Dealing with different currencies when transferring money to another country is not a new issue and necessary to transfer the value. We have had days when people used to send physical gold with ships and still have armory trucks and airplanes full of cash going from one country to another for final settlements.

With globalization and open trading among countries we now need a better form of transferring value more than ever. Let’s see how you can actually transfer money abroad:

1- Pooling: Having a pool of money on both sides in different local currencies and transferring the money by just adding and deducting the money from the pool; as if the money never leaves the country.

2- Pairing/Netting: Let’s say I am sending KRW from South Korea to the US and at the same time somebody there is sending USD from the US to South Korea with the same amount. The first thought would then be: Cant we just net the money and settle this locally? Problem is solved. Same as pooling the money never has to leave the country. Sometimes it takes time to transfer money and it is because we have to wait to find the right match.

Both pooling and pairing are pretty efficient methods but they both require significant amount of trust to the escrow or the third party and also it wouldn’t work if the money flow is always from one country to the other in a one way direction. Then in that case you end up having a pile of money on one side and nothing on the other.

Our current system heavily relies on pooling and pairing especially when there is a systematic and regulated trade agreement between the entities or countries. It is a credit based system and requires trust.

Settlement, what people really expect.

Actual settlement however is a natural human expectation in any of these transactions that rarely happens in the current system because it comes with a price (Like an airplane full of cash).

Bitcoin is the airplane full of cash however that can transfer and settle your money right away at a very low cost. It is the only form of settlement that’s accepted by everyone and the reason simply is that it is a trust-less system which results in it’s global acceptance.

It removes the need for the middleman and speeds up the process. Lack of Bitcoin liquidity however is an issue for bigger transactions which will be gradually resolved as Bitcoin gets bigger.

Transferring values globally is not only an issue for individuals but it also is a problem for large banks and financial institutes. A cheap and fast global settlement method truly revolutionizes all these financial industries and they finally can catch up with the fast speed of trading internationally.

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