Ethereum Developer Vitalik Buterin Forecasts Drop in Blockchain Transaction Fees to $0.02
During his time at Korea Blockchain Week (KBW), Ethereum co-founder Vitalik Buterin made statements suggesting that blockchain data compression is the last obstacle to reducing transaction fees to cents or less on a global scale. All Layer 2 transaction costs must be under $0.05 for them to be “really acceptable,” as Buterin put it earlier this year.
Buterin has predicted that “transaction prices might fall down to $0.05, or even maybe as low as $0.02” as a result of the long-awaited Ethereum software Merge update, which he hopes would bring cryptocurrency payments into the mainstream and within reach of a wider audience.
He says this is because of “solid work occurring” with rollups like Optimism’s Layer 2 scaling solution for Ethereum (ETH), in which transactions are packed and compressed off-chain before being confirmed on the consensus layer. To be more explicit, Optimism allows users to save money on gas prices by consolidating transactions into larger batches and settling them on a separate blockchain using sophisticated data compression algorithms; the receipts from this blockchain are then sent back to the main Ethereum network.
In general, the number of feasible blockchain transactions grows when zero-byte compression is used, which means that the amount and cost of data in blockchain transactions may be reduced. Buterin claims that in the present day, rollups cost “somewhere between $0.25 and occasionally $0.10,” but in the future, rollups that provide increased efficiency would result in “cheaper and considerably more reasonable” transaction costs.
Bitcoin (BTC) was also mentioned by Buterin, who noted that its initial purpose was to serve as a “peer-to-peer electronic currency system” that was less expensive than more conventional payment methods. In 2018, nevertheless, this wasn’t anymore the case, as he thinks usage grew and blockchain transactions became prohibitively costly.
The co-founder believes that Bitcoin and other assets will once again be able to fulfill this role once costs are reduced to cents per transaction via scaling solutions. Buterin claims that low costs associated with crypto transactions will have far-reaching implications. These include domain name system (DNS) systems and Web3 account management facilities.
In particular, lowering the cost of online transactions has the potential to increase people’s economic independence by providing them with easier access to essential online payment infrastructure. Buterin continued:
To put it simply, “you need to really send a transaction to construct a DNS name, you need to actually send the transaction to restore your account, and you need to actually submit a transaction to fulfill some of these adjustments. With an average cost of $11 per procedure, it’s clear why no one is interested in this field.
In the end, Buterin emphasized how scalability may allow and unlock completely new classes of applications while still retaining on-chain composability amongst smart contracts, making it a primary focus of blockchain research and development. In light of this, recent statistics reveal that the price of Ethereum gas has dropped to its lowest level since 2020. In reality, Ethereum network costs have fallen to 0.00086 ETH, or $1.46 per transaction, a level not seen since December 2020.