape for exotic currency remittances are expensive and the reason is due to the architecture needed past the main 30 currency pairs. First, difficulty resides in the need for bank accounts to be opened in each country – however, the connectivity between them is incompatible and unreliable.
Additionally for exotic currencies, buy demand is often imbalanced – making liquidity hard to generate for less-popular currencies, all in all making cashing out cheaply near impossible. The common solution for this is remittance companies to connect to gateways that hold monopoly over regions, however as usual with monopolies, high costs apply.
Lowering Remittance Costs
Take for instance remittances from Australia (AUD) to Papua New Guinea (PGK), one of the most expensive remittance corridors in the world where according to the World Bank the cost of sending A$200 is A$40, a large sum for migrants seeking to send money home. This is because remittance companies either have several layers of banking to transfer the funds, or have opted to connect to a gateway. Both are cumbersome solutions that contribute to the high costs of remittance today.
This also proves true for inter-continent transfers. In Africa, which holds the record for the highest remittance fees in the world, sending $200 worth of CFA from Tanzania to Kenya the costs are in the $48-$50 range.
There are similarities with traditional remittances and Bitcoin, especially when speaking of accessing currencies outside of the top 30 and the expenses incurred. There is just not enough Bitcoin liquidity in exotic currencies that can support the remittance industry.
Besides Bitcoin’s scalability issues from block size limits and high network fees, Bitcoin remittance providers need to either settle in another currency or go through traditional channels – taking remittances to back to square one.
With Bitshares, a remittance company isn’t limited to major FX pairs such as the USD, EUR or top 30, but can create one-to-one pegged fiat currencies such as BitPGK or BitCFA. This means the ability to provide 180+ fiat pegged cryptocurrencies to customers with those currency transfer requirements.
Bitshares removes remittance providers’ reliance on banks or expensive liquidity providers such as OTC, brokers or exchanges for access to currencies with its smart asset creation functionality. Furthermore, with its built-in decentralized exchange, direct currency trading of exotic currencies is made possible without hedging USD making trades for exotic currencies cheaper with direct native currency trading.
Smart asset creation is not the only benefit. It’s the speed and cost of the Bitshares blockchain, too. Bitcoin is 9,090 times slower than Bitshares, which can process 100,000 transactions per second (tx/ps) making it capable of supporting large remittance volumes. Even Visa, which can process around 200 tx/ps, is no match for Bitshares.
The network fee is negligible, making it one of the cheapest blockchains out there with transactions costing under a cent. Imagine, sending A$200 to PGK for under a cent instead of $40. This is why Bitshares will be the killer blockchain for remittances.
About The Author
Maxine Ryan is the Co-founder and COO of Bitspark, the world’s first cash-in, cash-out blockchain remittance platform built in 2014. Recently named one of Forbes 30 Under 30 in Asia, Maxine is considered a cryptocurrency expert and is a frequent speaker on TV and at events concerning cryptocurrency and payments. Maxine is passionate about unbanking the banked with decentralised blockchains and has worked with several organisations such as the UNDP to mobilise bankless transfers. To date, Bitspark products and services reach eight markets predominantly in Asia and Africa.