In a recent tweet, the co-founder of Ethereum, Vitalik Buterin, suggested using the Ethereum network for payments.
More people should support ethereum for payments. The nice thing about supporting ethereum is that you're not just accepting ETH, you also get support for MKR, UNI, WBTC, and every stablecoin for free. And there's already like three working layer-2 scaling solutions on mainnet. https://t.co/EdD7J8isk8
— vitalik.eth (@VitalikButerin) October 1, 2020
The whole story originates from a tweet by Spencer Noon, DTC Capital’s chief investment officer, in which he is surprised by Square’s strategy of supporting only Bitcoin and not Ethereum.
“No one will ever be able to convince me that Square refusing to support Ethereum (in addition to Bitcoin) isn’t dumb”.
The CEO of Square is Jack Dorsey, the co-founder of Twitter, who is also a Bitcoin maximalist. So it is no surprise that they have chosen to support only Bitcoin.
No one will ever be able to convince me that @Square refusing to support Ethereum (in addition to Bitcoin) isn’t dumb. It’s the most head-scratching crypto strategy we’ve ever seen from a big corporate, and that’s saying something…
— Spencer Noon (@spencernoon) September 30, 2020
Noon, however, suggests that this strategy is stupid. Buterin followed up on Noon’s tweet, adding:
“More people should support ethereum for payments. The nice thing about supporting ethereum is that you’re not just accepting ETH, you also get support for MKR, UNI, WBTC, and every stablecoin for free. And there’s already like three working layer-2 scaling solutions on mainnet”.
Buterin is not referring to the Ether (ETH) cryptocurrency, but to the Ethereum network, which natively supports many ERC-20 tokens in addition to ETH. The most widely used of these is USDT, the Tether stablecoin collateralized in US dollars.
One of the main problems with cryptocurrency payments is the volatility of their value. Stablecoins such as USDT solve this problem at the root, because their value is as stable as the fiat currencies to which they are pegged, making them a payment instrument in many ways better than the fiat currencies themselves.
For this reason, Buterin suggests adding support to the Ethereum network to accept payments in USDT, USDC, DAI, or even ETH, WBTC, or DeFi tokens such as UNI and MKR.
The real problem with Ethereum at the moment are the transaction costs. The price of gas is still high, and it doesn’t seem that it can be significantly reduced in the short term.
Buterin refers to three layer-2 solutions that would already allow a large number of transactions to be supported at lower costs, but in reality, the gas price curve suggests that most users still prefer expensive on-chain transactions.
This could be the last real obstacle preventing stablecoins from becoming a real alternative to fiat currencies for payments, since the cryptocurrency tokens used by stablecoins have the double advantage that they can be used by anyone in the world without any limit or blockage of any kind, and that they can also be used, if desired, anonymously.
At a time when several governments are in a real fight against cash, stablecoins could prove to be a valid alternative.