Ethereum layer 2 is a concept that, in my opinion, been somewhat forgotten, and one of the main reasons it has been forgotten is that it was essentially priced out of the market, according to Vitalik Buterin.
The co-founder of Ethereum Vitalik Buterin has stated that layer-2 rollups will soon cause transaction prices to drop to a few hundredths of a cent, making cryptocurrency payments “make sense” once more.
Buterin was quoted by the Cointelegraph team present at Korea Blockchain Week (KBW) as saying that blockchain data compression is the last obstacle to scaling down transactions to fractions of a cent.
Optimism’s layer-2 scaling solution for Ethereum, which has worked to reduce the size and cost of data in blockchain transactions by adding zero byte compression, is one example of the “solid work happening” with rollups at the present, he said.
So today with roll ups, transaction fees are generally somewhere between $0.25, sometimes $0.10, and in the future with roll ups with all of the improvements to efficiency that I talked about. The transaction costs could go down to $0.05, or even maybe as low as $0.02. So much cheaper, much more affordable, and a complete game changer
Buterin underlined that, although serving largely as a speculative store of value, the main application of Bitcoin (BTC) described in its white paper from 2008 was to offer a “peer-to-peer electronic currency system” that was less expensive than conventional payment methods.
Buterin claims that while this was true up until 2013, it was no longer the case in 2018 as adoption grew and blockchain transactions became prohibitively expensive.
“It’s a vision that has been, I think, forgotten a little bit and I think one of the reasons why it has been forgotten is basically because it got priced out of the market,” he said.
According to the co-founder of Ethereum, scaling solutions, such as the Lightning Network in the case of BTC, will eventually lower the prices down to fractions of a cent, allowing BTC and other assets to once again provide this use case.
Uses for cryptocurrency payments
Buterin mentioned a few other instances where inexpensive crypto transactions will be crucial. First, despite the high cost of international remittances, he mentioned “lower income countries” or “places where the present financial system is not particularly functional,” as it will provide citizens with access to crucial payment structures over the internet.
Second, he pointed out that in the context of Ethereum, inexpensive crypto transactions can also aid in accelerating the adoption of non-financial applications including domain name system (DNS) servers, humanity 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 the transaction to recover your account, you need to actually send a transaction to meet some of these adaptations. If doing each of those operations costs like $11, then people are not going into it.
Scalability, he continued, “really enables and unlocks totally new kinds of applications. It’s not just like this dull thing where you simply need like cost figures go down.”