Ethereum co-founder Vitalik Buterin believes that encrypted payments are very valuable, very important, and for many people, it can make their lives easier. Crypto payments will "make sense" again, as transaction costs will soon drop to a penny thanks to layer 2 rollups.
Speaking at Korea Blockchain Week (KBW), Vitalik said the final hurdle to getting transaction sizes down to pennies is blockchain data compression.
He noted that there is currently "solid work going on" with rollups, such as Optimism's layer 2 scaling solution for ethereum, which reduces data size and cost in blockchain transactions by introducing zero-byte compression.
“So with rollups today, transaction fees are usually between $0.25, sometimes $0.10, and in the future, with the efficiency improvements in rollups that I talked about, maybe even as low as $0.02. Cheaper, more affordable, totally Changed the rules of the game."
Although Bitcoin's primary function is a speculative store of value, Buterin emphasized in his 2008 white paper that the key use of Bitcoin (BTC) is to provide a "peer-to-peer electronic cash system" that is cheaper than traditional payment methods.
However, while this was true until 2013, it was no longer the case in 2018 as adoption increased and blockchain transactions became too expensive, according to Buterin.
"I think it's a vision that's been forgotten, 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 ethereum co-founder’s view, BTC and other assets will soon be able to offer this use case again as a scaling solution — such as BTC’s Lightning Network — gradually reducing the cost to a penny.
Crypto Payment Use Cases
Buterin outlined several different areas, cheap crypto transactions will be particularly important. First, he pointed to "low-income countries or places where existing financial systems are less effective" because it would give citizens access to vital payment structures via the Internet, which are already in place despite the high cost of sending international remittances.
Second, he noted that, in the context of ethereum, cheap encrypted transactions will also help increase adoption in 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 satisfy these adaptations. If doing each of these operations requires Spend $11, and people won't participate."
"Scalability is not just some boring thing, you just have to reduce the cost to achieve scalability, and I think it can actually enable and unlock whole new classes of applications," he added.
Over the past few years, Buterin has focused on rollup and layer1 scaling solutions. He mainly focuses on top layer2 extension projects such as Optimism, Arbitrum, StarkEx, ZK-SNARKS and Polygon. “They take the security from ethereum, but they have their own features, and they’re adding more scalability,” Buterin said.
The Ethereum 2.0 merger is coming, and Buterin believes that the merger may be the biggest upgrade Ethereum has made in its entire history. “We started thinking about proof-of-stake long before Homestead, the first version of ethereum, was launched before crowdfunding,” he said .
The goal of the merger is to expand the amount of data that the ethereum blockchain can hold. This requires increasing the amount of space for rollups, so Ethereum's scaling solution has to handle more transactions while rollups become more efficient.
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