With existing banking infrastructure, it can take up to a week for a cross-border payments to validate and settle. It’s what consumers and businesses have grown accustomed to for decades, but it doesn’t have to be the norm moving forward.
The rise of blockchain technology offers a means of transferring money, contracts, and files from Point A to B in a significantly shorter time frame and with considerably lower costs. More importantly, blockchain technology can democratize finance by opening doors to those who currently lack access to basic financial services.
Ideally, the best blockchain projects and networks are the ones that investors should reward. But it doesn’t always work out this way.
Shiba Inu is soaring, but it lacks real-world appeal
Since its debut in August 2020, meme coin Shiba Inu (CRYPTO:SHIB) has blazed to historic gains. Through late evening Nov. 13, 2021, SHIB tokens had gained approximately 10,600,000%. Put another way, if you had invested $10 into SHIB on Day 1, you’d be a millionaire today.
For Shiba Inu, there have been no shortage of catalysts. For instance, there’s been a fairly steady stream of cryptocurrency exchanges accepting SHIB for listing. More listings means improved liquidity for the token, a larger community, and increased awareness.
Tesla Motors CEO Elon Musk is another catalyst for Shiba Inu. The world’s richest person adopted a Japanese Shiba Inu-breed dog in June, which he named Floki. Anytime Musk tweets about his dog or posts a meme containing a Shiba Inu, investors take it as their cue to pile into SHIB tokens (or other Shiba Inu-inspired coins).
But what Shiba Inu doesn’t do particularly well is process transactions efficiently. As an ERC-20 token built on the Ethereum blockchain, Shiba Inu is effectively held hostage by the popularity of Ethereum’s network, which comes with high transaction fees and settlement lag.
These cryptocurrencies process transactions markedly faster than Shiba Inu
The reality is there are a number of other cryptocurrencies that offer lightning-fast processing and settlement times, relative to Shiba Inu. Below are four blockchain projects that have real-world appeal and long-term potential.
XRP: 3-5 seconds
Arguably the best-known of these four lightning-quick cryptocurrencies is XRP (CRYPTO:XRP), the currency native to digital payment platform RippleNet. According to Ripple, which oversees RippleNet, the average cross-border XRP transaction can validate and settle in about three to five seconds. This sure beats a one-week wait time using existing infrastructure, or the potential lag associated with Ethereum during peak use periods.
The key to XRP’s efficiency can be found in its consensus mechanism. Instead of relying on proof-of-work, XRP leans on Unique Node Lists, or UNLs. According to the XRP Ledger, which is the distributed ledger database that RippleNet runs on, UNLs are lists of validators that participants believe won’t defraud them.
XRP has garnered quite a few high-profile partnerships over the past couple of years. This includes working with Banco Santander on a cross-border payment service known as One Pay FX, as well as previously working with MoneyGram International on rapid cross-border payments.
Stellar: 4-5 seconds
Another very similarly modeled blockchain project to XRP is Stellar (CRYPTO:XLM). Focused on expediting the processing and settlement of cross-border payments, Stellar claims to settle transactions on its ledger in an average of four to five seconds.
Aside from exceptionally fast processing times, the real lure for Stellar might be its transaction fees. The cost to complete a transaction on Stellar’s network typically runs 0.00001 Lumen (XLM, the protocol token of the network). Based on the current price for XLM of $0.3729, the average transaction costs about $0.0000037. It would take about 269,000 transactions for a participant to rack up the equivalent of $1 in fees.
Although Stellar doesn’t have the partnership resume of XRP, its network was used by a dozen major banks in the South Pacific region four years ago.
Nano: Less than 1 second
For “blink and you’ll miss it” transactional speed, consider truly off-the-radar cryptocurrency Nano (CRYPTO:NANO). Nano describes itself as the “fastest decentralized currency in existence, with a median transaction time of less than one second.”
What makes Nano so insanely fast is its block-lattice blockchain. Instead of utilizing a single blockchain, every user has their own blockchain that they can add to. This means not having to compete with other users for blocks and, presumably, the ability to scale Nano’s block-lattice quickly. The key point here being that the block-lattice ensures no slowdown in the network as it’s scaled.
And if you thought Stellar’s transaction fees were low, you’ll love Nano. The incorporation of Open Representative Voting, which allows delegated representatives to vote on the validity of individual blocks on the network, helps to ensure that transactions are free. Yes, fee-less transactions!
Algorand: Approximately 4.4 seconds
A fourth cryptocurrency project with breakneck processing speeds is relative newcomer Algorand (CRYPTO:ALGO). Data taken directly from the Algorand website on Nov. 13 showed a block finality of 4.41 seconds, making it one of the fastest decentralized blockchains for validation and settlement on the planet.
The standout differentiating factor with Algorand is its consensus mechanism. Instead of relying on a traditional proof-of-stake model, Algorand employs what it refers to as a pure-proof-of-stake, or PPoS. With PPoS, users are randomly and secretly selected to propose blocks and vote on block proposals. According to Algorand, the only way to boost a users’ chances of being chosen is to increase their stake. Since large holders have no incentive to diminish the purchasing power of their stake, PPoS is a seemingly perfect way to ensure that no malicious actors can adversely affect this fast-paced and highly decentralized blockchain network.
Although the expectation is that Algorand’s blockchain will be used to host an ecosystem of smart contract-fueled decentralized applications, it’s hard to ignore the payment potential for such a scalable network that’ll never fork.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.