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Comment by zinekeller | Hacker News Reader

Eh, probably, but so can mobile banking solutions[1] that are popular in Africa. Unlike in, for example, Europe where mobile payments requires a (relatively fancy) phone, M-Pesa works even on basic phones, which you can't say about cryptocurrencies in general. This is not to dismiss them, of course, but "conventional" currency already has a solution for this, so unless you're advocating for decentralisation (which is a different issue altogether), I don't think that cryptocurrency can serve the unbanked without radical changes that will also benefit conventional banking.

P.S. If you instead measure unbanked/underbanked by percentages (and exclude mobile banks like M-Pesa), you can see Japan and Korea on top 25[2], which isn't to say that they're poor (which also includes China which was mentioned in the article), but because of cultural differences. If you include the likes of M-Pesa, the graph slides slightly so that it shows that Asians (in general) tend to be the underbanked, which is technically true but doesn't automatically mean that they're poor.

[1] For example, M-Pesa (https://en.wikipedia.org/wiki/M-Pesa)

[2] Last data I read about this is on 2017, so this might have changed? But my point still stands out.

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(I don't feel I'm expressing myself well here, but bear with me:)

Something that tends to be underappreciated is the risk associated with contemporary mobile payments solutions. Both the individual and the local economy become incredibly reliant on a small number of private companies.

For more well-off individuals who can spread their risk ad easily switch providers, this is much less of a practical risk and therefore are likely to shrug off. They also tend to have access to providers with human support and better platforms.

Consider also that for multi-national providers, they become affected in new ways to foreign domestic and international policies and politics.

These are just some ways in which people become serfs, at real mercy of the whims and fate of politics and businesses.

Last week, thousands of people who had Coinbase accounts in Japan are now forced to close them due to them now only being available for Japanese citizens (as opposed to residents).

This is probably not more than an annoyance for most of those affected, but transfer that to migrant populations and mobile banking in Africa and things get dark pretty quickly.

Cryptocurrencies (when done in a way that liberates the user as opposed to being wrapped in centralized fintech) break this dynamic completely.

> Cryptocurrencies (when done in a way that liberates the user as opposed to being wrapped in centralized fintech) break this dynamic completely.

Now, tell me how to do this exactly? (At least a general sketch?) Because I really think that this is really not a problem that can be seen with cryptocurrency, but rather with how societies work, which is hard to solve.

I don't want to favour one or the other, but societal problems are something that require all of the cogs are working. Even if I assume that people are willing to use cryptocurrencies, oppressive governments can seize digital gadgets out of their hands, much as they can block transactions. I also don't have a solution to this unfortunately, and I feel that this is unsolvable.

Maybe not “exactly” but for key management roughly something like the Ledger Nano X (has to come down 10x in price obv): Small separate device that can be used to sign transactions with. Can be used with smartphone wirelessly. This device should also work seamlessly for general 2FA and auth/identification, preferably usable with government services.

Apart from being sold directly to consumers, it could be issued by providers of banking services (lending or payments for example) to clients.

You would also have service providers offering key recovery services (could be shamired)

Okay, I will assume that the government is either caring, doesn't care or incompetent (meaning not actively suppressing this). You forgot the mining side, so how do you solve that? Because, for example, the 50%+1 problem is still there, right, so if you really want a decentralised system, you also need to solve this.

Also, your solution doesn't work against oppressive governments. (Again, I don't have a solution to that, just pointing out that they do exist.)

See my point above. If you can memorize 12 words crypto makes this possible. No other store of value can make the same claim. No hardware wallet is required.

See Bitcoin’s BIP-39.

With crypto, if I can remember 12 words I can freely transport my life savings anywhere in the world and no government can seize my wealth without torturing me into giving up my passphrase. Can you share a similar strategy for refugees using fiat, gold, real estate, stocks or bonds?

This is feasible if you have something for long-term savings. At the same time though, this doesn't solve the day-to-day problems though (like transactions), especially in context of Africa.

I feel like your response embodies crypto critics quite well. Someone asks a question, someone answers how crypto helps and then someone else moves the goalposts.

I am focusing on the article itself, which is if cryptocurrency is feasible to the unbanked, usually in Africa, and if cryptocurrency can solve it. I have explained in another comment why Africans usually can't use banks in genral, and why in my opinion cryptocurrency can't fully solve the problem (https://news.ycombinator.com/item?id=28736411).

I personally want to understand from people who understands how they do function if they do have ideas to actually do it in a practical way. While the idea presented by the GP is indeed good in the long run, it still doesn't solve the problem that most unbanked people in those areas have only either a basic phone (i.e. purely calls and text) or even none, which precludes the habitual use of cryptocurrencies. I also acknowledged that for long-term storage away from often-opressive regimes, there are solutions available.

However, unless you can give everyone in Africa a smartphone and build the infrastructure necessary to have a reliable internet connection, I cannot say that, as of what I've read, have a realistic solution to everyday use of cryptocurrencies hold well.

Unfortunately, you've just stated something that is frankly unhelpful. I've read the article, I've read the comments and be very careful since that these types of discussions tends to catch fire quickly. I've just pointed out that for realistic use in this case, it is currently simply impossible in inner reaches of Africa. Even 3np acknowedges that costs on dedicated wallets should decrease (https://news.ycombinator.com/item?id=28736599) if Africans will use it. As of now, it's not simply feasible.

If you wanted to understand how crypto can help, you should've asked a question - not declared something about crypto that was both incorrect and tangential to the point being made.

close to 50% of sub-sharan africa owns a cell-phone and internet quality is of little consequence to crypto as any short frame of connection can facilitate much of what was being described in your parents context (which is infrequent "savings account" type transactions)

crypto doesn't have to be the only system of currency and probably shouldn't be until things like cell phones are ubiquitous - this isn't a criticism against crypto it's simply a lack of infrastructure needed to aid crypto in solving every currency need.

Paper money suits people without internet much better than crypto for daily trading - that doesn't mean there is no place for crypto in securing peoples savings. If you want to start saving wealth, you'll probably not want to do that in a society where everyone has cash on hand (which promotes theft) but instead you'll want to make infrequent visits to someone with internet and purchase a cheap device to facilitate savings account types of transactions that you know you can secure easily even in the event your cheap device fails. This property is one of many properties that is extremely valuable for money. Something fiat achieves with large expensive bank infrastructure that even though the concept has existed for at least thousands of years, yet is too expensive to serve people in many many places as this article outlines.

The problem is that mobile banks have existed in Africa long before mobile cryptocurrency transactions have been possible. Is the problem is indeed with the banks specifically and not because they literally don't have anything to save? Because I don't think it's solvable with cryptocurrencies in this situation, mainly beacuse banks there have lowered the deposit requirements to the point that you can open an account easily. Surely if they can't do it despite these efforts, is there even a chance that cryptocurrency, specifically in those conditions, can survive?

if you want to save and don't have a bank within a reasonable traveling distance - what are your alternatives? Almost everywhere in africa will have at least spotty internet within walking distance - the same can't be said of access to a bank. Now if you have identification maybe you can open an internet bank account (although I suspect that's very difficult for countries/areas that are under-served) or you could buy crypto from any vendor and know that it's secure the second you send it to your wallet.

It's also likely to be expensive to send paper money to your internet bank account as you'll be purchasing wire services or similar, whereas crypto vendors could be nothing more than a contact you have buys crypto and sells in exchange for paper currency.

I don't know enough about these peoples situations to know what will end up serving them best, but I do know having options will always be to their benefit and at the very least crypto will be competition on competing forms of currency.

This is only true to the extent that you can exchange those tokens for the things you need. Just as with all other asset classes, once a government makes an effort those options dry up — and the public nature makes it worse because the system is designed to help the government auditors trace your transactions and punish everyone who’s helped you launder funds, which will be priced into the costs which are already higher than the unbanked can afford.

Think of Bitcoin as your personal reserve currency rather than a directly transactional currency at least today. You use Bitcoin as your store of wealth to transfer your life savings safely across borders. Then once safely in a refugee camp or other safer place you could use the local black market to exchange some Bitcoin for the local currency so you can spend it.

Yes, I’m familiar with the pivot after failing at its stated goals. That has the same problem: you need to conduct illegal transactions on both ends which will be expensive even if it doesn’t lead to getting caught, and the volatility is potentially ruinous if you can’t wait for favorable exchange rates with a stable currency.

I thought the same thing when reading the article. Crypto for this particular problem seems like the proverbial sledgehammer to crack open the walnut.

More like using a flotilla of Kuka industrial robotic arms to open a walnut. If financial literacy is hard, what's crypto-financial literacy?

Cryptocurrency really feels like a solution desperately in need of a problem.

> a solution desperately in need of a problem.

Or a pyramid scheme in need of an excuse / justification.

Or a massively multiplayer online game of hot potato.

Please do define how Bitcoin or Ethereum (among others) are "pyramid schemes". Cryptocurrencies have indeed been used for pyramid schemes by specific actors, but then again so has normal money, and many other things. Numerous people on this site who presumably have the intellectual faculties to know better toss that little qualification out from their mouths almost reflexively out of emotional crypto-hate, but have apparently never even read a basic encyclopedia definition of pyramid scheme structure.

It doesn't matter if it is a crypto scheme or pyramid scheme. The token itself is not a product, the central distributor sells you tokens in a presale and then you have to recruit new members through marketing the token and sell them your tokens. The point is that there is no end goal. The last person to buy the token didn't get chocolate coins that he can eat.

The current crypto bubbles seem to be working on the "greater fool" theory, same principle can be argued to underpin MLMs - your downline are your "greater fools", and you only make money so long as you (or your existing fools can) can recruit more fools.

Crypto is a solution to the "problem" of centrally controlled money.

I'm just not 100% sure that it is a real problem, but those who buy it either believe it to be, or at least, want to hedge for it.

It (centrally controlled money) is a problem if you want to fleece people for their retirement money in tech support scams or ransomware and avoid having your bank account being seized when the authorities catch up with you.

Except there are tons of crypto scams and governments have used the blockchain to find criminals by tracking payment flow.

That's true for Bitcoin, which its blockchain by design is open to everyone. Unfortunately, Monero seems to be the preferred cryptocurrency in this space, and tracking Monero is purposely hard.

Isn't bitcoin centrally controlled though? Bitcoin's monetary policy is programmed into the bitcoin software. This means whoever writes (or wrote) the software controls the policy.

Bitcoin mining has also been centralised since about 2014 - three entities are known to control >50% of all mining, and there's no way of knowing how many of the other mining entities they have effective control over.

"Decentralised" is a phantasm.

Yes, similar to how the US presidential election is centrally controlled because only 51 entities are voting.

>This means whoever writes (or wrote) the software controls the policy.

1. there are multiple competing implementations

2. it's ultimately up to the users/merchants/miners what software they run. A commit making into the bitcoin core repo doesn't mean it's going to be adopted by the network.

“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” - Satoshi Nakamoto, The Bitcoin Whitepaper.

What if I told you that the root cause of inflation is not the price increases, those are a side-effect. The real cause is that the value (aka purchasing power) of your money is being diluted by means of central banks printing money and stealing value from the populace over time.

70% of the US dollars that were ever created were created since the invention of Bitcoin. It is only natural that the real value of those dollars has fallen.

Inflation is theft by central bankers to pay for politician’s desires without openly increasing taxes on the people.

Bitcoin fixes this because no politician, central bank or corporation can ever inflate the supply over 21 million, nomatter what they do.

The article says "cryptocurrency", not bitcoin. There are 10,000+ cryptocurrencies - and both the trading markets and the payment markets are agnostic as to which token they use, as long as traders can make money and payments go through.

Anyone can make their own crypto, and they do - so cryptocurrency as a whole is hyperinflationary.

Bitcoin maximalists say, but bitcoin is first and unique in many ways. Certainly - but not in ways that the trading or payment markets appear to care about. The "banking the unbanked" proposal is much closer to the payments market - nothing about it seems to depend on bitcoin's special characteristics.

I note that you're proposing a bitcoin version of Austrian economics there, with the word "bitcoin" substituted for "gold" - but Austrian economics proponents have long noted this cut'n'paste cryptocurrency problem with the bitcoin proposition.

Then you would expect the value of cryptocurrencies to drop like a stone and never recover, but it hasn't worked out that way. Maybe markets aren't quite as agnostic as you think.

Seems to me we're actually heading for the competing private currencies advocated by Hayek, who thought the result would be long-term price stability without the need for top-down control.

Crypto prices aren't showing anything like stability - I don't see at all how you could claim that.

Denationalisation of Money was arguably disproven by the ICO boom - it turned out that actual users just treated the shitcoins as proxies for BTC and ETH, and BTC and ETH as proxies for dollars.

I said we're heading for that, not that we're there now. The demand for transactions is increasing at a rapid pace. I don't think it's reasonable to expect price stability with so much change in demand.

It's as, or more, volatile now than it's ever been. You're basing this prediction on no evidence and a theory you don't outline. How will more demand for transactions stabilise the trading price?

Not more demand but stable demand. Transaction demand growth is still vigorous, as any look at gas prices can verify. I'm just saying Hayek might be right, if the underlying GDP is reasonably stable as he assumed.

But fine, I'll admit I have little to go on. Are you willing to admit the same? Because you're even further from the actual data so far.

> Not more demand but stable demand.

as in, demand for using crypto as a transactional currency, rather than as a speculative asset right?

The demand that is unstable is because it is driven primarily by speculation. There's very few commodities being exchanged via crypto.

So to reach stable demand, crypto must be a currency that is used for non-speculative transactions (such as buying groceries, or buying oil from countries). I don't see that happening any time soon tbh, except for may be countries that are trying to escape USA sanctions.

Correct. It certainly won't happen before the next step in scaling. I will mention that transactions on Ethereum are not primarily speculations on the currency itself.

...So apparently you will not admit that there's little evidence to support your hyperinflation theory.

“Central banks debase currencies to discourage people from hoarding cash and using it as a store of value instead of investing it into productive assets.

So they claim. Could it also be that debasing the currency is far easier than taxation as a form of wealth appropriation since the effect is subtle and indirect?

Central banks debase currencies to discourage people from hoarding cash and using it as a store of value instead of investing it into productive assets. They are not perfect but they don't pretend to be something they are not.

Bitcoin claims it's a "currency" but almost everyone uses it like a store of value (HODL) because its value keeps increasing.

>Inflation is theft by central bankers to pay for politician’s desires without openly increasing taxes on the people.

This is weird. Inflation can happen without any central bank activity. Regular banks can lend out money. People can spend their money faster. All of that creates inflation without benefiting the government at all.

Central banks set the interest rates that regular banks base their rates at. I don't know how you would de-couple those relationships.

Inflation like what we had under the gold standard is bad, it leads to currency hoarding. Deflation is bad, as it leads to all sorts of bad effects. And minimal inflation can also be bad, as it leads to higher asset prices if the velocity is dropping.

I've been working through a thought experiment where we have a cryptocurrency that ensures that velocity stays constant. It does so by enforcing a tax on transactions, where you lock in a transaction to occur at a certain time in the future, but you can pay for it to occur sooner. The more we are taxing, the more we can ensure that the economy is doing well, the more the money supply is allowed to expand.

I'm also thinking that PoW is an extremely bad model, and I would prefer to work with their proof-of-weather, where weather is determined by a combination of many different weather trackers that we can prove occurred but are unable to predict much ahead of time.

It seems to be a good model, but there's still a lot to think about.

The problem to be solved was found some time ago: shifting money from the poor to the rich.

Bitcoin certainly isn’t a solution to this. Any inflationary currency like Bitcoin favors the wealthy, as existing wealth becomes more valuable.

That's the same as what they said, isn't it?

There's other groups of people who have access to money and tech but lack access to banking: persecuted people, financially ruined people or people with irregular documents.

1) persecuted: For example, a religious cult grew to require power in the government in Turkey, clashed with the official government and even tried a military coup and failed. Following the coup, those with direct involvement to the coup went to jail and anyone known to be associated with the cult lost access everything and even their bank accounts were closed(they had a regular Banking institution that was seized) and other banks often refused to open an account for those who were associated with the cult. As a result, they started using money transfer services that are not banks and keep to money in cash.

2) financially ruined: People who screwed up or got unlucky in something and lost everything. Many would work and do business outside of the official channels and as a result they don't want to keep the money in traditional institutions because the money can be blocked or seized due to their financial situation. Also, they won't be able to get any benefit of a bank, so all they need is a way to keep and transfer money.

3) irregulars: Those are usually immigrants who entered a country trough illegal ways or overstayed their visas. In most places, they wont be able to provide the documents to open a bank account or even get a TV subscription but they will be working and making money for many years until they sort out their situation. They will need ways to get payed and pay bills, rent etc.

Therefore, "unbanked" doesn't really mean too poor, many times it means "unserviceable clients". The "decentralised" aspect can actually mean no one is left out since the usreviceability of those people come from the central government in the region.

You have good points here, and this reminds me of MasterCard getting giddy with pornographic transactions, even in areas where it is fully legal. However, I think that cryptocurrency will only solve 3) in your list.

For 1), they often seize everything, to the point that they seize computers and phones. Even if they are smart to have a backup, I'm pretty sure that they will try to hoover up anything and everything, even regular currency.

For 2), I think that this is a societal problem, really. In France (as an example), you are entitled to a bank account regardless of your status, that even means if you have been convicted of money laundering. On the flipside, and I am assuming to use cryptocurrencies like Monero which makes transaction tracking harder, if you are really wanted you could end up in situation that I described on 1).

The story is bigger than just in-person payments, it's also about remote payments, cross-border transfers, and savings.

Sure "conventional" paper currency is already a good solution for in-person payments, but it doesn't work for remote payments, international transfers or savings.

Cashapp has compelling answers for remote domestic payments and savings in the US, and TransferWise is great for international transfers among wealthy nations.

These three are the use cases we're seeing blossom in El Salvador where Cashapp and TransferWise aren't available.

I suspect this is an Innovator's Dilemma situation, where crytpocurrency solutions are honed and adapted in emerging markets, then eventually compete with established players in rich nations.

Conventional currency can do anything cryptocurrency can do with far less overhead and usually less complexity… if you can trust someone.

The problem is that centralized trust creates moral hazard and over time tends to be abused. Abuse of centralized trust can be incredibly destructive both financially and in humanitarian terms.

To me the key question is which is cheaper?

Is it cheaper to run cryptocurrency with all its overhead or is it cheaper to use faster cheaper simpler centralized systems and “eat” corruption and abuse since those represent the hidden costs of those systems.

The answer differs depending on which society you are evaluating and it’s corruption index. It’s not the unbanked that represent a hidden base of cryptocurrency users. It’s those that reside in kleptocracies and failed states.

Then how come that 57% of Africa's population lacking any form of bank account.

Because of non-technical reasons: like economical and political reasons.

Cryptocoins won't solve those issues, nor can they bypass them.

... mainly things that aren't even fixable by cryptocurrency?

- Wars. Most people in warzones don't want to hold a bank account because it is very unreliable. Cryptocurrency won't solve that problem, in fact it will exacerbate the problem because of your phone or computer is damaged it's game over[1]. Also, how do you even transact when you don't have any form of communication?

- Actually don't have anything to bank on. Their money is just enough to survive, so they can't even bank, regardless of its form. Giving cryptocurrency is often a proposed solution, while forgetting that regular currency works fine too in these situations.

- Cultural differences. Most, to be honest, don't want to depart their money to someone they don't know. They were introduced to money just a generation or two ago, so they are relatively new here. Good luck convincing that cryptocurrency is trustworthy in a way that can be easily understand.

[1] I mean you could write them on paper, but that's really stretching it, mainly because you need a computer to execute transactions.

The Critisism section of that Wikipedia article paints a rather grim picture of M-Pesa in Kenya. To me it looks like the people could benefit from a decentralized finance system that is run by enthusiasts rather than by turbo capitalists.

I'm not saying that M-Pesa is perfect but

1) I mentioned M-Pesa because it is the largest one in Africa. There are also smaller players there.

2) While there are problems that is specific to M-Pesa or even conventional currency, looking at the landscape of cryptocurrencies some problems, which in my opinion is inherent in how do you define value, are problems that even cryptocurrency has fallen trap into.

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