I first heard about Bitcoin a couple of years ago. I remember seeing a 1 minute video where the presenter was showcasing how people are making money by mining bitcoins. I didn’t get the concept and didn’t try any deeper to understand it. It seemed a gig for some hobbyists.
Recently I stumbled upon a video where Bill Gates was talking about Bit coin and Block Chain. It is a 6 minute video that completely changed my outlook towards bitcoin and the blockchain concept. He mentioned about a company in Bangladesh called BKASH that was successfully using it. That was an Aha moment for me.
I spent the next couple of hours researching about this company and found few videos explaining BKASH’s services. The videos were in Bangla language. Growing up in the eastern part of India, I had some exposure to that language and could get a glimpse as to how easily they were using Bitcoins to help Bangladeshi expats from USA transfer money to Bangladesh.
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Why BitCoin though? Even though I was witnessing a successful use of Bitcoin, I had still not understood as to why would a company in Bangladesh out of nowhere would use Bitcoin. I was pretty sure that they were not some bunch of Silicon Valley nerds who just wanted to play with the technology. I was pretty sure that there was a fundamental business reason that I had to uncover.
I spent next couple of days tirelessly getting a handle on basics of Bitcoin and the Blockchain concept. It had many moving parts and I seemed to getting lost. I had more questions than answers. The learning process seemed pretty frustrating. I was at the verge of giving up when I stumbled upon a write-up that gave a high level explanation about the transaction fee one needs to pay to transfer money via Bitcoin.
A Money transfer service like Western Union or Paypal makes money by charging a transaction fee , which is a fixed percentage of the amount that you are sending. This means that if you are sending a high amount then your fees are also high. But in the world of Bitcoins the transaction fees are not related to the amount you are sending. In fact there is no fixed transaction fee. The sender can put any amount they want. To understand this, let us look at a real world live transaction
LIVE TRANSACTION SNAPSHOT – Part of Block#476553
The above snapshot of a transaction might seem gibberish to you. Thus let us focus on the yellow highlighted portion and the green box in the bottom right corner.
1. Green box in bottom right corner: The number above the green box i.e. 94.11807776 BTC denotes the amount that was transferred on Jul-19-2017. On that day the value of bitcoin was around $2,300 / BTC. This equates to $216,471.58
2. Yellow highlighted amount at top: This denotes the Fees that was paid by the sender for the transaction. It was 0.00075 BTC . Applying the exchange rate of $2,300 / BTC we get the total fees as $1.73
From the above transaction we can see that the sender just paid $1.73 fees for sending $216,471.58. This is certainly way low than the transaction fees one would have paid if the sender would have used any conventional money transfer service. Thus this gives us a high level view as to how Bitcoin is disrupting the money transfer business.
Article by Dayanand Menashi