I accidentally took on the deal during the weekend

In my lifestyle as a mostly co-founding programmer of bitcoin platforms, there is not much difference between weekdays and the weekend. I do not even use a phone. So, I only become aware of what day and what time it is, when I fire up my laptop.

Once in a while I trade in bitcoins for cash. I definitely prefer to trade peer to peer. So, unaware of the coming problem, I picked a counter-party who announced a good offer at localbitcoins.com, to be settled over Moneygram.

Ten minutes later, the peer gave me a payment transaction number for cash to pick up at Moneygram. When I went outside, however, I saw that a first Moneygram office was closed. Yes, it was Saturday. I tried another one: also closed. I went to the Moneygram website and discovered a particular, annoying truth: All Moneygram partners in my local area are closed during the weekend.

So, I went back to my counter-party, profusely apologizing, because sorry, I could not pick up the payment and finalize the deal right now. Maybe we could move over to using some other fiat payment channel? Unlike other peers who insist that the deal should be finalized within at most one hour, or else throw a tantrum, this peer was really cool. He said it was ok for him if I finalized the deal on Monday. That person is really exceptional!

The peer to peer bitcoin trade has its own requirements. The corresponding fiat payment method has to be pretty much global, irreversible, and support payment tracking.

A local-only fiat payment method would balkanize the market too much. It may be too difficult to find a suitable peer within minutes (or so), whose timezone happens to be awake exactly when you seek to trade.

Since reversing a bitcoin payment cannot be done, the fiat payment method must also be irreversible. If the money gets paid into an “account”, the payment will be de facto reversible. That kind of payment channels are an accident waiting to happen. One day or the other — reversible as it is — your fiat payment will simply end up reversed, while your bitcoins will be irreversibly gone. That is why fiat banks, Paypal, and similar are unusable for this trade. The payment must truly be executed as an effective payout in cash, because the physical handover of cash is fundamentally also irreversible.

Furthermore, for the purpose of dispute resolution, it must be possible to track the fiat payment.

The market’s arbitrage helpdesk must be able to use the payment instruction number to verify if the seller has, yes or no, picked up the money. Without payment tracking, the helpdesk would have no usable information, allowing them to decide about what to do with the bitcoins held in escrow. Must the coins go to the buyer or returned to the seller? Since there is no way for a payer, a payee, or a third-party to verify the payment status of Paypal or a fiat bank payment instruction, these methods are unusable for any kind of secure and escrowed trade.

Moneygram is indeed global and irreversible, and supports payment tracking. However, everything else about Moneygram is generally not a pleasant customer experience. It is not just Moneygram’s opening hours that are an issue (even on weekdays they close at 16:00h).  Their only excuse for that, is that the other global alternatives are conceivably even worse. I have used these alternatives for this trade too, and I can tell you that I am not fond of Western Union or RIA either. Furthermore, fewer peers on the market agree to finalize fiat payment over Western Union or RIA. In fact, localbitcoins.com does not even support RIA.

We could certainly use more and better alternatives, which would certainly already exist, if it were not for government regulations that turn also this industry into some kind of jurassic park. But then again, if the financial industry were not some kind of jurassic park, there would never have been a need to invent bitcoin in the first place. We would have been able to solve the existing problems within the system, instead of now replacing it wholesale.

Peer to peer trade has fundamentally better characteristics than centralized exchanges.

In any trade, there are three parties, not two: [1] the buyer, [2] the seller, and [3] the judge, that is, one who is going to be the judge of it when things go wrong. If you are trading on a centralized exchange, [2] and [3] are one and the same person. That is never a good thing. Someone who is a player in the game, should not be at the same time referee.

Centralized exchanges may at first glance be more efficient, but in fact, they are not. You can perfectly-well use the APIs of the peer to peer platform to automate the selection of peers and carry out the finalization the trade. It would yield the same efficiency effects as on a centralized exchange. It is generally better to distribute the computation power and keep a simpler core. In the battle between centralized and distributed computing, the internet as a distributed system has long ago won the war already. There no longer exists a centralized variant of the internet. That is how inefficient centralized computing is.

In a distributed system, there will still be a problem in using fiat payment APIs, because APIs are usually not available in jurassic park. You can ask any person in finance what the term API stands for. He does not know. He will undoubtedly say that it must be a variation on TT, Telegraphic Transfer, but then carried by postal pigeons.

The real solution will materialize when we will be able to pay everything with bitcoin, and that there will be no need to change bitcoin to fiat money at all. For many things on the internet, this is already the case. For local expenses, fiat cash is still king. Therefore, we will just have to keep dealing with jurassic park, until we can pay for local expenses with bitcoin too.

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eriksank

I mostly work on an alternative bitcoin marketplace -and exchange applications. I am sometimes available for new commercial projects but rather unlikely right now.

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