Opinion of: Neeraj Srivastava, Chief Technology Officer at MNEE
When they first appeared, StableCoins were pitched as a revolution in payments. Traditional banking lines often take one to four days to resolve debit card transactions (and weeks for wire transfers) and charge you a hefty sum for the service. StableCoin settlements will not only be faster and cheaper; They are quick to install and cost almost zero.
Unfortunately, we can’t really claim that they live up to that promise. While transaction settlement times have been significantly reduced, they still vary significantly depending on the blockchain used.
Ethereum, home to most of StableCoin’s supply, takes three minutes to confirm transactions, and its fees sometimes run into the multi-dollar range.
We can do better. If StableCoins are to be truly sold as instant currency, the blockchain infrastructure needs to be better.
Some chains are bad at StableCoins
For developers, fintechs and merchants integrating StableCoins, the wish list is quite simple: near-instant finality, low-to-no gas fees, easy integration and predictable performance.
Even when you Compare chain, the differences are stark. If you make a USDC (USDC) transaction in Solana, the payment achieves final confirmation in about 400 milliseconds. At Arbitrum, the same transaction takes about three minutes. At the base, the wait time can be anywhere between three to nine minutes. Some chains, like plume or zksync era, can take 30 minutes or even hours.
We are far from a near stable end or predictable performance.
There is also the issue of gas bills. Ethereum, the backbone of the StableCoin market, continues to experience fee spikes, which can increase the cost of a single transaction of USDT (USDT) to $ 2 or $ 3. Other chains, such as avalanche or polygon, can process Transactions for less than $0.0003, although this is partly because these chains experience less traffic.
Related: Visa to start supporting StableCoins on four blockchains
The simple fact is that most StableCoin transactions still run on infrastructure that was never optimized for high volume, very low payouts.
The high cost of poorly optimized blockchains
At first glance, waiting a few extra seconds for your transaction to settle may not seem like a significant issue. So what if it costs a couple more dollars than expected? After all, these repairs are still faster and cheaper than a wire transfer. At scale, however, those issues result in enormous financial and psychological costs.
For everyday shoppers, delays mean inconvenience. No one wants to stand in a checkout line for three minutes while a transaction is confirmed. Unexpected fees constitute a significant cause of cart abandonment in e-commerce. The incoherence of blockchain infrastructure translates into a frustrating user experience and lost sales for merchants.
For professional traders, market makers and cross-border FX desks, the stakes are higher. In financial markets, every millisecond counts. A single second of latency can mean the difference between executing an arbitrage trade and losing it, while high transaction fees make certain trades unprofitable to deploy. Those issues ultimately trickle down to end-users, who are forced to accept higher costs due to market efficiencies.
StableCoin Issuers are launching their own chains instead
The good news is that the industry has recognized this problem and is tackling it head on. In particular, StableCoin issuers are launching their own blockchains expressly designed for payments.
Tether, for example, Issued Plasma, a blockchain focused stablecoin, while round Unveiled The own settlement network, called arc. Payment Giant Stripe is also building The own chain, Tempo, in collaboration with the paradigm. Purpose-built chains prioritize fast confirmation times and minimal fees.
This is an encouraging development, but it raises new questions. Will these chains truly revolutionize open and interconnected ecosystems, or will they lock out competitors? Ideally, a blockchain optimized blockchain will not only serve the issuer that built it, but will support multiple tokens and enable fair competition.
The industry must avoid the retreat of fragmentation and inefficiency that pervades traditional finance. Private blockchains, however optimized, will do just that. Converting your USDT to USDC to use one platform, then converting your USDC to USDE to use another chain, is a slow, paid process. The better path is to create open, high-performance blockchains that allow all stablecoins to operate on an equal footing.
The promise of instant, limitless digital currency is within reach. To achieve this, we need open, high-performance blockchains where all StableCoins can operate on an equal footing.
Opinion of: Neeraj Srivastava, Chief Technology Officer at MNEE.
This article is for general informational purposes and is not intended to be and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
