Opinion: Neeraj Srivastava, MNEE Chief Technology Officer
When stablecoins first appeared, they were touted as a revolution in payments. With traditional bank rail, debit card transactions often take 1 to 4 days to clear (wire transfers take weeks) and you are charged a high amount for the service. Stablecoin payments are not just fast and cheap. They are done almost instantly and the cost is almost zero.
Unfortunately, I can’t really say they delivered on that promise. Although transaction settlement times have been significantly reduced, they still vary significantly depending on the blockchain used.
Ethereum, which makes up the bulk of the stablecoin supply, still takes three minutes to confirm transactions, and fees still sometimes spike to a few dollars.
We can do better. For stablecoins to be truly sold as instant money, blockchain infrastructure needs to become more efficient.
Some chains don’t like stablecoins
For developers, fintechs, and merchants integrating stablecoins, the wish list is relatively simple. That means near-instant finality, low or no gas fees, easy integration, and predictable performance.
But when you compare the chains, the differences are obvious. When you transact with USDC (USDC) in Solana, your payment will receive final confirmation within approximately 400 milliseconds. On Arbitrum, the same transaction takes about 3 minutes. At the base, wait times can range from 3 to 9 minutes. Some chains like Plume and ZKsync Era can take 30 minutes or even hours.
You cannot achieve near-instant final results or predictable performance.
There is also the issue of gas costs. Fees for Ethereum, the backbone of the stablecoin market, continue to rise, and the cost of a single USDT transaction could rise to $2 or $3. Other chains such as Avalanche and Polygon can process transactions for less than $0.0003, but this is also because these chains have less traffic.
Related: Visa launches stablecoin support on four blockchains
The simple truth is that most stablecoin transactions are still run on infrastructure that is not optimized for high-volume, very low-cost payments.
High costs due to poorly optimized blockchain
At first glance, waiting a few more seconds for a transaction to complete may not seem like a significant problem. So what happens if it’s a few dollars more expensive than expected? After all, these payments are still much faster and cheaper than wire transfers. However, when these problems become large-scale, they incur enormous economic and psychological costs.
For everyday consumers, delays mean inconvenience. No one wants to wait in a checkout line for three minutes waiting for their transaction to be confirmed. Unexpected fees are a major cause of cart abandonment in e-commerce. Unreliability in blockchain infrastructure leads to poor user experience and lost sales for sellers.
For professional traders, market makers and cross-border FX desks, the stakes are even higher. In financial markets, every millisecond counts. While a one-second delay can mean the difference between executing an arbitrage trade or missing out, high transaction fees make it unprofitable to deploy certain trades. These problems ultimately trickle down to end users, who are forced to accept higher costs due to market inefficiencies.
Stablecoin issuers are launching their own chains instead.
The good news is that the industry is recognizing this problem and tackling it head-on. Stablecoin issuers are increasingly launching their own blockchains designed explicitly for payments.
For example, Tether launched Plasma, a stablecoin-focused blockchain, and Circle announced its own payment network called Arc. Payment giant Stripe is also working with Paradigm to build its own chain, Tempo. These dedicated chains prioritize fast confirmation times and minimal fees.
This is an encouraging development, but it also raises new questions. Will these chains truly evolve into open and interoperable ecosystems, or will they crowd out competitors? Ideally, a payments-optimized blockchain would not only serve the issuers who built it, but would also support multiple tokens and allow for fair competition.
The industry must avoid replicating the fragmentation and inefficiencies that plague traditional finance. Siled private blockchains, even when optimized, do exactly that. Converting USDt to USDC to use one platform and then converting USDC to USDe to use another chain is a time-consuming and expensive process. A better way is to create an open, high-performance blockchain that allows all stablecoins to operate on an equal footing.
The promise of instant digital money without borders is within reach. Achieving this requires an open, high-performance blockchain where all stablecoins can operate on an equal footing.
Opinion: Neeraj Srivastava, MNEE Chief Technology Officer.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.