The World's Settlement Layer - The Daily Gwei #213

Visa is on-board, are you?

I have long held the belief that Ethereum will become the world’s most secure and decentralized settlement layer it has ever known. Just a few hours ago, that belief got even stronger as Visa has announced that they will be using Ethereum to settle USDC payments via partner company

There’s no containing my excitement here - this news is incredibly bullish and just further cements Ethereum’s network effect inside and outside of crypto. Now, obviously Visa isn’t going to be settling all of their transactions on the Ethereum mainnet because that would be prohibitively expensive and really it just wouldn’t work practically at all. I’m sure they’re going to start by maybe doing daily settlements onto the network and then eventually ramping this up to faster settlements as they adopt Ethereum layer 2 solutions (the payments-based L2’s are pretty far along at this point). Oh and Visa needs to buy ETH in some way to do all of this!

Of course, Ethereum’s position as a settlement layer just got more dominant with this news. I think most of us are aware that Ethereum is now settling more value than any other public blockchain (yes, even Bitcoin) and settled over $1 trillion last year alone. The key thing to note here is that all of this settlement was done uninterrupted on a secure network that offers incredibly strong settlement assurances. On top of this, value is being settled on Ethereum from literally all over the world - it doesn’t matter if you send a transaction from China or from the U.S - all of them are settled on the neutral platform that is Ethereum. While Ethereum wasn’t the first to do this (obviously Bitcoin was), Ethereum’s support for tokens and programmability means that it can settle much more value and assets than Bitcoin can. This is a major reason why Ethereum is the ideal settlement layer.

So let’s skip ahead into the future by about maybe 5 to 10 years - what does it look like for Ethereum? Well, I bet we have traditional finance integrated into most of Ethereum and DeFi in some way. I bet that most of this activity lives on layer 2 and by proxy ends up paying 10’s or 100’s of billions of dollars worth of ETH fees to layer 1. And in case you forgot, EIP-1559 is going to burn a healthy portion of this fee revenue so if $100 billion worth of fees is being paid each year and 50% is being burned, then the network would be burning 25% of ETH’s current market cap every year. I truly wonder how anyone can still think ETH isn’t undervalued at this point.

All of this goes back to my belief that Ethereum is an economic nexus that will have all sorts of value both settle on it and flow through it from literally everywhere. Payments companies, central banks, DeFi, the NFT economy, online marketplaces and more - it doesn’t matter where the value comes from - all that matters is that it is able to settle on and interact with a neutral and global base layer. And because of all of this, Ethereum will one day be settling quadrillions of dollars worth of value each year.

So buckle up - we’re just getting started.

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.