Layer-2 scaling will make crypto payments “make sense” again
Ethereum co-founder Vitalik Buterin has claimed that crypto payments will once again “make sense” as transaction costs will soon drop to fractions of a cent due to layer-2 rollouts.
The Cointelegraph team currently on the ground during Korea Blockchain Week (KBW) quoted Buterin as stating that the final hurdle to getting transactions down to fractions of a cent at scale is blockchain data compression.
He pointed to “solid work happening” with rollups at the moment, such as Optimism’s layer-2 scaling solution for Ethereum, which has worked to bring down the size and cost of data in blockchain transactions by introducing zero-byte compression:
“So today with roll-ups, transaction fees are usually somewhere between $0.25, sometimes $0.10, and in the future with roll-ups with all the efficiency improvements that I talked about, transaction costs could go down to $0.05, or maybe as low as $0.02. So much cheaper, much more affordable and a complete game changer.”
Despite acting primarily as a speculative store of value, Buterin emphasized that the main use case for Bitcoin (BTC) presented in his 2008 white paper was to provide a “peer-to-peer electronic cash system” that was cheaper than traditional payment methods.
However, while that was true until 2013, according to Buterin, this was no longer the case in 2018 as adoption increased and blockchain transactions became too expensive.
“It’s a vision that, I think, has been kind of forgotten, and I think one of the reasons it’s been forgotten is basically because it was priced out of the market,” he said.
In the Ethereum co-founder’s view, BTC and other assets will soon be able to offer this use case again as scaling solutions – such as the Lightning Network in the case of BTC – gradually reduce costs to fractions of a cent.
Use of crypto payments
Buterin outlined a couple of different areas that cheap crypto transactions will be particularly important. Firstly, he pointed to “lower-income countries or places where the existing financial system is not very efficient”, as it will give citizens access to important payment structures over the internet, something that has already been adopted despite the costs of international money transfers .
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Second, he noted that in the context of Ethereum, cheap crypto transactions will also help increase the use of non-financial applications such as Domain Name System (DNS) servers, proof-of-attendance protocols and Web3 account management services:
“You actually have to send a transaction to create a DNS name, you actually have to send a transaction to restore your account, you actually have to send a transaction to fulfill any of these customizations. If each of these operations costs like $11, then people don’t go into it.”
“Scalability is not just like a boring thing where you just need cost numbers to go down scalability, I think actually enables and unlocks whole new classes of applications,” he added.
