Mono-rail to no rails

Sharing observations and findings after spending more time in the DeFi world has been a fun part of the journey. It helps communicate to people inside of traditional finance environments and those outside them.

Talking about moving money in a traditional environment very quickly focuses on transfer types and funds flows. Transfer types are typically mono-rail-type conversations. Pick a use case and select the transfer type to get money between the banks.

For an incredible amount of funds flows, something like the below diagram becomes the consideration and choices.

Depending on the specifics, you might go a layer deeper but it’s still connected to the decisions above. For example, a project might use CCD SEC codes for the ACH debit if it is a business fund flow decision. A company might select Same Day ACH if it is a payout for labor performed during the week. If cost is less of a concern, speed is the thing, the payment is below a certain threshold, and the receiver’s bank participates in RTP, RTP it is!

In a DeFi world, it is more straightforward. The consideration looks more like this:

Funds come from a wallet, but it almost does not matter which one. The next question is which chain is in use, is it EVM or it is not, and what ecosystem is the money going into after the transfer.

The question becomes one of interoperability which usually takes a few days to a few weeks to solve from a cold stop, as opposed to what could be a decade in the other environment. Moving between banks doing ACH origination and returns is dramatically more difficult and time-consuming than moving between chains.

Neither solution is better per-say, as they each have their advantages but are undoubtedly different.