Stablecoins Deserve Better, And They’re Finally Getting It

Opinion by: Neeraj Srivastava, chief technology officer at MNEE

When they first emerged, stablecoins were pitched as a revolution in payments. Traditional banking rails often take one to four days to settle debit card transactions (and weeks for wire transfers) and charge you a hefty sum for the service. Stablecoin settlements wouldn’t just be faster and cheaper; they’d be near-instant and cost almost zero. 

Unfortunately, we can’t really claim they’ve lived up to that promise. While transaction settlement times have been significantly decreased, they still vary substantially depending on the blockchain used. 

Ethereum, the home to the vast majority of the stablecoin supply, takes three minutes to confirm transactions, and its fees still occasionally spike up to multiple dollars. 

We can do better. If stablecoins are to be truthfully marketed as instant money, blockchain infrastructure needs to become much more efficient.

Some chains are bad at stablecoins

For developers, fintechs and merchants integrating stablecoins, the wish list is relatively simple: near-instant finality, low-to-no gas fees, easy integration and predictable performance. 

Yet when you compare chains, the differences are stark. If you make a transaction with USDC (USDC) on Solana, the payment achieves final confirmation within roughly 400 milliseconds. On Arbitrum, that same transaction takes about three minutes. On Base, the waiting time can be anywhere between three to nine minutes. Some chains, like Plume or ZKsync Era, may take 30 minutes or even hours. 

We’re far from near-instant finality or predictable performance.

There’s also the issue of gas fees. Ethereum, the backbone of the stablecoin market, continues to experience fee spikes, which can increase the cost of a single USDt (USDT) transaction 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 truth is that most stablecoin transactions still run on infrastructure that was never optimized for high-volume, very-low-cost payments.

The high costs 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 settlements are still way faster and cheaper than a wire transfer. At scale, however, those issues result in enormous financial and psychological costs.

For everyday consumers, delays mean inconvenience. No one wants to stand at a checkout line for three minutes while a transaction is being confirmed. Unexpected fees constitute a significant cause of cart abandonment in e-commerce. The unreliability of blockchain infrastructure translates into a degraded user experience and lost sales for merchants.

For professional traders, market makers and cross-border FX desks, the stakes are even higher. In financial markets, each millisecond counts. A single second of latency can mean the difference between executing an arbitrage trade and missing it, while high transaction fees make specific trades unprofitable to deploy. Those issues 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 has recognized this problem and is tackling it head-on. Increasingly, stablecoin issuers are launching their own blockchains that are explicitly designed for payments.

Tether, for example, issued Plasma, a stablecoin-focused blockchain, while Circle unveiled its own settlement network, called Arc. Payments giant Stripe is also building its own chain, Tempo, in collaboration with Paradigm. These purpose-built chains prioritize rapid confirmation times and minimal fees.

This is an encouraging development, but it raises new questions. Will these chains truly evolve into open and interoperable ecosystems, or will they lock out competitors? Ideally, a payments-optimized blockchain wouldn’t just serve the issuer that built it, but would support multiple tokens and enable fair competition.

The industry must avoid recreating the fragmentation and inefficiency that plagues traditional finance. Siloed 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, fee-ridden process. The better path is to create open, high-performance blockchains that allow all stablecoins to operate on equal footing. 

The promise of instant, borderless digital money is within reach. To achieve this, we need open, high-performance blockchains where all stablecoins can operate on an equal footing.

Opinion by: Neeraj Srivastava, chief technology officer at MNEE.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.