Why Real-Time Gross Settlement Systems Are Obsolete

RTGS systems like Fedwire and CHIPS settle in batches, creating hours or days of counterparty risk. This is a relic of mainframe-era computing.

• Trillions in daily exposure locked in transit.
• Operational hours create global arbitrage and liquidity fragmentation.
• No atomicity leads to costly fails and reconciliation overhead.

Blockchains enable atomic composability: value transfer and contract execution in one step. This is the core innovation of DeFi and protocols like Uniswap and Aave.

• Finality in seconds, not days, eliminating counterparty risk.
• 24/7/365 operation aligns with global digital commerce.
• Programmability enables complex transactions (e.g., flash loans) impossible in RTGS.

The end-state isn't one chain, but a network of specialized layers (e.g., Solana for speed, Ethereum for security) settled via bridges and interoperability protocols like LayerZero and Axelar.

• Real-time gross settlement across any asset, any chain.
• Capital efficiency through shared security models and intent-based routing.
• Sovereign chains can specialize while tapping global liquidity.

RTGS systems like Fedwire operate on banker's hours, creating settlement risk and delays. Stablecoins like USDC and USDT settle final payments in ~15 seconds, any time of day.

• Eliminates Counterparty Risk: Value transfer is atomic and final, not a promise.
• Unlocks Global Commerce: Enables real-time B2B payments and treasury operations across time zones.

Traditional cross-border payments involve multiple correspondent banks, each taking a fee and adding latency. On-chain stablecoin transfers collapse this chain into a single, predictable transaction fee.

• Cost Transparency: Fees are ~$0.01-$1.00, visible on-chain, not hidden in FX spreads.
• Direct Access: Removes rent-seeking intermediaries, passing savings to end-users and businesses.

RTGS ledgers are static; they can't enforce logic. Stablecoins are programmable assets that integrate natively with DeFi protocols like Aave and Compound for automated treasury management.

• Auto-Sweeping: Excess corporate cash can earn yield automatically via MakerDAO strategies.
• Conditional Payments: Enables escrow, streaming salaries, and complex settlement logic impossible in legacy systems.

Visa's pilot using USDC on Solana demonstrates a new paradigm. It's not just a payment, but a settlement infrastructure with ~400ms block times and sub-cent fees.

• Merchant Settlement: Funds are final and liquid instantly, vs. days for traditional card networks.
• Composability: Settlement layer integrates directly with on-chain liquidity pools from Orca and Raydium.

RTGS and commercial bank ledgers are opaque, requiring audits and reconciliation. Public blockchains provide real-time, cryptographic proof of all transactions and reserves.

• Real-Time Audits: Anyone can verify Circle's USDC attestations and mint/burn authority.
• Reduces Systemic Risk: Network-wide transparency allows for faster risk assessment than closed-loop banking systems.

Banks tie up trillions in capital in dormant correspondent accounts to facilitate global payments. Stablecoins and bridges like LayerZero and Wormhole use a shared, neutral ledger.

• Capital Efficiency: Frees trapped liquidity for productive use.
• Unified Ledger: Creates a single source of truth, eliminating reconciliation headaches and operational risk.

RTGS systems like Fedwire settle in batches, creating multi-hour delays and counterparty risk. This is incompatible with global, 24/7 digital commerce.

• Risk Window: Settlement finality can take 3-6 hours, exposing parties to credit risk.
• Inefficient Capital: Trillions in liquidity are trapped, unable to be reused intraday.

Blockchains enable Delivery vs. Payment (DvP) in a single atomic state transition, eliminating settlement risk. This is the core innovation of DeFi protocols like Uniswap and Aave.

• Risk Elimination: Asset transfer and payment are a single, indivisible operation.
• Programmability: Enables complex, conditional logic (e.g., flash loans) impossible in RTGS.

RTGS systems are closed-loop silos. Connecting them requires a labyrinth of correspondent banks and SWIFT messages, adding days of latency and opacity. Cross-chain protocols like LayerZero and Axelar solve this natively.

• Friction: Cross-border payments average 1-3 days and ~6% in fees.
• Opacity: No real-time tracking or programmable conditions.

RTGS relies on a central operator (e.g., a central bank) for finality, creating a single point of failure and control. Blockchain settlement distributes trust across a decentralized network of validators.

• Censorship Risk: Transactions can be blocked by the central operator.
• Operational Cost: Maintaining the centralized infrastructure is expensive and opaque.