What do bitcoin and remittances have in common?
Many herald the digital currency Bitcoin as the most important invention since the Internet. Lasse Birk Olesen is one of them. At a recent event at Kuppa Roastery & Café in Fort Bonifacio, the Danish entrepreneur addressed a small group of interested Bitcoiners.
The August 24 audience which was mostly composed of speculators (buy low, sell high types), miners (people who help create new Bitcoins through a complex cryptographical process that comes down to leaving a computer, or supercomputer, on, in a region where electricity is cheap), and enthusiasts (one guy had a shirt with a Bitcoin logo that he had custom made).
In a state of the union-like speech, Olesen recounted how far Bitcoin has come from its origins in a 2008 theoretical paper by a mysterious figure known only as “Satoshi Nakamoto” to the small but growing adoption it’s achieved as of 2013. More investors are buying Bitcoin, more consumers are using Bitcoin, and more vendors are accepting Bitcoin. He even has a friend who sells dresses for Bitcoin—in my mind, this person just has to be a Filipino.
But Olesen has a greater vision for the cryptocurrency. Harnessing his experience as founder of Bitcoin Nordic, the exchange for Bitcoin in his country, Olesen wants to create a similar online marketplace for the Philippines. Among other things, this could disrupt the way that overseas foreign workers send remittances.
In its very DNA, Bitcoin seems built to excel at just this. For one, it’s open-source, stewarded only by the Bitcoin Foundation. Peer-to-peer transactions, as in the case of sending a remittance, are generally free. This sets Bitcoin in sharp contrast to the banks and financial institutions like Western Union that charge a small but noticeable fee for every exchange of money.
Bitcoin helps save time. Rather than having to brave metropolitan traffic to get to a bank or an exchange, an overseas Filipino worker (OFW) can send the remittance from the comfort of his own home—he need not even get out of bed.
Bitcoins can be sent from most any device, including computers, tablets, and smartphones. The transaction takes only a few seconds to complete and a few minutes to verify. On the recipient’s end, there will be no days-long waiting for the money to clear, or standing in soul-sucking lines at the bank. The Bitcoins are just there, secure in your wallet, ready for you to spend them. And therein lies the challenge, at least when it comes to Bitcoin in the Philippines.
When we say that there are more vendors accepting Bitcoin in the Philippines, we mean this relatively speaking. A few years ago, there might have been none. Now, there are some. A handful really, in the context of a national economy.
In fact, when Bitcoiners speak of such establishments, it can sound more like gossip ("I know a guy that does web design for Bitcoin...") — rather than the beginnings of an economic revolution. There’s that problem: OFWs can send all the Bitcoins they want to their loved ones who will have nowhere to really spend them (unless, that is, you need a surplus of dresses and websites).
This creates a classic case of a network effect. Stores have no incentive to accept Bitcoin because there are not enough consumers using it. Consumers have no incentive to use Bitcoin because there are not enough stores accepting it.
What will break this deadlock? A pivotal first step might be the Bitcoin marketplace that Olesen is planning to establish. This would allow Filipinos to make use of the Bitcoins sent to them. They could quickly turn the Bitcoins into cold, hard cash that they can spend anywhere.
On a deeper level, the experience of cashing in Bitcoins may help Filipinos overcome the psychological hurdle that comes with using a currency that cannot be held in hand. With enough traction, we might gain the critical mass, or in the case of the Philippines, the critical masa—necessary to sustaining a healthy, Bitcoin economy.
In time, perhaps the Philippines can dominate cryptocurrency the same way it has social media, as I sure hope and Olesen does, too. When I asked Olesen what kind of market research he was doing in advance of starting his Philippine Bitcoin exchange, he said, “None.” The only way to find out if it would work here, he said, is to try.
That’s the point, I realize now. As the first cryptocurrency of its kind, no one can really tell what will become of Bitcoin.
In this way, the uncertain future of Bitcoin mirrors the very spirit in which remittances are given. When overseas foreign workers wire some portion of their paycheck to their loved ones, they may not have seen them in years. So it’s not just money they’re sending, it’s something much greater.
It’s the conviction that the money will be put to good use. The kids will study diligently in their crisp uniforms, all worries of tuition aside. The brother will stock the fridge with groceries and not the liquor cabinet with gin. The wife will put together some nest egg of savings and investments so that they may work less, or not at all, in their old age.
OFWs may be in a different hemisphere. Can they be sure that the grainy image on the computer screen is telling the truth? No. The kids may very well be flunking away their tuition, the brother on booze, the wife on a boyfriend. Yet they cannot think about such possibilities, horrifically vivid as they are, lest they lose the resolve to work in a strange land. They must become steel. They must trust that their loved ones are as true as they left them and will remain so upon their joyous return.
OFWs—like all the investors who buy into Bitcoin—must take things that the only way that pioneers sometimes can: on faith.
Ezra Ferraz graduated from UC Berkeley and has a Master of Professional Writing program from the University of Southern California. He currently lives in Makati, Philippines and serves as a chief consultant for an educational company in the United States. He is on Twitter: @EzraFerraz.