Reasons Kiva should accept Bitcoins

[Guest]

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[Amy-in-PHX]

In addition to Paul's concern about bitcoin having the appearance of a possible pyramid scheme, I wanted to add another thought.  (I don't understand things like "hashing power," so this is just my $.02 as an ordinary citizen without technical expertise.)  Bitcoin sounds as if it might be used for money-laundering by drug dealers, or financing of terrorists.  Movements of funds, in amounts of US $10,000 or more, have to be reported to the government by financial intermediaries, and it's not legal to carry hard currency across the border.  I am certain that other developed countries have similar laws, because if they did not before 2001 the US would have prevailed upon them to institute such laws after 2001.  Disrupting their finances, is a tool the government uses against both terrorists and drug dealers, and it is just as important as "boots on the ground."

Bitcoin sounds like a way of getting around all the laws about movements of money.  If it's not already illegal, then at least it sounds, IMO, like it might provide support to drug dealers and terrorists, and I certainly would not participate in it for that reason, nor would I encourage Kiva to do so.

 

[asherp]

The poor of the world are not going to finance your currency speculation

Hey, I just wanted to say thanks for keeping this discussion going. When you said this, I admit most of the wind was taken out of my sails. I'm just a lowly physics grad student with a kid on the way, and I like to study and teach people about complex stuff simply because I enjoy it. That being said, I do have about 11 BTC and I'd like to invest it, not cash in, and the moment Kiva posts a wallet address you'll see my 11 BTC show up there; I'm not asking anyone here to buy bitcoins. I just think Kiva and their supporters should be aware of what's happening, and to prepare for the sea change.

reasons not to

1) No one uses them. Name a MFI who uses them. Name a major corporation who uses them.

You're right, I can't name a single major corporation who uses them, besides Wikileaks (if you can call them a corporation). However, a lot of mom and pop operations use them because they don't require transaction fees. Here's a bunch of merchants who use them:
http://www.bitcoinworldmarket.com/default.aspx
https://en.bitcoin.it/wiki/Trade

2) The exchange rate. The value fluctuates, in some cases dramatically, so over the time of the loan you lose if the value increases. (i.e - if you pay 1 bitcoin in 2011 equal to $25 to fund a loan, and a year later the loan pays back $25, which is now worth .1 bitcoins if the value has increased 10 fold). If you assume you will be paid back in bitcoins, and the value goes up, the lender will need to default instead of paying you back $250.00 for your bitcoin. The poor of the world are not going to finance your currency speculation

So, this is one reason the GLBSE was created; the idea is that you can issue and sell shares to raise capital for your business. You then pay dividends to the share holders based on your profits. It all depends on how you set up the contract, but yeah obviously the payments shouldn't be based on a set bitcoin price.

3) Transaction fees. There are none for Kiva now, so why use a currency that is more costly to use ?

I didn't know Kiva had a special agreement with Paypal before starting this thread. However, bitcoin doesn't require transaction fees and involves no intermediary, so I really don't see how it could be more "costly". In fact, I can send arbitrarily small amounts of bitcoin, even fractions of a penny. This could be useful for spreading a small investment over thousands of small businesses with zero overhead.

By the way, it's great that Kiva has a special agreement with Paypal. However, they have been known to screw over their users occasionally. See http://money.howstuffworks.com/paypal7.htm or http://www.paypalsucks.com/ if you're interested.

4) People in Europe (or other countries like Canada etc) need to exchange their money (euros, pounds, dollars, etc) into US dollars to make a loan. Why should bitcoins have precedence over this significant population of lenders ?

This is a great example of how bitcoin helps: In most cases it's hard to exchange your local currency for US dollars without losing a substantial amount to either exchange fees or bank transfers. For example, my wife is German but has a Swiss bank account with Euros. If she wants to, she can use bitcoin to avoid the transaction fees both our banks will charge if she tried a regular bank transfer. To do this, she would first convert her Euros to bitcoin, then send bitcoins to herself for free, then convert them back to USD. MtGox is the largest USD/BTC exchange and they only charge half a percent.  

Aside from that, it would be a technologically trivial matter for Kiva to accept bitcoin donations; all they would have to do is post a wallet address. However, it's not so easy for them to accept any other foreign currency.

5) A decentralized, partially anonymous currency is great for international drug dealing, why is is a good fit for kiva ? What is the benefit ? How would accepting bitcoins do anything worthwile for the working poor of the world ?

So, I think I've addressed why lenders might want to use bitcoin. Now let's think about the borrower end. Recall what happened to the Zimbabwe dollar when it inflated at a rate of millions of percentage points and how that affected Kiva loans: http://www.kiva.org/partners/184

During the period of hyperinflation, microfinance loans in Zimbabwe were extended for extraordinarily short terms and generally to cross-border traders.  As of early 2010, loans continued to be extended over short time horizons reflecting short term financing for portfolios, concerns about continued economic and political stability, and frequent borrower business orientations to quick turnover activities

Since then, Zimbabwe has moved to the US dollar as it's primary currency. But what do you think happened to all the money Kiva loaned out? The problem is, inflationary currencies are not so great a store of value, especially when the government backing them decides they need to fund a war or two. When your local currency collapses, all your wealth goes with it. This is why a decentralized currency that can't be printed on a whim is so important for the developing world.

Bitcoin sounds as if it might be used for money-laundering by drug dealers, or financing of terrorists.  Movements of funds, in amounts of US $10,000 or more, have to be reported to the government by financial intermediaries, and it's not legal to carry hard currency across the border.  I am certain that other developed countries have similar laws, because if they did not before 2001 the US would have prevailed upon them to institute such laws after 2001.  Disrupting their finances, is a tool the government uses against both terrorists and drug dealers, and it is just as important as "boots on the ground."

Bitcoin sounds like a way of getting around all the laws about movements of money.  If it's not already illegal, then at least it sounds, IMO, like it might provide support to drug dealers and terrorists, and I certainly would not participate in it for that reason, nor would I encourage Kiva to do so.

It's true, anyone who wants to can send any amount of bitcoins anywhere in the world, provided they have the funds to send. If you want to send money to relatives in another country, nobody will be able to stop you. Like any form of money, whether it's diamonds or dollar bills, it can be used for good or evil. Most drug dealers use US Dollars, yet you still carry them. About 36% of our tax money goes to the US military, yet we still pay our taxes. There is a "dark net" called Tor which has been used to access the Silk Road, a website for trading illicit substances in exchange for bitcoin; it's probably used by terrorists organizations, too. However, Tor is also used by Chinese dissidents and human rights activists the world over. So, do we ban the technology because of the bad guys? Or do we find good uses for it?
By the way, the CIA's not-for-profit Venture Capital Firm recently invited Gavin Andressen (the bitcoin lead developer) to talk about the technology.

http://media.bitcoincommons.org/sites/default/files/GavinAndresenBitcoinShow06152011_0.mp3

Apparently, even the government may find it useful...

--Asher

[iampaul]

That being said, I do have about 11 BTC and I'd like to invest it, not cash in, and the moment Kiva posts a wallet address you'll see my 11 BTC show up there;

I said I was done with my participation in this thread, but I'm going to break that - not to discuss bitocoin further but to correct what seems to be a misconception on your part about Kiva.

Simply put, Kiva is a lousy "investment" for you. It is absolutely guaranteed by Kiva upfront that the absolute best you can do is break even. You receive no interest on what you loan to the world's poor through Kiva, stand the risk of losing to default or to fluctuations in currency value, and will be asked to donate towards Kiva's operating expenses on top of all that. The real return you get from Kiva is the satisfaction you may derive from helping others.

Is Kiva still for you?

Paul

[asherp]

I said I was done with my participation in this thread, but I'm going to break that - not to discuss bitocoin further but to correct what seems to be a misconception on your part about Kiva.

Simply put, Kiva is a lousy "investment" for you. It is absolutely guaranteed by Kiva upfront that the absolute best you can do is break even. You receive no interest on what you loan to the world's poor through Kiva, stand the risk of losing to default or to fluctuations in currency value, and will be asked to donate towards Kiva's operating expenses on top of all that. The real return you get from Kiva is the satisfaction you may derive from helping others.

Is Kiva still for you?

Paul

Hey, welcome back Paul. I happen to be a religious person, so yeah I'd like to believe most of what I do is for altruistic purposes. I don't own stock in anything - the 11 BTC I own represent the first time I've put my own money into something. As you can imagine, as a grad student I don't have much to invest in anyway. But I do know that a little first-world currency goes a long way to helping the working poor. However, as I understood it, part of the reason Kiva became a success was that they aren't looking for handouts, but partnerships. I'd rather own stock in some guy's chicken farm than in Apple, and not because I expect it to be all that profitable.

[iampaul]

However, as I understood it, part of the reason Kiva became a success was that they aren't looking for handouts, but partnerships. I'd rather own stock in some guy's chicken farm than in Apple, and not because I expect it to be all that profitable.

  You won't own stock in any chicken farm through Kiva, although you could well be providing interest-free money to fund a loan to a chicken farm. You might want to take some time to read About Kiva.

Paul

[JohnAtKiva]

Hello Asher.  As noted above, Kiva's payment is done by Paypal.
http://www.kiva.org/about/supporters#Paypal

If you're looking to get Kiva to support a new currency, I'm guessing that your best bet would be to talk to Paypal about adding native support for bitcoin.  Good luck.

Best,
John at Kiva

[Peter S]

. . . Recall what happened to the Zimbabwe dollar when it inflated at a rate of millions of percentage points and how that affected Kiva loans: http://www.kiva.org/partners/184

Since then, Zimbabwe has moved to the US dollar as it's primary currency. But what do you think happened to all the money Kiva loaned out?
. . .

I know it can be difficult sometimes when facts get in the way of a good argument, but I just wanted to correct the completely mistaken implication that Kiva lenders suffered any losses attributable to Zimbabwe's hyperinflation.  As the partner page you linked to points out, MicroKing Savings and Credit Company (MKF) -- Kiva's first and thus far only field partner in Zimbabwe -- has been a Kiva partner for only 3 months, and all their Kiva loans have been transacted in US Dollars.  That's why you'll find "Currency Exchange Loss: N/A" against each MKF loan on Kiva.

As far as bitcoin is concerned, and the idea that Kiva should adopt it, my view is that if something is too difficult for an intelligent layperson to understand (...a mining efficiency of .5 Mhash/J and a hash rate of 11447 Ghash/s... well, OK) then it just ain't ready for primetime, and probably never will be.

 

[asherp]

I know it can be difficult sometimes when facts get in the way of a good argument, but I just wanted to correct the completely mistaken implication that Kiva lenders suffered any losses attributable to Zimbabwe's hyperinflation.  

Did I say Kiva lenders suffered? It's pretty obvious that hyperinflation was really bad for the people of Zimbabwe, and it is by no means an isolated incident. The point is that even if a borrower starts to make a profit, what good is it when their government can effectively steal that wealth by printing money? That ability undermines all the efforts of Kiva and the MFIs.

As the partner page you linked to points out, MicroKing Savings and Credit Company (MKF) -- Kiva's first and thus far only field partner in Zimbabwe -- has been a Kiva partner for only 3 months, and all their Kiva loans have been transacted in US Dollars.  That's why you'll find "Currency Exchange Loss: N/A" against each MKF loan on Kiva.

Thanks for pointing out that Kiva's first involvement in Zimbabwe was through MKF. I didn't notice that on the right it says "Time on Kiva 3 months". Here is where I was misled:

During the period of hyperinflation, microfinance loans in Zimbabwe were extended for extraordinarily short terms and generally to cross-border traders.

So I assumed Kiva was using some other partner before MKF. My bad.

Hello Asher.  As noted above, Kiva's payment is done by Paypal.
http://www.kiva.org/about/supporters#Paypal

If you're looking to get Kiva to support a new currency, I'm guessing that your best bet would be to talk to Paypal about adding native support for bitcoin.  Good luck.

Hi John, thanks for posting! Bitcoin kindof undermines Paypal's business model, so I doubt they'd be interested in accepting it... but hey while we're all thinking positively here, I guess I should ask them anyway

 

You won't own stock in any chicken farm through Kiva, although you could well be providing interest-free money to fund a loan to a chicken farm. You might want to take some time to read About Kiva.

Paul

I wasn't saying Kiva is using the stock model right now. I am saying they could utilize such a model if/when they decided to accept bitcoin. The Global Bitcoin Stock Exchange (GLBSE) makes it possible for anyone to create and sell shares of their company for free. To me, the concept of lending money to someone isn't all that different from the concept of raising capital for a small business and paying back dividends to investors.

As far as bitcoin is concerned, and the idea that Kiva should adopt it, my view is that if something is too difficult for an intelligent layperson to understand (...a mining efficiency of .5 Mhash/J and a hash rate of 11447 Ghash/s... well, OK) then it just ain't ready for primetime, and probably never will be.

Sorry to break out the dimensional analysis on you! I was merely trying to estimate the cost of all the effort used to secure the bitcoin network. You don't really need to know all that to grasp the idea that right now 1 BTC is worth 15 USD, and that I can transfer that coin (or even one millionth of that coin) to anyone in the world who has access to a computer... But I think I get the sentiment a lot of you have, that's it's too complicated, especially for those who live in the first world and are pretty comfortable with the way things are.

I first heard about Kiva from the TED talk by Jessica Jackley. I submit that after watching about 50 TED talks, you see the world as a set of problems that require some clever solutions. Maybe bitcoin can help... For instance, I really like Ronan's suggestion and I think I'll take the time to research it further.

It sounds like bitcoin would be ideal in a pure P2P model.  If you're going to apply it to the Kiva model, then you have to deal with two intermediaries -- Kiva and the local MFI.  

Probably a better fit for bitcoin would be to integrate it with an existing mobile transfer services such as M-PESA:
http://en.wikipedia.org/wiki/M-Pesa

I know that Opportunity International (which is the parent organization of some of Kiva's Field Partners) is doing a lot of work into utilizing technology to reach more microfinance clients:  http://www.opportunity.org/blog/update-innovations-in-technology

Perhaps that's another organization to try.

Regards,
Ronan

[chris]

Hey asherp,

Just wanted to pop in to give you a little support. Your idea has been beaten-up pretty well in this thread (-:

At present, I don't think Kiva gets much of an advantage from using accepting bitcoins. From a microfinance perspective, the most attractive attribute of BC is that payments are individually cross-verified, and therefore don't rely on a fee-charging processor to clear the transaction. This reduces cost, which of course helps. But Kiva already gets free transactions thanks to Paypal, so there is little incentive to change that (and risk angering the Paypal gods!).

BC is too new, unproven, and not well-accepted. Still as someone who has studied both IT and economics, I'm very interested in tracing its development over time.

As far as concerns about BC being a pyramid scheme, well..... consider any other currency. People desire dollars or euros because they anticipate other people will want them, and they can therefore buy things with them. The system is based on people's acceptance. Because BC acceptance is low at the moment, I feel it's closer to collapse.

But new currencies are invented all the time, and many have gained acceptance. People in Africa have started using their prepaid cell phone minutes as a form of currency. Sure, there's a risk of the phone company gong kaput, but most people are expecting that won't happen in the near future. Or consider frequent flier miles: they can be earned and spent on flights, merchandise, event tickets, or donations.  In many ways my frequent flier miles are like cash, but I didn't need to buy them using a "real" currency. In fact, in some cases I prefer to accept them over dollars.

Anyway, I concur that there isn't much benefit for Kiva to accept BC, but it's not fair to base that on BC's certain doom.

[Peter S]

Kiva Software Engineers Pushing for Bitcoin Implementation

just an FYI for those interested, I have no comment