This document discusses cryptocurrency remittance and the existing landscape of remittance providers. It notes that while incumbents like banks and Western Union offer brick-and-mortar services, transfers can take days and costs 8-10% of the value. Upstarts using cryptocurrency aim to provide faster, cheaper transfers. Remittance using cryptocurrency is discussed as a second-generation technology that could empower people. Technical challenges around identity management and verification are also covered.

1. Exploring Cryptocurrency Remittance
June 2014
Doug Sharp, Dan Cocuzzo, Justin Maletsky, Alex Marlantes

2. 2
Existing Landscape of Remittance Providers
Incumbents
• Banks (existing payment rails), FIs
• Western Union, Moneygram
Benefits
• Brick & mortar intake/distribution
• Known, trusted
Considerations
• Need globally connected system
• Cost: 8-10% of transfer value
• Lag: can take 2-5 days to clear
• Banks require accounts
Upstarts have entered market
• WalMart
• TransferWise, Xoom
• Credit card networks – V, MA, AXP
• Cryptocurrency-based

3. 3
Remittance as a 2nd Generation Technology

4. 4
Ronald’s Problem from Bitcoin in Uganda: Empowering People

5. 5
Unfounded Hype or Legitimate Technology?

6. 6
Technology Takes Time: BitPesa Launches 2 Weeks Ago
<- Existing
ecosystem to
build from
<- Regulatory
hurdles
<- Stability and
mining
infrastructure

7. 7
Future Outlook Uncertain, but Optimistic

8. 8
Regulatory Case Study: Coincove
Know Your Customer
• Uses a third party API to confirm identity
• Collects passport/drivers license before fulfilling orders
• Collects proof of mailing address via utility bill
Anti-Money Laundering Policies
• Confirms identity before confirming orders
• Provides identity information to regulatory authorities
• Can refuse any transaction
• Monitors transactions for suspicious activity
• Provides transaction data to authorities

9. 9
Technical Challenge: Identity Management & Verification
• Blockchain technology allows users to utilize public key
cryptography primitives to publish and manage their own
identity information.
• No inherent certainty or central authority for dispute
resolution; probabilistic notion of identity by cross-
referencing.
• NamecoinID and OneName built atop NameCoin blockchain
to manage identity information: email addresses, Bitcoin/
Namecoin/*coin wallet addresses, GPG key, XMPP address,
etc.
• Future outlook: regardless of the platform, once enough
users add information to a block chain mechanism in a
standardized format, services will let users sign in using their
decentralized identity.

10. 10
Appendix

11. 11
Existing Landscape of Remittance Demand
Large TAM
• $436bn of remittances to developing countries
• Growing ~8% p.a.
• Larger market if developed countries are
included
Concentration
o 40% of value sent to India, China, Philippines
and Mexico
o Creates opportunity for niche product launch
into single, large market

12. 12
Current Platforms, Tech, & Players
• Existing BTC protocol and network well-suited for remittance payments; higher-
level applications can be developed on top as needed
• A common trend in remittance startups is to focus on specific markets.
CoinCove (Mexico), CoinFling, BitPesa (Kenya), etc.
• Most platforms allow senders to link with existing bank accounts to purchase
bitcoins. Recipients may withdrawal to a bitcoin wallet or convert to local
currency

13. 13
Technical Challenges
Identity Management
• Regulations (KYC, AML, etc.) require institutions to perform due diligence on customer identity and collect information
about customers that wish to participate in financial transactions
• Bitcoin provides pseudonymity through wallet addressing
• Is it a good idea to bake real identities into transactions?
Security & Trust
• Senders/recipients of remittance payments rely heavily on the trust and security of the system to avoid fraud, especially
true in areas with poor technological and financial literacy (prefer cash).
• Hacks / other incidents (Mt. Gox) are harmful to public perception of Bitcoin as legitimate, safe asset.
Technology adoption and education among target users

14. 14
Distributed Identity Management…in the Cryptocurrency Ecosystem
• Use Public Key Infrastructure to allow users to publish and control their identity information
• No inherent certainty or central authority for dispute resolution; probabilistic notion of identity
o 3rd party services and channels may be used for cross-referencing (i.e. social networks)
• Namecoin: key-value store as a mechanism for registering, updating, and transferring information based
on Bitcoin
o Allows for creation of globally unified namespaces (domain system, personal identity)
o Does not define the format of an identity, only the consistency / consensus mechanism

15. 15
Distributed Identity Management…in the Cryptocurrency Ecosystem
Namecoin ID (www.nameid.org)
• User identity can be composed of email addresses, bitcoin/namecoin/*coin addresses, gpg key (fingerprint), xmpp
address, and other things (uses Namecoin blockchain)
OneName (www.onename.io)
• Uses links to/from accounts on social networks, organizations, and other digital services to verify user identity (uses
Namecoin blockchain)
BISON by Jumio NetVerify, BlockScore
• Services that advertise user verification and vetting for digital transactions with compliance
• Unclear if they actually use blockchain technology or act as 3rd party central authority
Network Effect ~ regardless of the platform, once enough users add information to a block chain mechanism in a
standardized format, services will being letting users sign in using their decentralized identity
Identity verification mechanisms will be crucial to provide trust & compliance for Bitcoin remittance services