How Cryptocurrency Transfers Work.

The phrase “payment transfer system” sounds so technical, but it’s really just a way for one individual to make a payment to another individual or entity.

Imagine you’re living overseas and want to send some of your wages back to your home country. How do you accomplish this? Why through some payment transfer system of course.

These are known as remittances, but even when you buy something online (and who doesn’t) you’re using a payment transfer system.

That’s a pretty useful system, don’t you think?

It is, but it’s also a bit cumbersome. Payment transfers in fiat currencies can take several days, you need to provide detailed contact information, and it can be quite expensive. Here are the most common issues that have been identified in traditional payment transfer systems:

Fees: Bank transfers can be extremely expensive, especially for smaller transfers. Third-party services such as Western Union and Paypal aren’t much better either.

Exchange rate: If you’re sending fiat currency to a different country there’s a very good chance that the currency you’re sending will need to be converted to the local currency. This means an exchange rate will be used to convert the currency, and most banks will quote rates that are 5-8% more expensive than interbank rates.

Time: Bank transfers can take up to several days, which is frustrating if you need access to your money right away.

Access: It’s been suggested by the marketing of banks and money transfer agents that you will always have quick access to your money, but the reality is quite different. For those in developing countries it could mean a long journey to find an office or agent where they can collect their funds.

Legalities: Some countries have legislations governing money transfers that could mean that you’re subject to taxes or other penalties.

Thankfully a better system has been developed. That is the cryptocurrency system that emerged in 2009 when Satoshi Nakamoto released Bitcoin to the world.