TransferWise on Bitcoin and the Battle for International Money Transfers
Everyone from Nick Szabo, who developed the concept of smart contracts, to Blockchain Capital Managing Partner Brock Pierce has been touting Bitcoin’s value as a vehicle for international money transfers lately, but it appears that TransferWise CEO Taavet Hinrikus has not received the memo. Hinrikus was recently on a panel with MasterCard President of International Markets Ann Cairns at the World Economic Forum in Davos, and he did not seem threatened when asked about the new Bitcoin-based alternatives to his service, such as Align Commerce, that have popped up over the past year.
Although Hinrikus appeared to be bullish on blockchain technology, he said the Bitcoin experiment is nearly over.
Bitcoin Is “Becoming Dead”
When asked directly for his thoughts on using Bitcoin for international money transfers, Hinrikus conceded that the idea sounds exciting in theory; however, the TransferWise CEO believes this digital peer-to-peer cash system will work only if more people have bitcoin wallets. He explained:
“I think [Bitcoin-powered money transfers] are super exciting, and in a world where we all have a bitcoin wallet in our phones, that actually might work. But how do we go from a world where nobody has a bitcoin wallet to a world where everyone has a bitcoin wallet? That’s the question that I haven’t been able to figure out.”
When viewing Bitcoin as a system for money transfers, Hinrikus noted the costs associated with each end of the process. In his view, these added costs make the idea more expensive than originally thought. He stated:
“If you think about it today, getting money into Bitcoin is a pain in the ass. Getting money out of Bitcoin is similarly a huge pain. You end up paying typically half a percent or one percent on both ends. It’s a process which takes multiple days, so I think Bitcoin – I’m kind of sorry to say it but – it seems that experiment is becoming dead pretty quickly.”
This response from the TransferWise CEO does not sound dissimilar from a Medium post made by former Rebit.ph Head of Product Luis Buenaventura. After co-founding and working at Rebit.ph for over a year, Buenaventura came to the conclusion that Bitcoin does not make international remittances cheaper due to the costs associated with the “last mile” on the recipient’s end.
Blockchain Is More Exciting
Hinrikus also echoed some of the same points he made when asked about Bitcoin at last year’s TechCrunch Disrupt. Specifically, he feels the growth of Bitcoin has been mostly driven by greed. He stated:
“It seems to me that what has been driving Bitcoin has been greed – similar to a lot of stuff that has been driving the banking system. People bought bitcoin because they thought it was going to be worth more tomorrow … I kind of don’t have much hope for bitcoin anymore. With blockchain, I think that’s much more exciting. I think about – could we see a world where blockchain disrupts MasterCard?”
Although Hinrikus noted his appreciation for blockchain technology, he made no indication that his company is currently looking at implementing (or even testing) any sort of distributed ledger technology. On the other hand, MasterCard’s Cairns said that the credit card processing giant is currently testing out blockchains for a variety of possible use cases.
BitFury CEO Defends Bitcoin
The day after the panel discussion featuring Hinrikus and Cairns took place, BitFury CEO Valery Vavilov was interviewed in the same exact spot. He took on the role of defending Bitcoin against the pessimism from the TransferWise and MasterCard representatives.
During his interview with TechCrunch’s Matt Burns, Vavilov explained why the public Bitcoin blockchain still has a key role to play in this new world of permissioned, distributed ledgers:
“Bitcoin is the most secure blockchain. The Bitcoin blockchain is the public blockchain. If we split Bitcoin and blockchain – blockchain is the ledger. Blockchain is the database. Bitcoin is the vehicle and the security. Bitcoin is today secured by 750 petahashes of computational power. Let’s look at an analogy. Imagine the top 500 supercomputers in the world. The Bitcoin blockchain security is more than 3,000 times bigger.”
In other words, Bitcoin’s open, permissionless features are not found on any of the private blockchains currently in development by R3, Digital Asset Holdings, or any other startup. Bitcoin is also backed by an exponentially larger amount of hashing power than any other public blockchain.
The only requirement for someone to receive bitcoin is for them to have a bitcoin wallet and access to the Internet. This is a much lower barrier to entry than anything attached to the legacy banking system – at least when it comes to digital payments. Bitcoin’s censorship resistance also makes it useful for getting around capital controls in more economically-restrictive countries.
TransferWise may not see the value of Bitcoin now, but at least three Bitcoin startups (Align Commerce, Abra, and Freemit) believe they’re missing out on a huge opportunity. Only time will tell who has it right.
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report and many other media outlets. You can follow @kyletorpey on Twitter.