Why are blockchains more efficient?

Issue #1

Harry Glynn

Let's say you want to send some money to India.

Sending it on TransferWise costs $6.83 for next day delivery.

Sending it on Ethereum (a blockchain) costs $0.06 and takes 1 minute.

Why is that?

With TransferWise, you transfer money into their Canadian bank account and they transfer it out of an Indian bank account.

There are 3 companies involved, TransferWise and 2 banks.

With Ethereum, you transfer money directly into another Ethereum account.

Intuitively, me-Ethereum-you is more efficient than me-TransferWise-bank-bank-you.

The more organizations in the way, the more money it’s likely to cost as they all charge a fee.

Ethereum is more direct.

All a blockchain really is, is a big set of accounts with a built-in transfer agent.

A blockchain plays the role of TransferWise and the banks.

Combining functions saves money and time.

TransferWise and the banks also have huge fixed costs. Employees, offices, etc.

If you can avoid those expenses, it should mean a cheaper service.

And not only does reducing the middlemen make it cheaper, it makes it faster too.

It takes time for all those organizations to coordinate with each other.

It’s like playing a game of telephone vs talking in a big circle. In the circle everyone is immediately on the same page.

An inefficiency with our current system is money lives in separate places.

It’s walled off within different countries, banks, and companies.

The more money is separated, the more organizations are involved, the more time it takes to coordinate moving it around.

With blockchain everything is in one place so moving things around is really fast.

Imagine a giant global bank that has no owner and anyone can use. That's blockchain.

(Anyone can create an Ethereum account in 5 seconds. Try it yourself here: xdai.io)