Bitcoin (BTC), the world’s leading cryptocurrency, could potentially solve the global remittances problem, according to OpenNode, which focuses on supporting payments for businesses throughout the world.
As explained by the OpenNode team, they aim to “empower” consumers and connect the world via “trusted” digital payment infrastructure – which aims to facilitate low-cost transactions, quick settlements, while providing a seamless user experience.
The OpenNode team explains that millions of migrant workers, across the globe, have to send money back home to friends or family members. International money transfers or cross-border payments are now a critical part of the world economy. The world’s remittance market has been expanding rapidly. It has grown at an average rate of 10% each year since 2000.
According to OpenNode, the traditional or legacy financial system is not adequately-equipped to enable fast, affordable global money transfers. There are many middlemen charging high fees and there can be a lot of paperwork or lengthy processes involved in facilitating simple digital transactions.
While Fintech Unicorns like TransferWise and Ripple are also focusing on offering better options to people wanting to make cross-border payments, OpenNode appears to focus on using the open, permissionless Bitcoin (BTC) network to send money across borders.
As noted by OpenNode, the remittance industry has taken an “inequitable cut” from migrant workers who might already be not earning enough to meet basic expenses. Consistent pressure from the G20 and the United Nations may have helped with lowering costs for senders. We now have lower fees for sending funds to other countries.
The world’s remittance market was valued at over $700 billion last year, according to World Bank estimates. However, the average cost per remittance transaction is still too high at 6.67%, meaning that a substantial $48 billion in value is extracted from senders recipients of cross-border payments each year.
“As a payment system, Bitcoin provides a better way to transfer digital cash anywhere in the world. Payments are simple, secure, near-instant, low cost, and global.”
This might not necessarily be the case right now because the BTC network is only processing 2.76 transactions per second right now, because we’re in the middle of a bull market. The Bitcoin network hasn’t been able to scale effectively which is why competing cryptocurrencies are promising faster transactions but at the expense of poor security.
Bitcoin transactions are also relatively expensive at the moment, with each transfer costing around $2.297 at the time of writing. Many regulators across the globe haven’t created proper guidelines for BTC transactions, because they might not fully understand how the pseudonymous currency works.