Ethereum Founder Vitalik Buterin Believes Cryptocurrency Payments Will “Make Sense” Once Transaction Fees Fall Below a Cent

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Ethereum co-founder Vitalik Buterin has argued that due to layer-2 rollups, transaction costs will soon fall to fractions of a cent, making crypto payments “make sense” once more.

The Cointelegraph team, currently on the ground at Korea Blockchain Week (KBW), quoted Buterin as saying that blockchain data compression is the final barrier to scaling transactions down to fractions of a cent.

He mentioned “solid work” being done with rollups right now, such as Optimism’s layer-2 scaling solution for Ethereum, which has worked to reduce the size and cost of data in blockchain transactions by introducing zero byte compression:

“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.”

Despite serving primarily as a speculative store of value, Buterin emphasized that the key use case of Bitcoin (BTC) presented in its white paper from 2008 was to provide a “peer-to-peer electronic cash system” that was less expensive than traditional payment methods.

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According to Buterin, this was true until 2013, but it was no longer the case in 2018 as adoption increased and blockchain transactions became prohibitively expensive.

“It’s a vision that I believe has been forgotten a little bit, and I believe one of the reasons why it has been forgotten is because it has been priced out of the market,” he said.

According to the Ethereum co-founder, BTC and other assets will soon be able to provide this use case again as scaling solutions — such as BTC’s Lightning Network — gradually reduce costs to fractions of a cent.

Crypto Payment Use Cases

Buterin outlined a few areas where cheap crypto transactions will be especially useful. To begin, he mentioned “lower income countries or places where the existing financial system is not very effective,” because it will provide citizens with access to vital payment structures via the internet, which is already being used despite the high cost of international remittances.

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Second, in the context of Ethereum, he noted that low-cost crypto transactions would aid in the adoption of non-financial applications such as 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 isn’t just like some boring thing where you just need like cost numbers go down scalability, I think actually enables and unlocks entirely new classes of applications,” he added.