By
Steve Muchoki
May 6th, 2024
While TransferWise believes that blockchain has no significant advantage over existing systems, we decided to burst the myths startup communicates.
Even though in the early stage of its development, the blockchain technology is hailed by many as a potential game-changer in the future. Several FinTech organizations are flexing their muscles to facilitate instant cross-border payments using blockchain. However, the London-based financial startup TransferWise which transfers money across 70 countries, refuses to acknowledge the potential of the blockchain technology. TransferWise believes that blockchain is still pretty novice and there no potential advantage of using it.
TransferWise Finds No Major Advantage of Using Blockchain
Co-founder and chairman of TransferWise – Taavet Hinrikus – recently appeared on Fortune’s latest episode of “Balancing the Ledger”. Hinrikus snubbed any potential advantage of using the blockchain technology.
“We’ve heard this dream many times from different people. However, if you start digging into it, you realize that it may look great on paper, but in reality, to make use of it, it’s really hard. We’ve looked at different blockchain technologies, but yet we haven’t found anything which enables us to do what we do in a way that is cheaper or faster” said Hinrikus.
The thing is that in the last one decade, blockchain has yet to sweep through global banking institutions. The global use of blockchain can only help to prove its efficiency and benefits over the traditional banking systems. The blockchain adoption in the banking space remains relatively slow. However, FinTech companies like Ripple are working to change this scenario. But it looks like blockchain has a higher milestone to achieve to actually push the transition.
On the other hand, TransferWise claims that it can transfer money from Australia to U.K in just 15 seconds. Moreover, it charges a fee of 1% or less. While carefully trading his words, Hirinkus goes to make a mild comparison of TransferWise with Ripple.
“If every bank in the world was going through the Ripple network, it would be amazing. Yet how many banks are using Ripple today in production? It’s a very short list,” Hinrikus says. “In that sense we’re big supporters of Ripple or anything else…and if any of these gets enough adoption, and it actually materially helps us do things cheaper and faster, we’d love to, but so far we haven’t found one.”
Busting the Myth of TransferWise
While that TransferWise chairman claims to see little advantage of using blockchain, the scenario can be actually different. There are already formidable startups like Ripple which prove that blockchain is the game-changer. While TransferWise takes 15 seconds to complete a transaction, Ripple’s blockchain-based XRP token does this in 4 seconds. This itself shows that Ripple is several times more efficient than TransferWise.
Moreover, Ripple is making consistent inroads in the global banking space with its blockchain solutions. Banking giants like PNC and Banco Santander have pledged support for the Ripple technology. This year itself, Ripple made several partnerships with banking institutions across Asia, the Middle East, and some parts of Europe. The rate at which Ripple continues to grow, it won’t be legit for TransferWise to undermine the blockchain penetration.
Moreover, Binance demonstrated that it can transfer millions of dollar at a very little fee. Binance has been recently moving millions of dollars of Bitcoin funds to its cold storage wallet. For a transaction that took place in block 550211 shows that Binance transferred BTC worth just over $1 million on November 15. Binance paid an $8 fees for the transfer to go through. This transaction was not particularly large at 1550 bytes.
But another transaction pointed by Antoine Le Calvez of CoinMetrics.io is more notable for its size of $600 million transfer.
Binance just created the largest unspent transaction output existing today (but not all time) at 109k BTC (nearly $600M).https://t.co/Ot2ST37flU
— Antoine Le Calvez (@khannib) November 15, 2018
These two transactions demonstrate the irony of Bitcoin transactions. It shows that the fee is independent of the amount transacted. Rather, it depends more on the computer resources required to store this information. The second transaction on block 550156 comprised 5591 bytes and yet cause Binance just over $7.
Now if we go by TransferWise’s charge of 1% fee, it would cost the startup a whopping $6 million to transfer $600 million worth assets. This itself goes to show that blockchain indeed has got some potential benefits as otherwise claimed by TransferWise.
It’s just that one needs to have a better understanding of how the technology operates.