How Does Blockchain Money Transfer Work?

You may have heard of the terms ‘blockchain technology’ and ‘cryptocurrency’ and wondering how it fits together with Bitcoin or Litecoin.

Blockchain technology

Here’s a quick and simplified definition:

Blockchain – is a public database (some describe it as a ledger) containing all transactional information

Cryptocurrency – is a type of digital currency i.e. digital cash

Bitcoin – is a type of cryptocurrency

Litecoin – is a type of cryptocurrency

Sending money home or abroad

There are currently several ways to send money using your bank, or with a money transfer services.

Traditionally, when you transfer funds, money goes from one bank to another, and then to the recipient’s account. The bank acts as an intermediary for your transfer. They’ll have all your information (and often collect data about your spending habits), whether you like it or not.

There are also money transfer services like Western Union and MoneyGram are less instant, you can pay with cash and both parties go to a retail location. You can also fund those transfers from your bank account or credit card however it may take several days, and you’ll be hit with extra fees.

Venmo, PayPal, and Square Cash are some other third party services that act as an intermediary for your transfer. However, whichever the case, someone’s still holding onto your information.

Blockchain money transfer

Here’s an illustration of how blockchain money transfer works:

Zack recieves money via bitcoin

  1. Imagine that you want to send money to your cousin in Canada, Zach
  2. The new transaction is configured into a “block” and is shown online
  3. The new transaction block is sent to everyone in the network
  4. Everyone in the network helps validate the transaction to ensure it is accurate
  5. Once approved by the majority, the block is added to a chain of recorded transactions in a public ledger, the block is then added to the chain which provides a permanent, non-disputable and transparent record of the transaction
  6. Zach receives your money

Key takeaways

To summarise, in this scenario, you and Zach are transferring funds to each other directly; no one acts as an intermediary. Those in the network validating the transaction – are seeing data relating to the code of the transaction, not your personal data, or Zach’s.

Wirex money transfer

Sending money via Wirex is really simple:

  1. Fund your Wirex account with Bitcoin or Litecoin
  2. Make a transfer to your recipient’s multi-crypto wallet by clicking send and entering their public key (Bitcoin or Litecoin wallet address)
  3. From there, they can use the multi-crypto funds to:
    1. Exchange to traditional currency (Wirex app)
    2. Withdraw it at an ATM (Wirex Plastic Card)
    3. Shop online or in person anywhere Visa is accepted (Wirex Virtual/Plastic Card)

Zero blockchain fees between Wirex Community

We’ve recently upgraded our platform (in preparation for Segwit), which means internal transfers between Wirex customers are free. That’s right, there is no blockchain fee when transferring to another Wirex account.

Note*: A blockchain fee will still incur when transferring to an external (non Wirex) multi-crypto address. This is a miner’s fee (as part of the multi-crypto system). Learn more about blockchain fees.

Lowest exchange rates for Wirex customers

We use a pool of liquidity providers, W-Pay, who compete for the lowest exchange rate at the time of your transaction. We are focused on expanding our network, to ensure you’re getting the best and most competitive rate, always. Learn more about W-Pay.