Billion Percent Savings. How Much More Profitable Are Cryptocurrency Transfers
Kataryna Kovtun April 17, 2020
In the Bitcoin network, transactions are carried out with an incommensurate commission. For example, the Bitfinex exchange for the transfer of $ 1.1 billion paid 70 cents. But this method has a minus, which can overshadow all the benefits.
In mid-April, the Bitfinex cryptocurrency exchange conducted the largest transaction in the Bitcoin network — 146,500 BTC. That amounted to over $ 1.1 billion at the exchange rate at that time. The company said that a small part of the funds was transferred to a hot wallet, the rest was returned to cold storage.
Such transactions of hundreds of millions of dollars are not uncommon in the blockchain network. Almost always they are associated with translations of trading platforms. For example, in February, the Bittrex exchange sent 49,922 BTC ($ 460 million) in one transaction with a commission of $ 0.60. And in January, an unknown company or investor sent 124,946 BTC (about $ 1 billion), but it cost $ 83.
Drop in the number of transactions
The record value in bitcoins also belongs to Bittrex. In December 2019, a series of transactions worth $ 8.9 billion was recorded on the exchange, about 1.3 million BTC were transferred in total. The commission for 21 operations totaled about $ 12.5.
In January, the number of confirmed transactions in the Bitcoin network since its launch exceeded 500 million. At the same time, in March, the number of operations in the blockchain of the first cryptocurrency sharply updated the annual minimum. But the point is not a drop in interest in the asset, but the purpose of such transfers. Some of them are used to move funds, while others are used to record data from third-party services.
For example, the Omni protocol works with the data, on which the Tether stable coin was originally based. Now, the USDT issuer is gradually transferring an increasing part of tokens to the Ethereum network and becoming the main consumer of its computing resources. This is what leads to a decrease in the load on the Bitcoin blockchain.
The benefit over traditional services
Thanks to this, transactions of ordinary users or large transfers on exchanges are faster and cheaper. Conducting small transactions in bitcoin is not profitable since the commission can be disproportionately high. When it comes to large transfers, bitcoin is one of the most effective options.
For comparison, the PayPal payment system website indicates that the commission is 3.4% of the total transaction amount for each transaction. For international payments, a commission of 0.4% to 1.5% is charged depending on the country. If Bittrex exchanged 21 transactions for $ 8.9 billion through PayPal, the transfer fee would be at least $ 340 million. This is 2.4 billion per cent more than with Bitcoin.
At the same time, the first cryptocurrency is not the most effective digital coin in terms of transferring funds. It is believed that it cannot be used for everyday transactions, both because of the volatility of the exchange rate and because of long and relatively expensive operations. But altcoins solve this problem.
More effective altcoins
For example, the XRP token was developed by Ripple to solve banking problems. Blockchain project products, such as xRapid, allow you to instantly transfer large amounts to any distance instantly and almost for free. And immediately after the operation, you can withdraw altcoin to fiat to protect against fluctuations in its value.
But while large transfers, which are widely known, are held on the Bitcoin network. Their main difference from classical methods and a huge minus its irrevocability. If one of the Bitfinex employees made a mistake in any sign when sending $ 1.1 billion in cryptocurrency, then the operation could not be cancelled. Wallet address numbers look like a long chain of unrelated numbers and letters, so making mistakes is pretty easy.
The main problem of cryptocurrencies
At the moment, this problem is one of the main ones that hinder the wider distribution of a new type of asset. The difficulties lie not only in sending cryptocurrency but also in the ways of its storage. In January, Peter Schiff, a gold supporter and head of Euro Pacific Capital, said that he had lost all his savings in bitcoin because he did not remember a special password.
The creator of Ethereum Vitalik Buterin reacted to this.
«I am disappointed in the opinion that supposedly you must be careful and write backups in three places when working with cryptocurrency. We can and should create the best technology for wallets to improve their security ”, — Buterin wrote then.
Now cryptocurrency resembles the Internet and other technologies in the initial stages of development. Few people understood how this works. Logging in was a whole problem. But in the end, technology has developed to such an extent that even children can easily use it. This is exactly what digital money is missing. Once their developmental stage reaches the maximum user friendly, it will be difficult to imagine everyday life without Bitcoin or other coins.
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