The blockchain has been lauded as the technology that brings efficiency to just about every aspect of our everyday lives. It makes sense therefore that technology is widely adopted especially by countries that are not well resourced and are underdeveloped.
For instance, the technology is believed to be a game-changer in the sphere of cross remittances, an very important flow of foreign currency for developing countries. Over the past few years, the technology has demonstrated that the cost making payments across borders can be much cheaper when using digital currencies anchored on the blockchain.
Similarly, the blockchain also looks to make an impact on the insurance business. Through smart contracts on the blockchain, the technology is able to speed up many processes while reducing overhead costs. This in turn helps to make an affordable and strong insurance industry.
The list of areas where the technology is making positive changes, and where it will have a similar impact, is growing. However, of late, this evolving technology has proven to have certain flaws, which if not solved, renders the whole concept of the blockchain moot. That flaw manifests itself as the high transaction fees and so far this problem has seriously affected Bitcoin and Ethereum networks.
When the crypto market goes through a bull-run, the much talked about efficiency and cost-effectiveness simply vanishes. Transacting on these two networks becomes so costly such that using traditional channels when sending remittances, for instance, looks much better.
To illustrate, on September 2, the average transaction fee on the Ethereum network topped $15.13 yet when sending money to Sub Saharan Africa via money transfer organisations, it will cost $10 for every $100. In addition to the high network fees, users have to contend with slower confirmation times due to networking clogging. For business organisations, faster confirmation or processing of payments is absolutely essential. When this cannot be guaranteed, it adds uncertainty.
Fortunately, this problem seems to be more profound on the Ethereum network, the largest smart contract platform for deploying decentralised applications (Dapps). Still, many of these Dapps were created based on the assumption that transaction fees remained insignificant. However, given the ongoing Defi bubble, which some blame for fueling ETH network fees, it looks like the scourge will be around for a long time.
As more and more Defi tokens are getting launched, this only increases pressure on the fees. So bad are the fees that some organisations, whose operations have been badly hit by the fees, are now searching for alternative chains where fees have remained relatively low.
But there is a challenge when looking for an alternative, these must also still adhere to the decentralization ideals and still be capable of scaling.
That is what one publishing platform, which tips its contributors with ERC-20 tokens, essentially said when it suspended payments using ETH tokens. Publish0x recently said the current ETH fees make it almost impossible for business to continue as before. The publishing platform has said it is open to ideas including using alternative tokens for tips.
While Publish0x is yet to make a decision on how it wants to get around this problem, it appears the Circle Consortium, the issuers of the USD-C stablecoin have already made up their mind. Circle Consortium has chosen the Algorand blockchain. One of the reasons for this choice is obviously the scalability of the Algorand chain. At 1000 transactions per second, this blockchain helps to make the stablecoin a more useful protocol for solving real-world financial problems.
However, it is in the context of high transaction fees that Algorand blockchain is winning the argument. Transaction fees on this chain have remained unchanged even as interest in Algorand has grown. Staying at 0.001 Algos (or 1/20 of a cent) during a crypto bull run speaks volumes about the capacity of the blockchain.
Clearly, the Algorand blockchain has something that first-generation networks do not possess. Algorand is not held back by the politics that dog proof of works networks and with constant improvements, like the rekeying functionality, the chain will probably see more Dapps being deployed on it.
While Ethereum struggles with its much delayed ETH 2.0, many more organisations are actually migrating to Algorand as it is becoming clear that the chain was built to scale. As more organisations become fully acquainted with the pros and cons of blockchain technology, it is hoped that many more will switch to these tactics.
Terence Zimwara is a blockchain writer, content creator and crypto analyst who has contributed to a number of international publications and news sites like Coindesk, BitcoinAfrica, Coin Info News publications. He is also involved in efforts aimed at raising awareness about the potential impact of this technology in communities across the African continent.