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Seeing the popularity of blockchain technology and the crypto industry spike to its current level is not surprising. After all, many enthusiasts predicted their essentiality in progressing every sector globally, especially during the COVID-19 pandemic, which brought economies to their knees.
Blockchain technology infiltrates every industry, including the healthcare, finance, supply chain management, transport and cloud computing sectors. However, traditional blockchains have a few loopholes that prove costly to users. Although most developers came up with functional blockchains like Bitcoin and Ethereum, most did not consider the user base growth.
As such, scalability and transactional prices have been problematic for most investors. At this point, you may be thinking about Ethereum gas fees and blockchains like Algorand that work towards solving this problem. But what do you understand by gas fees? This article explains gas fees in cryptocurrency networks and why Algorand is a to-got-to blockchain to avoid hefty transaction prices.
In-Depth Look into Gas Fees
If you are reading this article, you must have come across blockchain consensus algorithms that assist nodes in verifying transactions. Most traditional blockchains use the proof-of-work (PoW) consensus algorithm.
For a node to successfully verify a block, it needs the high computational capability to solve complex equations on the blockchain. The process of adding a block to the chain is called mining. Notably, Bitcoin mining has been on the kinds of many, considering its energy and environmental implications.
However, gas fees developed from the Ethereum blockchain as the fees addresses pay to miners to approve a transaction. That is, you pay for how much computational power a miner leverages during a transaction verification.
The Ethereum blockchain is one of the best Layer 1 solution providers in the crypto world today. Furthermore, it opened gateways to DeFi, DApps and NFTs, boosting its popularity among crypto enthusiasts.
Along with this popularity came the increasing gas fees to execute a smart contract on the platform. Gas prices vary according to how much a smart contract can handle. A basic contract to move funds from one address to another would have cheaper gas fees.
However, when it comes to interoperable networks or liquidity pools on DEXes, the story changes. Miners will come up with minimum transaction fees for every process.
What Other Factors Affect Gas Fees?
Miners play a critical role in ensuring the safety of a blockchain from bad actors. Furthermore, they maintain the credibility of currencies in the face of double-spending and fakes in the market. This is owing to the attention they pay to verify a transaction and prove its validity.
Some factors affect the entire process, including how much demand the blockchain faces, the congestion on the blockchain at a given time, and the consensus algorithm. When there is more activity in crypto markets, including during bull runs and bearish seasons, fees go up.
Scalability is a pain point that requires immediate solutions for the continued progression of the blockchain and crypto sectors. It is crucial to note the efforts blockchains are making to adapt better consensus algorithms, such as proof of stake (PoS), delegated proof of stake and proof of activity.
Furthermore, more platforms are incorporating Layer 2 solutions, including rollups, sidechains, state channels, aggregators and plasma chains. The Ethereum blockchain, for example, is transitioning from PoW to PoS. Additionally, it hopes to use Layer 2 scaling answers to resolve its scalability issues. The crypto world is yet to see the successes the London fork has in store for Ethereum users.
Algorand is an Alternative
Algorand has taken the spotlight as one of the primary competitors of the Ethereum blockchain. The blockchain prides itself as the greenest blockchain in the industry today. By being a green blockchain, it aims at environmental sustainability and carbon-negative status. As such, its ecological impacts are close to zero while it maintains a scalable platform for users.
The blockchain leverages a unique consensus algorithm dubbed the pure proof-of-stake (PPoS) consensus algorithm. The consensus protocol is specific to the Algorand blockchain, which focuses on overall input from users to the blockchain. It differs from the traditional PoS algorithm in its randomness of choosing users to verify transactions; traditional PoS favours wallets holding more coins.
The platform uses the verifiable random function to select block validators randomly. To be a participant, you need to generate a participation key that gives you proposal and voting rights. After voting on a node, the information remains private.
Benefits of the PPoS
The most important advantage of the PPoS is the freedom it gives users to participate on the platform. Therefore, the process eliminates the bias evident in other consensus algorithms. This factor ensures true decentralisation on the blockchain due to anonymity and randomness.
Second, scalability is no longer a pain point for the Algorand blockchain. As it stands, the blockchain can manage 1000 transactions per second, making it one of the fastest blockchains in the industry today.
Being a green blockchain, Algorand maintains significantly low energy usage during transaction verifications. Additionally, it supports clean emissions during the process to protect the environment. The randomness of validating blocks does not depend on the number of coins or on how heavy your equipment is. You can perform this function on any device you have.
Low Fees, Dependable Blockchain
You can rest easy when leveraging the Algorand blockchain because it veers away from the basics of gas fees. Whereas the transaction fees still depend on the transaction size, the costs are close to negligible. The minimum fees are 0.001 ALGOs, equivalent to $0.00183 with the current Algorand price. This coupled with the near-instant transaction speeds allows users to derive the most convenience from the carbon-negative blockchain.
Algorand may serve as a role model for both traditional and upcoming blockchains aiming to ensure sustainability. Furthermore, it proves that low fees do not necessarily mean weak security on a blockchain. In the future, crypto will see palpable competition between Ethereum, Solana, Algorand and Cardano for scalability and efficiency.
