Now, everyone is celebrating the 11,000 dollar Bitcoin and the recent Ether (or Ethereum) price race. But I must spoil the party. I began to read about cryptocurrencies in 2013. One of the main goals of this industry was to make cheap, quick, and comfortable international transfers possible. With a reason, because traditional banks charge high fees for international transfers, at least 10 to 20 USD or Euro per transaction. Initial Bitcoin transaction fees were only a couple of cents. For example, only one cent in 2012.
But today, look at the data of Bitinfocharts.com. The average Bitcoin transaction fee was $5.8 two days ago. By Ethereum, the number two cryptocurrency, the transaction cost was $1.4. Litecoin and Dogecoin are still cheap, but who uses them? In the case of the main cryptocurrencies, high fees apply.
Cryptocurrency Fees And Conversion Nightmare
Some more examples. A week ago I wanted to transfer 150 Tether from a famous crypto-currency exchange to a personal wallet. (A stablecoin pegged to the US dollar.) The fee was also high, 2 USD (1.33 percent). Almost like in the conventional old banking system. Also on Minds.com, I paid 1.6-2.2 USD (in Ether) in the last weeks for every single transaction. I should better stop it.
I also wanted to exchange Steem cryptocurrency to Hive cryptocurrency this week. With a smart-contract system called Steem-Engine. First, I had to pay one percent to convert my Steem to an intermediary currency (“Steam pegged”). Second, I had to sell it in a trading platform for another intermediate currency (“Hive pegged”). The margin (the distance between the bid and ask prices) was very high, approximately 5 percent.
Last, I had to exchange the intermediate “Hive pegged” currency to Hive for another one percent. The whole process ate at least 4-5 percent of my money. (Later I discovered another easy method, you can convert it through Swap.App for a 0.7 percent fee.) OK, I know, illiquidity is always a problem by all assets. Bitcoin or Ether markets are much more effective.
Without Cryptocurrency Fees, Miners Must Sell
In major cryptocurrency exchanges and by major cryptocurrency pairs, trading fees are low, mostly less than 0.1 percent. But sending cryptocurrencies in and out (deposit and withdrawal) requires other transaction fees. I know cryptocurrencies and blockchains are not only about transactions and transfers, mean much more. There are other very important topics, extra values in play. Like decentralized finances (DeFi), decentralized social media, gaming, or gambling. And smart contracts in general. I am wondering when Ethereum finally solves its problems and offers a fast and cheap system. The advances are very slow until now.
I also know that some cryptocurrencies have no fees at all. Like Steem and Hive, which I mentioned above. But they have other problems, like the continuously declining market price. Witnesses and developers operating the Steem blockchain must sell. They receive their payment in cryptocurrency and sell to cover their expenses. So, the downtrend in the price seems to be pre-programmed. (Steem fell to $0.21 from approximately $1 in two years.)
Cryptocurrency Fees vs. Fintech
If all this weren’t enough, the traditional banking system and especially Fintech businesses have evolved a lot in recent years. The system of instant transfers in Europe is implemented in more and more countries. Here you can transfer money from one bank account to another within a few seconds, also at night and on weekends. The Revolut app and similar services provide free or cheap currency exchange, credit cards, transfers. The Robinhood app offers securities investments in small amounts without broker commissions. (Although, the German Wirecard scandal may delay the advance of the Fintech-sector in Europe.)
“Banking the unbanked” was another nice saying I heard a lot. It is another goal to set on the road of cryptocurrency mass adoption. That means many people in developing countries have no bank accounts, but they have smartphones. Cryptos could provide them access to modern digital finance solutions. But many people in Africa, South-Asia or Latin-America earn only a couple of dollars a day. How should they pay 6 USD for a bitcoin transaction? No way.
Are They Stealing Crypto-Ideas?
In traditional online brokerage, I pay 0.3 percent for most transactions. And that is one of the expensive services today. Bitcoin speculators see the high fees as a bullish sign, and as an investor, I feel good, thanks.
While the programmers worked hard but at length on the code of cryptocurrencies, the world seems to run past them. I don’t mean that cryptos are over and can’t make a revolution. This could still happen. But it would be good to speed up. Before the traditional financial system or Fintech businesses, based on traditional currencies, steal and implement all the crypto-ideas. Most people don’t care if a service is centralized or decentralized.
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