The decentralized network of Bitcoin allows money transfer based on P2P system. Every node of this system keeps the network alive by mining new coins and also validates the transactions. All the transactions that happen across this network are registered on blockchain which uses cryptography technology to validate the authenticity of each transaction. It makes sure that the same bitcoin is not being used more than once or are not using the currency that you do not own. The transfers are done real time and within 10 minutes your money transfer is approved. Because there are no third parties involved, the transactions are absolutely free of charge.
Remittance market is gradually becoming digital and has a huge potential
In 2014, according to World Bank, the remittance market was $582 Billion strong. However, the transactions are being conducted using the conventional methods. However, using the digital means can cost up to 10% as Western Union and MoneyGram have to pay huge amounts to fund their local connections.
However, due to growth of smart phone users, even in the emerging markets the payment transfer market is becoming more digitized to cater to larger people. Mobile remittance service providers are growing exponentially and claim that they are 45% cheaper than the traditional methods of payment transfer.
Start-ups already see the future in Remittance market
Even though remittance market is still at a nascent stage, many upcoming entrepreneurs and investors are attracted to the possibilities that it offers.
BitPesa, a start-up company that recently raised $1.1 Million, has been formed to make the transfers from UK to Africa easy as well as possible. Abra is another such company that has raised a second round of Seed Capital in San Francisco to make easy transfers on P2P and Bitcoin platforms.
Even though Bitcoin is an open source platform, it has long been regulated by the banks. However, since the largely decentralized and operates on a P2P network, financial markets think of it as a threat. The anonymity of the sender’s identity is also of big concern.
Companies that are operating under the principle of Bitcoin transfers must get an approval for regulation to be able to function in the developed markets as financial institutions insist on every unit’s transparency in the process. Other big issues include the currency’s overall volatility and the security concerns.
Although Bitcoin has a lot of potential to be the principle technology behind digital remittance and most importantly it can help provide banking facilities to the un-banked markets. However, for that to happen, Bitcoin will have to overcome these challenges to be able to convince the investors in its potential.
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