Babel fees are game-changing for mass adoption of cryptocurrencies. Babel fees will allow users to pay transaction costs on Cardano in any eligible cryptocurrency. Under the current blockchain model, to transact on a blockchain, you must maintain a balance of the native token, such as ETH on the Ethereum Blockchain, to pay transaction costs. This requirement isn’t always clear to new users. Removing native currency-only transaction costs will make a much more user-friendly experience from the outset. This will also solve the longstanding problem of digitizing fiat currencies. Cardano treats all tokens as first-class citizens on the Cardano blockchain by enabling payment of gas fees with any token. This stands to change the crypto landscape forever.
Stable coins maintain a value equal to a fiat currency. You can read more about them in our post on cryptocurrency tokens. In a Reddit post by u/Playistheway, the poster suggests that Cardano has won a stablecoin arms race.
To move stable coins on the Ethereum blockchain you need Eth.
The poster discusses an example of stablecoins on the popular Ethereum blockchain. “You are new to crypto, and you want to move some stablecoins into your wallet. At the moment, your only real option is to buy ETH and USDT and then pay an arbitrary amount of gas to move them. Better keep some more ETH stashed away too, otherwise, you might struggle to move the coins when you need them. At the current market rate, better make that a decent chunk of ETH. Overall, this is a terrible user experience.”.
Dissecting this example, users are forced into holding Eth for transaction fees to use stable coins or any other Ethereum based tokens on the blockchain. This is both inconvenient and unfriendly. In addition, this requirement adds exposure to volatility in both token values and gas fees that might otherwise be avoided when holding stablecoins. Centralised exchanges like Coinspot or Binance already sort all this on the user’s behalf for an additional fee, but a truly decentralised experience on the Ethereum blockchain requires Eth. By approaching this differently, Cardano has gained a competitive edge in the race for user adoption.
Cardano babel fees let users pay transaction costs in any currency they want.
Cardano Babel fees solve this problem and give Cardano a significant edge for adoption. By allowing users to pay transaction fees in currencies, they already hold, Cardano simplifies the user experience and creates flexibility for users. In contrast to the Ethereum example, with Cardano, it will soon be possible to buy a stablecoin from an exchange and instantly send it to your wallet, paying the fees from the same stablecoin you just bought. This flexible approach is more viable for mass adoption, especially for the large number of users that blockchain aims to reach with simple and decentralised banking solutions.
For more information on how babel fees work, you can read a February post by Prof Aggelos Kiayias here.