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Author Topic: Reasons Kiva should accept Bitcoins  (Read 16019 times)
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asherp
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« on: July 08, 2011, 02:37:54 PM »

I'm fairly new to Kiva, but I do know a bit about Bitcoin so I thought I'd explain why it's useful. Bitcoin is an international cryptographic currency that can be used either as a store of value or as a medium of exchange. The transaction fees for money transfers in bitcoin are negligible compared to paypal, credit cards, and bank transfer. For that reason alone, Kiva should adopt it over PayPal. As a purely digital currency, Bitcoins can't be seized, inflated, or even taxed by governments. This is why some say that Bitcoin will become the de-facto currency of developing countries. As of this week, Bitcoin can be used as a local currency through Android-enabled phones. However, until it obtains wide-spread adoption, local exchangers will need to exist to get funds into whatever currency is used locally. This is basically where Kiva would really help, by setting up exchanges and teaching people how to use the technology to their advantage.

Funds can be sent directly to borrowers, and borrowers can pay back dividends directly to lenders. This process can be managed by the Global Bitcoin Stock Exchange. As the name suggests, it's a stock exchange anyone can use to create a company and to start selling shares. Kiva could use this as the back-end to broker all funds between lenders and borrowers. I'd highly recommend working with Nefario (the GLBSE creator), but the infrastructure is basically waiting to be utilized. Here's an interview with him to get you started http://bitcoinweekly.com/articles/interview-with-nefario-founder-of-bitcoin-global

Anyway, there's my two cents. Full disclosure: I own about 11 BTC, worth about $150 USD as of today. I was going to save it for my kid's college fund, but if I could instead invest it into Kiva shares, I would Smiley
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cpbailey
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« Reply To This #1 on: July 08, 2011, 03:37:44 PM »

Kiva doesn't pay transaction fees for Paypal under a special arrangement with Paypal.  Even a negligible transaction cost with millions of dollars per month would cut into donations.
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asherp
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« Reply To This #2 on: July 08, 2011, 03:49:24 PM »

Good to know! Well, bitcoin's transaction fees are actually optional - they are just there to incentive miners to prioritize your transactions. Ultimately, this means transactions get verified in minutes rather than hours if you pay a little extra. You also don't have to worry about charge-backs, since all bitcoin transactions are final. On the other hand, I'm guessing Kiva doesn't see a lot of fraudulent charges either?
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iampaul
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« Reply To This #3 on: July 08, 2011, 04:37:49 PM »

Bitcoin is an international cryptographic currency that can be used either as a store of value or as a medium of exchange.
Quote
As a purely digital currency, Bitcoins can't be seized, inflated, or even taxed by governments.

asherp, can you comment on this article and the events described within?

http://blogs.forbes.com/petercohan/2011/06/28/can-bitcoin-survive-is-it-legal/

Paul
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asherp
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« Reply To This #4 on: July 08, 2011, 05:31:08 PM »

asherp, can you comment on this article and the events described within?

http://blogs.forbes.com/petercohan/2011/06/28/can-bitcoin-survive-is-it-legal/

Paul


I think I've read every bitcoin article in the mainstream press, just not this particular one. Sure, I'll give it a shot.

The article gets a few things wrong about the Mt Gox crash on June 19, wherein the most popular bitcoin exchange was hacked, and a lot of users' login information was posted on the web (mine included - you can even see my user name/email if you want). The important thing to note is that this was an example of bad security practices on behalf of mtgox, and not the bitcoin protocol itself. Anyway, the article says the bitcoin price plummeted to pennies. While this appeared to be the case, it was primarily due to an attacker gaining access to one or several Mt Gox accounts and attempting sell everything and cash out. However, all the trades were rolled back, and the USD price on all the other exchanges remained the same price throughout the crash. Many thought that surely everyone would dump their bitcoins as soon as Mt. Gox came back online; this didn't happen either; the price is still around pre-crash levels.

What made this hack relevant was that people woke up to the reality of what it means to value your own financial security: when you give up on banks and credit cards as the protectors of your wealth (and debt), you have to take on certain responsibilities. For example, you probably shouldn't be using "password" as your password, because no one will come to your rescue if/when you get hacked. Bitcoin is as good as cash - so once it's gone, there's no one to complain to but yourself. That being said, the less tech-savvy among us may wish to use an intermediary to secure their bitcoin; perhaps Google's wallet service may come into play here, but again this is another area where Kiva could step in.

"Bitcoin might survive as a currency if it can find a way to make consumers and merchants better off. But its limited use so far suggests that the most compelling application — as a way to pay anonymously for illegal drugs sold on Silk Road – is the one that has been referred to the U.S. Attorney General as a violation of money laundering statutes."

Actually, any currency can be used to buy drugs, which any drug test on US dollars can attest to (I actually looked that up on Snopes the other day). To me, that's not really a direct criticism of bitcoin. As a medium of exchange, it is amoral. As for it's "limited use", I refer you to the list of bitcoin merchants here https://en.bitcoin.it/wiki/Trade You might wonder why merchants would be willing to accept bitcoin over credit cards. Ask your local barista how much VISA takes off the top in transaction fees compared to their profit margin and you have your answer. If anything, merchants should be offering you a discount if you use bitcoin. Getting discounts on coffee prices is a first-world problem. The fact that I can send a .00001 BTC to anyone in the world for free is what's relevant here. All we need are local exchangers.

With regards to the legality of bitcoin, check out This Week in Law episode 114 (Bitcoin discussion starts at 20:50)
The roundtable of lawyers conclude that while bitcoin is not illegal in the US, politicians could certainly make it difficult to do business there. Whether or not that happens is less important for countries that find the currency useful, especially in the developing world.
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iampaul
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« Reply To This #5 on: July 08, 2011, 08:35:10 PM »

I think I've read every bitcoin article in the mainstream press, just not this particular one. Sure, I'll give it a shot.

Thanks for the response. I've been reading about bitcoin for a while now since the first "mainstream press" piece I read quite a while ago - don't even remember what it was at this point. I guess the bottom line for me is that I find a great deal to be skeptical about and a little bit that I just can't wrap my head around - maybe because I am one of the "older generation," as one person critical of Peter Cohan's article labeled him, or maybe because I'm just not of an economist type of mindset. Searching Google for news items brings up enough recent items to definitely concern me. But my personal feelings about bitcoin really are irrelevant to your stated goal here.

As I see it, you hope to convince Kiva to adopt bitcoin and then hope to also have it adopted "locally" internationally by the microfinance institutions that Kiva partners with around the world. I won't even get into the complexity of the second part of that.

Addressing just the first part - the Kiva part - I just have to point out that "we is not they." You addressed this suggestion to KivaFriends, which does include some Kiva staff members among its members and participants and yet is not Kiva. I find the powers of persuasion of KivaFriends over Kiva to be pretty limited IMHO, but peruse the many topics and threads found here and decide for yourself the degree of influence. My suspicion is that, here, the suggestion may just fade away.

You might be better served to approach Kiva directly, through their own website contact forms and/or their customer service e-mail address contactus@kiva.org.

My $.02, which as I understand it is now worth about 0.0014286 BTC but would have been about 0.0229885 BTC in late March and about 0.3333333 BTC last October. BTW that's one heck of a growth rate! It sure seems that it has favored early adopters, especially if they can keep the expansion going for a while. Kinda reminds me of some other types of expansion.

Paul
« Last Edit: July 08, 2011, 08:35:45 PM by iampaul » Logged
iampaul
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« Reply To This #6 on: July 08, 2011, 09:00:45 PM »

BTW, asherp, was the following your statement and, if so, what did you mean by it?
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bitcoin - internet's way of rewarding geeks for all their years of quiet service with boatloads of cash.

Paul
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asherp
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« Reply To This #7 on: July 08, 2011, 11:58:42 PM »

BTW, asherp, was the following your statement and, if so, what did you mean by it?
Paul


Yep, that was me. Bitcoin is a pretty complex system and most people will write it off for that reason alone; but it's also the kind of system that attracts a lot of geeks. This means the first people to get into bitcoin are geeks (with money or mining equipment to invest) and, of course, the speculators. Due to bitcoin's appreciation, the ones who bought in a year ago no longer need to work. So, in a sense, they have been rewarded for their due diligence.

You might have figured out that I'm into a lot of things - I'm currently getting a PhD in space physics, but I admire a lot of people outside of my field of research. Some days it's a game designer or an AI artist or a hacker. Today it's whoever came up with the bitcoin system.
« Last Edit: July 09, 2011, 12:00:07 AM by asherp » Logged
asherp
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« Reply To This #8 on: July 09, 2011, 12:33:45 AM »

As I see it, you hope to convince Kiva to adopt bitcoin and then hope to also have it adopted "locally" internationally by the microfinance institutions that Kiva partners with around the world....

You might be better served to approach Kiva directly, through their own website contact forms and/or their customer service e-mail address contactus@kiva.org.

Thanks for the suggestion. The reason I wanted to bring it up here is that I'm not sure how it should play out and I'm looking for ideas that fit well with Kiva's system. However, I think bitcoin's adoption is inevitable with or without Kiva's involvement: as a store of value it beats a flock of sheep any day, and the fact that it can't be printed at the whim of local governments means that local economies can flourish. Surely there are ways that bitcoin could be used to help in the micro-financing problem, since that's what it's designed to do!

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DoubleR
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« Reply To This #9 on: July 09, 2011, 01:53:36 AM »

Surely there are ways that bitcoin could be used to help in the micro-financing problem, since that's what it's designed to do!

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
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