The big news that Visa Inc. will use Ethereum to process transactions for USD coins is no doubt optimistic – but what impact will this have on network scaling and the economy?
On March 29, global payments company Visa announced the use of Circle’s USD coin to process transactions on its network. Visa is launching a pilot program with the Crypto.com platform, which will be used to process payments over the Ethereum network.
In response to the big news, David Hoffman wrote his latest DeFi bankless newsletter, titled “Visa Will Pay ETH Holders”.
He explains how Visa offers a way to scale USDC payments to Ethereum through its own payment network, which can process 1,500 transactions per second.
Ultra sound money
Hoffman notes that Visa’s scaling capacity can currently only be offered by a central service provider. In a similar process to Layer 2 rollups, where transactions are combined into one and processed outside the main chain, he commented:
“Thousands of transactions can be processed internally on Visa’s network, and then Visa can make a single, stacked transaction to Ethereum that updates the balances of its partners who use Visa for USDC transfers.”
While this does not scale Ethereum directly, it does reaffirm the premise that ETH is “ultra-solid money”.
The blog post further suggests how the development could be viewed as “rugging the fed”. The Federal Reserve and the US dollar have a monopoly as the greenback is the world’s reserve currency and the Fed controls the ledger, he noted.
Settling USDC with Visa on Ethereum doesn’t change that. All dollars go back to the Fed. However, it is shifting a lot of economic activity into the Ethereum ecosystem.
Visa is just a processing platform with no assets of its own. So if things grow beyond crypto banks and USDC, there could be future integrations with decentralized stablecoins like DAI or even wBTC.
There is a lot on the program for the developments of Ethereum in the coming year:
This time next year, Ethereum will:
-Proof of Stake that completes the chain
-Fee burn
-Approx. Net zero emission
– Full scalability of layer 2
Have you adjusted your portfolio accordingly?
– eric.eth (@econoar) March 30, 2021
Ethereum price reaction
Ethereum prices responded to the news with an 8% pump, hitting an intraday high of $ 1,830. Although prices cooled down a bit on Tuesday morning, the asset is still up 5.7% on the day. At the time of going to press, ETH changed hands at $ 1,804, according to CoinGecko.
ETH prices have reached 142% since the beginning of 2021. They even outperformed Bitcoin, which scored around 97% over the same period.
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