When we had noted that institutions were turning towards Ethereum, we ourselves didn’t anticipate just how swift and substantial the developments would be.
Following PayPal’s stunning decision to create a stablecoin pegged to the dollar on the Ethereum network – the PayPal USD – another heavyweight in the payment realm is pivoting towards Ethereum to better serve its users: Visa.
Recognizing Ethereum’s technological capabilities as a payment platform, Visa has embarked on a path to leverage its potential.
However, it discovered a hurdle hindering broad-scale Ethereum adoption – gas fees, the charges associated with conducting transactions on the network.
So, what’s the problem with these fees? There are primarily two aspects.
First, they are not constant but instead vary based on the network’s load at the time of the transaction.
Second, they are paid in Ethereum rather than conventional currencies like dollars or euros.
This means that if they were to utilize Ethereum’s infrastructure, their customers would need to acquire the cryptocurrency in a personal wallet to cover transaction costs.
But beyond the process of acquiring Ethereum – say, from exchanges – the ongoing fluctuations in fee costs often lead to excessive expenses or insufficient Ethereum balances. In essence, this complexity deters user experience to a discouraging extent.
To tackle this issue, Visa’s engineers devised a solution involving Ethereum’s ERC-4337 standard and a smart contract named “Paymaster,” enabling fee settlement off the blockchain. The process, as outlined by Visa, unfolds as follows:
- The user initiates an Ethereum transaction through their wallet, which is sent to the Paymaster application.
- Paymaster calculates the fees in fiat currency and charges the user using Visa’s payment management platform, Cybersource.
- A digital signature is temporarily verified and added to the wallet before transmission to Ethereum.
- Paymaster validates the signature and covers the expenses.
This sequence enables users to directly pay transaction fees using Visa credit or debit cards, obviating the need for Ethereum ownership.
These recent developments underscore the interest of traditional financial players in Ethereum:
- a) The surge in applications for Ethereum ETFs, even if based on futures rather than the spot market.
- b) PayPal’s stablecoin issued on the Ethereum blockchain.
- c) Visa’s exploration of Ethereum’s transaction capabilities.
Notably, the top 10 addresses now possess a significantly larger portion of available Ether, rising from 11.2% to 34.6% over five years, according to Santiment.
However, Ethereum’s allure extends beyond the powerful players. Addresses holding even minimal amounts of Ether have surpassed 100 million, per Glassnode. This implies a vast user base, steadily growing with a consistently positive adoption trend.
Despite these encouraging signs, Ethereum’s price has stagnated near $1,850 for nearly half a year. This prevailing market stagnation is perhaps best exemplified in the massive triangular consolidation pattern formed, suggesting a significant price movement on the horizon.
As history has shown, a breakout from one of the trend lines could lead to substantial price action – whether upwards or downwards, only time will tell.