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Bitcoin Cash – Banking the Unbanked is now closer than ever.

The crypto community is currently caught in a heated debate whether Bitcoin is a store of value or a medium of exchange. I believe in medium of exchange first, and store of value as its secondary effect.

Why?
Because a huge economic value of banking the unbanked – approximately valued at $380 billion – will be missed, if cryptocurrency is to mainly become a store of value (Raconteur, 2017).


Source: https://www.raconteur.net/infographics/banking-the-unbanked

This article will explain the history of the term ‘bank the unbanked’, assess the opportunity related to the phenomenon, and finally, suggest action-of-plan for Bitcoin Cash to successfully promote financial inclusion whilst capturing the $380 billion opportunity in a near future.

What does banking the unbanked actually mean?

Banking the unbanked simply means the action to include the unbanked into a financial system, and to enable them to fully participate in economic activities. The unbanked or the underbanked is defined as people who do not have a bank account, either through a financial institution or through a mobile money provider. As of 2017, there are still 2 billion adults – or 38% of the global population – that remain unbanked. Out of those unbanked, only 4% said that they do not need financial services. Yet, the most alarming fact is that more than half of the adults within the poorest 40% household in developing countries remain unbanked.


Source: https://www.raconteur.net/infographics/banking-the-unbanked

The benefits of banking the unbanked go beyond the individuals themselves. Greater access to financial services help reduce inequality, increase standard of living, and accelerate economic growth.

Furthermore, moving cash-based payments to digital is especially important for developing countries. It increases speed, security, and transparency of payments between senders and receivers; it is also a first entry point into an inclusive financial system – allowing the participants to increase savings and economic productivity.

Although the unbanked was not explicitly mentioned in the Bitcoin whitepaper, Satoshi clearly stated that financial inclusion is the vision for Bitcoin. Bitcoin was to become a trustless and decentralized electronic cash for anyone to transact without payment uncertainties and control from financial institutions. This is why the term “bank the unbanked” has become a mission for some of cryptocurrency pioneers.

Opportunity for Bitcoin Cash, following development over the years.

From 2011 to 2014, the number of the unbanked has dropped by 20% to 2 billion adults. This number was driven by a growth in account penetration and innovation in technology – such as mobile banking. South Asia, Latin America, and Sub-Saharan Africa experience the highest growth in account ownership, but the region that is most notable affected is Sub-Saharan Africa. Sub-Saharan Africa experienced the highest growth in mobile banking: almost a third of account holders have mobile money account, and 5% of these account holders only have mobile banking. From financial inclusion of lower income households to easier and more secure cross-border payments and remittances, the impact of mobile banking on the lives of people in Sub-Saharan Africa is irrefutably enormous.


Source:  The Global Findex Database, 2014 (Demirguc-Kunt, et al., 2014).

Nonetheless, while mobile banking does not require account holders to register under a financial institution, users still need to pay and rely on centralized providers for their services. This is where Bitcoin Cash can be a game changer. Staying true to the vision of Bitcoin, Bitcoin Cash is a decentralized electronic cash that could be seamlessly used peer-to-peer transactions. A decentralized system gives full control to users – essentially anyone who joins the network, without the scrutiny from any governing institutions.

Most of the unbanked remain so due to the barriers of banking enforced by financial institutions, such as high joining costs and cumbersome documentation requirements. The financial institutions themselves, have no economic incentives to lower its barriers, due to their own economic interests. Globally, we thus see formal economic systems that exclude those who could benefit most from financial inclusion, especially in developing countries. The 2 billion unbanked, the 460 million who currently have dormant accounts, and the 50 million in Sub-Saharan Africa who only have mobile banking clearly reflect the failures of financial institutions to establish suitable services.

Thus, within a global economy where exclusion severely penalizes one’s opportunity, Bitcoin Cash – even more than mobile banking – provides a leapfrog opportunity for the unbanked to join in quickly, painlessly, and securely.

Bitcoin Cash to penetrate developing economies

Financial inclusion can be measured and broken down into the inclusion in two main financial activities: Account Ownership and Payment. We analyse the key obstacles that the unbanked face during each activity in order to suggest executable action-of-plan and entry opportunity for Bitcoin Cash.

Account Ownership

 Source: https://letstalkpayments.com/39-of-the-worlds-population-does-not-have-a-bank-account/

While account ownership has increased to 700 million since 2011, 38% of adults – or 2 billion adults – still remain unbanked worldwide today. Additionally, although account ownership has increased, 460 million accounts are dormant. Accounts are considered dormant if it has no deposit or withdrawal in the past 12 months. In some countries, dormant accounts could account for the majority of the newly banked. For example, out of the new 125 million accounts opened in India in 2015, 72% of the accounts show zero balances.

Payment


Source:  The Global Findex Database, 2014 (Demirguc-Kunt, et al., 2014).

400 million unbanked receive payments solely in cash, and more than 370 million unbanked in developing countries send or receive domestic remittances only in cash. Furthermore, 32% of adults reported having received at least one wage payment from an employer within the past year globally. On high-income OECD economics, only about 6% reported receiving wages in cash, while 59% of those in developing economics reported of having done so. Among those receiving payments into an account, the overwhelming majority indicated that they use accounts for cash management, safe storage, and monetary transfer purposes. They choose to withdraw and transfer their money over time as needed, as opposed to choosing immediate and complete withdrawal.

These numbers reflect that the unbanked economic activities are heavily limited by physical interactions to transfer cash.

According to surveys of 150,000 unbanked adults in 40 countries, the top reasons for the unbanked and dormant accounts are:
1. Unaffordable fee to open and maintain an account (59%)
2. Cumbersome Documentation Requirements (18%)
3. High fixed transaction costs for money transfer (23%)
4. Lack of trust in financial institutions (30%)
5. No need for an account as relatives already have one (30%)
6. Distance to financial institutions (27%)

 

Entry Points for Bitcoin Cash


Financial institutions are unwilling to take the risks to serve the unbanked. While mobile money transfer offers a better alternative than financial institutions, it needs physical over-the-counter venues to operate; users need to set-up and charge their accounts in-person. This is a serious barrier to usage for 27% of the unbanked who consider proximity of services as a priority. Moreover, mobile money transfer does not offer a safer alternative to store a medium of exchange, as users are required to carry cash around. Last but not least, the fixed fee imposed by mobile money transfer could take a high percentage of the transfer for smaller value transactions.

Thus, Bitcoin Cash could offer financial inclusion to the unbanked by allowing for:

1. Easy access to P2P transactions
No cumbersome documentation or prior infrastructure is required to receive Bitcoin Cash. The only requirement is for a user to have a Bitcoin Cash wallet, which could be easily be stored within anything from a piece of paper to a mobile device. To send Bitcoin Cash however, an internet connection is needed – for now. While internet connection might not be accessible to some of the unbanked, Bitcoin Cash is a more readily accessible solution than financial institutions or mobile money transfer. Internet penetration steadily grows by 3% since year 2000, and as of today, there is 3.8 billion internet users. There is a bigger possibility of internet reaching the unbanked than financial institutions.

2. Cheap money transfers
With low transaction fees and fast confirmation, Bitcoin Cash essentially eliminates all the major obstacles that unbanked face for remittance.

As a comparison, Bitcoin Cash can easily accommodate transactions less than $1.00 for no fee as shown below.


Source: Blockchair (2017).

Meanwhile, the transaction fee of mobile money transfers for smaller transaction could be as high as 75% of total transaction amount. Below is the tariff table for M-Pesa, the largest mobile money transfer service in Kenya and Tanzania.


Source: http://www.mpesacharges.com/new-mpesa-rates-safaricom-mpesa-rates-withdrawal-transaction/

3. Secure storage of value
Bitcoin Cash could be easily and safely stored in a cold storage. As it is run within a decentralised network, anyone that owns Bitcoin Cash is in control of their money – as long as they hold it in their own wallet.

Action of Plan

1. Education is an important part of mass adoption, especially if we are to on-board the unbanked. We need to educate them on how Bitcoin Cash works and the potential fraud issues that could occur when adopting the technology.

2. Abstract bitcoin, making it easier for the masses to grasp (this does not mean offchain).

3. Develop applications that are adapted (Triki & Faye, 2013) to local needs and technology limitations of the deployment area.

4. Make entry points into Bitcoin easy, and get merchants on board, in order to make it less appealing to leave.

References:

  • Central Intelligence Agency (CIA)., 2017. The World Factbook: Internet Users. [Online]
    Available at: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2153rank.html
    [Accessed 10 December 2017].
  • Demirguc-Kunt, A., Klapper, L., Singer, D. & Van Oudheusden, P., 2014. The Global Findex Database 2014 Measuring Financial Inclusion around the World, Washington: World Bank.
  • Raconteur, 2017. Finance: Banking the Unbanked. [Online]
    Available at: https://www.raconteur.net/infographics/banking-the-unbanked
    [Accessed 8 December 2017].
  • Stats, I. L., 2017. Internet Users Count. [Online]
    Available at: http://www.internetlivestats.com/
    [Accessed 10 December 2017].
  • Triki, T. & Faye, I., 2013. Financial Inclusion in Africa, Ghana: African Development Bank (AfDB)
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What is Bitcoin Cash? Explaining it easily.

If you have just recently jumped into the cryptocurrency wagon ride, you might be unfamiliar with Bitcoin Cash. You’re not the only one – trust me! It’s hard to know what has happened, how Bitcoin Cash was born, and the difference between Bitcoin and Bitcoin Cash, without a background knowledge. This is exactly why we are writing this article. From here, you’ll know exactly what Bitcoin Cash is, how it was born, and its main differences as compared to Bitcoin and other altcoins.

Bitcoin Cash is not an altcoin (a name usually given to alternative cryptocurrencies to Bitcoin). Bitcoin Cash is a hard fork of the Bitcoin network. In order to understand the difference between an altcoin and a hard fork, you need to roughly understand how Bitcoin works.

Hard fork explained

Bitcoin is essentially a ledger. A ledger is a record of all transactions that ever happened. In the Bitcoin network, the ledger, is made up of a chain of blocks – hence the name, blockchain. These blocks contain records of transactions that have happened on the network. Hence, all the transactions that ever took place in the Bitcoin network are traceable from the time they occurred. In order to generate a new block, “miners” have to compete to solve and submit the answer to a hard-computational problem to the network. The mathematical problem in each block is extremely difficult to solve, but once solved, it is easy for the rest of the network to confirm the answer.

There are certain rules that a miner must follow to create a valid block in the Bitcoin network.

What happens when a miner generates a block that others consider invalid? Short answer: other miners will ignore it, continuing to generate new blocks without appending the invalid block onto the chain.

Forked Chain

Given this example, if Miner A continues to generate blocks on top of the invalid block, a new chain is created. Both chains are identical up to the last valid block (block 87 from the given example), but from there on, Miner A is mining on a different chain. Any transaction that happens on Miner A’s chain from block 88 onwards will not be reflected on the main chain and vice versa; Miner A has thus created a new cryptocurrency. In order for this chain – or cryptocurrency – to have any value, Miner A has to get enough user base transacting with this new cryptocurrency.

This is essentially what happened with Bitcoin Cash. A big enough minority of the Bitcoin community – including miners – who wanted to mine blocks with different rules, in this case larger blocks.

Bitcoin Cash Forked

At one point in time, these miners started mining blocks with a different set of rules; this is commonly called a “fork”. As previously mentioned the Bitcoin and Bitcoin Cash networks are essentially identical, before the Bitcoin Cash community forked. If you have coins in the Bitcoin network before the fork, you will thus have the same amount of coins on the Bitcoin Cash network once it is created. What happens from there on, though, is entirely separate. Thus, whenever you spend your Bitcoins on the Bitcoin blockchain, your Bitcoins on the Bitcoin Cash chain will still be there and vice versa.

Hard fork analogy

If this all sounds too confusing, think of it this way, two friends are riding on a road together, every memory the make, they both share, however they come to a fork at one point of the road, one way leads to the sea the other leads to the mountains, with different opinions on where to go they decide to go their separate ways, from this point onwards any memory they make is their own and is not shared with the other.

The Bitcoin Cash community did exactly this, after years of debate and some unfulfilled agreements, they decide to go their own way. The main difference between Bitcoin and Bitcoin Cash are bigger blocks, Bitcoin has a maximum block size of 1MB (with segwit this may reach a block size of 1.7MB) and Bitcoin Cash has a maximum size of 8MB, easily increased to 32MB since the 8MB limit is enforced only at the miner level.

Why was a bigger block needed?

As Bitcoin grew, more users joined the network and started to transact on it. As can be seen in the graph below, the number of transactions and the block size steadily went up the maximum block size.

Graph 1: Bitcoin Block Size.
Source: Blockchain.com (https://blockchain.info/charts/avg-block-size?timespan=all)

BTC Block Size

Note: Bitcoin blocks have gone over 1MB from July 2017 onwards, with the activation of SegWit. However, this solution is something the Bitcoin Cash community considers inadequate, as in their view it does not solve the transaction bottleneck longterm.

When the maximum block size was hit, space in the blocks started to become scarce, increasing the network fees, since there was more demand and not enough offer.

Graph 2: Pending Transaction Fee in BTC.
Source: https://jochen-hoenicke.de/queue/#allPending Transaction BTC

Graph 3: Bitcoin Unconfirmed Transaction Count (Mempool).
Source: https://jochen-hoenicke.de/queue/#all

Bitcoin Unconfirmed Transaction Count

The Bitcoin community believes that scaling should happen mainly by use of the so called layer 2 solutions, and Bitcoin should become a settlement layer. While the Bitcoin Cash comunity believes that Bitcoin was intended, as the whitepaper states, to be P2P electronic cash. As such scaling should happen on chain, meaning every transaction should be recorded on the blockchain, and the fees for such use case should remain low, to allow access to everyone.

As you can clearly see in the graph that shows the average transaction fee of Bitcoin and Bitcoin Cash below, Bitcoin Cash transaction fee is much cheaper.

Graph 4: Average amount of fees per block in USD (BTC and BCH).
Source: https://fork.lol/reward/fees

Transaction Fees BTC vs BCH

Bitcoin or Bitcoin Cash?

This question highly polarizes the Bitcoin community. We believe that the value of a cryptocurrency is based on its utility. If you are here to stay, you have to decide whether the utility is to become a more accessible and cheap to use currency, a settlement layer, or a digital gold.

Here at Cryptartica, we have made our choice, should you wish to purchase something from our store, you will have to use Bitcoin Cash. If you are just starting, get to https://bitcoincash.org to set up your Bitcoin Cash wallet. We recommend a mobile wallet if you want to experiment with lower value transactions as a start. Welcome aboard, and enjoy the journey!

You can find a more in dept explanation as to why we use Bitcoin Cash in our blog post, Bitcoin Cash for a Global Business.

*Note: This article is not intended as technical explanation, but simply as easy way for beginners to understand Bitcoin vs Bitcoin Cash.

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Bitcoin Cash for a Global Business

Cryptartica welcomes Bitcoin Cash with open arms. The ease of transacting across the entire globe without a third party is the reason why Bitcoin was born, and we believe Bitcoin Cash best represents this vision.

As the first cryptocurrency, Bitcoin has been adopted by a bigger audience and has long become a symbol of novel innovation in the financial world. In the public eye, Bitcoin represents cryptocurrency – as evident by its wide media coverage and drastic increase in value over the past year. As passive observers that have been around the Bitcoin community since 2009, we have seen the development of Bitcoin firsthand. Within the past 3 years, we have grown increasingly concerned by Bitcoin’s capacity bottleneck. We have observed long enough to become disheartened by the Bitcoin’s core community inefficiency in addressing key problems surrounding the currency. We were perturbed that a world with seamless transaction might be forever lost.

The Creation of Bitcoin Cash

Our worries were not isolated; some of the Bitcoin community were also deeply concerned by the rising transaction fees and delays. For years, the community has tried to come to an agreement towards potential solutions. Yet, none has come to any substantial progress – most notoriously portrayed by the Hong Kong Consensus Agreement in 2016. In its whitepaper, Bitcoin is defined as a “A Peer-to-Peer Electronic Cash System”; Bitcoin Core developer’s decisions however, have been redefining it towards a store of value as digital gold. As transaction bottleneck issues remain unresolved, Bitcoin today imposes high barrier-to-transact towards smaller transactions, preventing seamless transactions to occur.

Bitcoin Cash was born out of the frustration deeply felt by a part of the Bitcoin community. Bitcoin Cash hard forked from Bitcoin on August 1, 2017. Bitcoin Cash aims to be “A Peer-to-Peer Electronic Cash System” that will facilitate small and the so-called micro transactions worldwide, on a P2P basis with no third party involvement.

The Creation of Cryptartica

As a long time members of the community, we found our frustration turned into excitement, when Bitcoin Cash was born. We understand that in order for Bitcoin Cash to be widely accepted, we need to start creating an option for users to spend their Bitcoin Cash. Excited about a whole new possibility on where Bitcoin Cash can go next, we created Cryptartica.

We might be newly established, but we’re committed and eager about growing the Bitcoin Cash community. Since Cryptartica’s launch, we’ve been having a lot of fun. We’re happy to see orders coming in; it shows that you put your trust in us. In fact, as we’re writing this, some orders are still on their way to someone in the community.

We’re a UK-based company but we’ve received orders worldwide. We only accept payment in Bitcoin Cash and receiving payments from across the world has never been so painless.

That is why we believe Bitcoin Cash is a game changer.

We have a lot of plans on where to go, for now, we will continue to add more merchandise to our store and focus on fulfillment of orders. Going forward in 2018, we have plans to add services around Bitcoin Cash.

It’s sad to see Bitcoin move away from the original use case, but we welcome Bitcoin Cash with open arms.