Cryptocurrency is something that has been gaining huge popularity and has become a hot topic of discussion. Most people are aware of what cryptocurrency is and recently, a lot of people have decided to buy, sell and trade crypto. Even then, the wider adoption of cryptocurrency for day-to-day transactions seems like a distant dream. There are a few reasons why crypto hasn’t taken off as a currency. And one of the biggest problem cryptocurrencies face is the transaction costs or fees associated with their use.
Why are Crypto Transaction Costs High?
When it comes to proof-of-work blockchains like Bitcoin, every transaction that happens in the network has to be added to the blockchain. The work of validating these transactions and adding them to the blockchain is done by miners using powerful computers. This is a resource intense process and therefore, for their efforts, the miners are rewarded a bounty called block reward, and they also receive all the fees sent with the transactions.
This provides the miners with a financial incentive to prioritize the validation of transactions that include a higher fee. And especially when the blockchain is congested when a large number of users are sending funds, the uses will have to start offering a higher fee to have their transaction approved. This bidding process can lead to astronomically high transaction costs.
As for proof-of-stake blockchains like Cardano and Binance Coin, the transaction costs are lower in comparison to proof-of-work coins. This is mainly because the staking process involved does not require the use of costly mining equipment and massive amounts of electricity. However, proof-of-stake coins require nodes or validators to lock a certain number of coins into the network as their stake. The size of the stake determines the chance to create the next block – the bigger the stake, the bigger the chances. And when the node gets selected to create the next block, it validates the transactions in the block and adds them to the blockchain. As a reward for staking and validating, the transaction fees that are associated with the transactions in the block will be awarded to the node.
Are There Feeless Cryptocurrencies?
Despite the high transaction fees related to some of the cryptocurrencies, there are a few cryptocurrencies that have managed to design zero transaction fee networks.
EOS/EOSIO is an open-source blockchain platform that was built for the development of industrial-scale decentralized applications (DApps). This blockchain that was built to be a user-friendly and business-friendly tool for building DApps has the ability to conduct millions of transactions per second and is completely feeless. EOS eliminates all transaction fees by having the network shoulder the costs relating to these transactions. And this done through inflation rather than having the individual users pay to access the combined resources of the network
Steem is a social blockchain with a blockchain-based social networking site that rewards its users for each contribution they make. The most remarkable feature of Steem is its free and fast transactions. Steem uses a combination of DPoS (delegated Proof of Stake) and bandwidth limiting to achieve this. And since it is feeless, Steem incentivizes its block producers by setting aside a sizable portion of inflation as block rewards.
Neo is a blockchain-based platform supporting its own Neo cryptocurrency and enables the development of smart contracts and digital assets. It resembles Ethereum in its design and technology. Neo aims to automate digital assets management through the use of smart contracts. Its longer-term goal is to build a distributed network-based smart economy system. Neo’s network has two tokens: Neo and neoGas. While all the Neo tokens were pre-mined, Gas tokens are used to reward users maintaining the blockchain. Similar to EOS’s approach, Neo puts the cost of most transactions on developers while unburdening individual users and rewarding stakeholders
4. x42 Protocol
x42 Protocol provides a blockchain platform for the development of DApps. It has its own cryptocurrency and decentralized payment network and provides custom sidechains and smart contracts. The main idea behind x42 is to be a developer platform with a minimal initial investment, feeless transactions and near infinite scalability. It uses proof-of-stake (POS) to validate blocks and the network is completely free to use and does not involve any gas fees.
Feeless DAG-Based Cryptocurrencies
Nano which was formerly known as RaiBlocks (XRB) is a peer-to-peer digital currency. Unlike other cryptocurrencies that use blockchain to settle transactions, Nano uses a system called direct acyclic graphs (DAG). Nano promotes itself as a feeless, eco-friendly and instant cryptocurrency. It uses a variation of delegated proof-of-stake (DPoS) that uses minimal resources which has helped Nano keep its network fee-less and instant.
IOTA is a cryptocurrency designed to facilitate microtransactions and data integrity between machines and devices in the Internet of Things (IoT) ecosystem. IOTA uses a quantum-proof Directed Acyclic Graph (DAG) known as the IOTA Tangle. It does not use miners to validate transactions in the network, instead, nodes should approve two previous transactions. Therefore, transactions can be recorded without fees.
Banano is a cryptocurrency that was forked from Nano and uses the same DAG technology. It is a meme cryptocurrency that has an ongoing free distribution. Banano puts a lot of emphasis on free and fair distribution, gamification and crypto education. Though the Banano team has fine-tuned some parameters, it has a lot in common with Nano and is feeless and instant.
Nollar is a 1:1 USD backed stablecoin that is fully redeemable and audited. It is based on the novel Block-lattice technology that is instant, feeless and green. Block-lattice is a type of DAG and it is this technology that helps Nollar remain feeless. Nollar is the world’s first feeless stablecoin.