Iron on patches work no better today because they still work the same way they always have: heat from an iron fuses a patch on. Unfortunately, heat in the clothes dryer then loosens it.
One applies an iron-on patch with heat, usually from an iron. The heat melts the patch's adhesive which permeates the fibers of the patch and the garment and pressure then binds them together. A clothes dryer's heat, while not as intense as the iron's, also softens the adhesive and weakens the bond. Additionally, this happens while the garment is being "worked over" by the dryer's tumbling action. Over time, the patch separates from the garment.
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