Ethereum co-founder Vitalik Buterin believes that crypto payments will “make sense” again as transaction costs will soon drop to fractions of a cent thanks to layer 2 aggregation.
The Cointelegraph team currently at Korea Blockchain Week (KBW) quoted Buterin as saying that the last hurdle in reducing transaction size to a fraction of a cent is blockchain data compression.
He noted that “solid work is happening” on rollups right now, such as Optimism’s Ethereum Layer 2 scaling solution, which reduces data size and cost in blockchain transactions by introducing zero-byte compression.
“So aggregated today, transaction fees are typically $0.25, sometimes $0.10, and in the future, with all the efficiency improvements I talked about aggregated, transaction fees are typically $0.25. Transaction costs may come down To $0.05, maybe even as low as $0.02. Much cheaper, affordable, and a total game changer.”
Although primarily used as a speculative store of value, a key use case for Bitcoin (BTC) proposed by Buterin in his 2008 white paper is to provide a “peer-to-peer electronic cash system” that is cheaper than traditional payment methods.
However, according to Buterin, while this was the case until 2013, this was no longer the case in 2018 when adoption increased and blockchain transactions became too expensive.
“I think it’s a forgotten vision, and I think one of the reasons it’s been forgotten is basically because it’s priced out of the market,” he said.
In the opinion of the Ethereum co-founder, BTC and other assets will soon be able to provide this use case again as a scaling solution – such as BTC’s Lightning Network – gradually reducing the cost to a fraction of a cent.
Crypto Payment Use Cases
Buterin outlined several different areas where cheap crypto trading will be particularly important. First, he pointed to “low-income countries or places with less efficient existing financial systems” as it would enable citizens to access important payment structures via the internet that have been adopted despite the high cost of international remittances.
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Second, he noted that in the context of Ethereum, cheap encrypted transactions will also help increase the adoption of non-financial applications such as Domain Name System (DNS) servers, proof-of-attendance protocols, and Web3 account management services.
“You need to actually send a transaction to create a DNS name, you need to actually send a transaction to restore your account, you need to actually send a transaction to meet some of those adaptations. If it costs $11 to do each of these things, then people will not be involved.”
“Scalability isn’t just some boring thing, you just drop scalability like the cost numbers, and I think it can actually enable and unlock whole new categories of apps,” he added.