Visa has just become the “side chain” of Ethereum.
Written by: David Hoffman
Translation: Lu Jiangfei
Visa has announced that it will use Ethereum for USDC payment settlement.
This means that part of the Visa payment network will use USDC for payment, and these payment transactions will be settled on the Ethereum network. Will this stimulate the rise of ETH?
“Visa processes billions of U.S. dollars in transactions in more than 200 markets around the world every day. It has now officially announced that it has accepted the first USDC U.S. dollar stable currency payment transaction settlement, which is anchored 1:1 with the U.S. dollar. This settlement transaction comes from In Visa’s global crypto wallet partner, Crypto.com, and processed through the Ethereum blockchain. This marks Visa’s official launch of a pilot project that will allow Crypto.com to fulfill part of its obligations in the Crypto.com Visa card project in the form of USDC. .”
Forbes employee Nina Bambysheva commented: “Visa, a credit card giant, has established partnerships with 35 digital currency platforms, including Coinbase, Crypto.com, BlockFi and Bitpanda, and they have more than 50 million active users in total.”
Visa will provide USDC settlement transaction services for its cryptocurrency on Ethereum
Visa is using its own payment network as a way to expand USDC payments on Ethereum. I took Visa payment and can process more than 1,500 transactions per second-only centralized service providers have this advantage, and this time A revolutionary new feature that Visa has brought to the payment industry is to use Ethereum to submit transactions that require final settlement.
The Visa network can process thousands of transactions simultaneously. After the transaction is processed, Visa can make a single or batch transaction to Ethereum, and then Ethereum will update the partners’ account balances. These partners use the Visa network to process USDC transfers. .
Gradually “poaching” the Fed
As an institution, the Federal Reserve is the “ultimate boss” of DeFi. But under the cryptocurrency revolution, the strength, value and brand of the US dollar are all threatened. We know that the U.S. dollar is currently the global reserve currency, so the U.S. dollar and the U.S. dollar are in a monopoly position, and the Fed controls the U.S. dollar ledger.
Using Visa to settle USDC on Ethereum does not change the “dominance” of the U.S. dollar. In any case, all U.S. dollars are settled by the Federal Reserve, but Visa will transfer more economic activities to the payment track of the Ethereum blockchain, which means Ethereum may become the settlement portal for daily economic activities (such as buying a cup of coffee), isn’t it cool?
Visa can handle large transactions through its network. From the perspective of transaction volume, processing USDC transactions may only account for a small part of their total transaction volume. However, as Visa enters the market, it is bound to help promote Ethereum settlement. U.S. dollar trading volume continues to grow.
What will happen when Visa and Ethereum integration expand beyond crypto banks and extend to more general payment merchants?
Visa is just a payment network and has its own native assets to provide payment services. Visa can settle any asset.
Today, it is USDC.
Tomorrow, will it be DAI?
Next, will it be WBTC, ETH, or even RAI?
Imagine the impact of Visa’s settlement of stablecoin RAI on Ethereum!
RAI: RAI is an “illegal currency-anchored” stable currency, which is completely run by a computer program. It is not linked to the US dollar, so it is completely out of the Fed’s monetary policy. RAI has autonomy and does not require the Federal Reserve for settlement, but is 100% native to Ethereum and supported only by ETH.
If people all over the world want to use cryptocurrency to pay, Visa will meet this demand. Visa is a for-profit company that doesn’t “kneel” the Fed. Visa only deals with U.S. dollar payment transactions, because now people all want (or use) U.S. dollars.
But what happens if people don’t want to use U.S. dollars tomorrow and want to pay in other currencies?
Judging from the current situation, cryptocurrencies seem to be “poaching” the Fed. In the first step, we started to settle USD on Ethereum and integrated Ethereum into the settlement layer of centralized finance; in the second step, the advantages of ETH, DeFi, digital currency and digital assets can be shown to the public, people Naturally, these better assets will be chosen; in the third step, people will “escape” the US dollar and then use digital currency. This may be the so-called Ethereum “Ultra Sound Money” era.
Will Visa “pay” for ETH holders?
In this week’s Bankless podcast, Hasu, a well-known cryptoeconomic researcher, talked about the issue of EIP-1559. After discussing various aspects of EIP 1559 in depth, he described Ethereum’s monetary policy as follows:
“You may get funding subsidies from ETH holders, but at the same time the holders will not feel any inflation, because the deflationary pressure brought about by the destruction of tokens may be about the inflationary pressure brought by the mining block subsidy.”
So, what does it mean to use Ethereum for USDC payment and settlement?
Well… we know that Visa is putting economic activities on the Ethereum blockchain, and more importantly, we have seen the growth of Ethereum, but the problem is: economic activities on Ethereum are still constrained.
The following figure shows the average daily gas consumption on the Ethereum blockchain, which can basically explain the economic activity on the Ethereum blockchain.
Source: Etherscan
We found that since the beginning of 2020, the Ethereum gas fee has been maintained at a high level. This is actually the appearance of block saturation. 99.9% of the Ethereum blockchain is full-and this problem has existed for a long time! If you have any further demand for Ethereum block space, you need to pay a high gas auction price, which is ultimately reflected in the ETH burn rate in EIP 1559.
Thanks Visa, because they decided to settle part of the economic activities on Ethereum, which can not only increase the scarcity of ETH, but also increase the security of Ethereum. Although Visa is currently only “testing the sledgehammer” on Ethereum (one “settlement” transaction is performed every day), I expect Visa will continue to explore other methods, aiming to use the Ethereum block space on its payment network to help merchants Improve product quality when paying.
In the future, these measures can accelerate the breaking of the circle of cryptocurrency community users and DeFi “believers”.
I believe that for the broader cryptocurrency market, it is impossible to regard the pricing of ETH in EIP 1559 as the true value of ETH. The upcoming Proof of Stake (PoS) upgrade is expected to significantly reduce the issuance of ETH. Although it has not yet been implemented on the Ethereum main network, these Ethereum economic optimization measures should be implemented as planned.
However, what is strange is that in the past many years, many people in the crypto community have been chanting for Ethereum. However, for some reasons, it seems that Ethereum still has not been able to attract most people in the crypto industry. There may be two reasons:
- Ethereum gas is too expensive;
- Some people will always shout “Ethereum wants to change monetary policy” and become like the Fed.
Well, not everyone can see what we see, but as Visa enters the arena, we have to figure out a few things:
- Visa has just become the “side chain” of Ethereum
- Visa will “pay” for ETH holders
This era is really crazy, maybe we really have a chance to see $10,000 in ETH.
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