By Alan Vey, Founder & CEO, Aventus Network
If you’re an avid follower of crypto news, you might know that earlier this week, Sam Bankman-Fried, one of the most influential players in the crypto industry, made what some might consider a bold statement: Bitcoin will never become a widely-used payments or scaling platform.
As founder of FTX, one of the largest and most popular digital asset exchanges in the market, you’d assume that Fried would know what he’s talking about. And he’s not wrong about Bitcoin.
First isn’t always best
As the first cryptocurrency, Bitcoin did incredible things. It was a pioneer in and driver of blockchain, and without it, the crypto industry as we know it today probably wouldn’t exist.
But being the first also comes with its downfalls. Namely, in Bitcoin’s case, its high energy demand. Bitcoin uses upwards of 1,173KWH per transaction. To put that into perspective, its annual usage is more than seven times as much electricity as all of Google’s global operations, and surpasses the energy use of the entire countries of Norway and Sweden.
As well as being energy-hungry, Bitcoin is also highly inefficient: the network processes just seven transactions per second. When you compare that to Visa, which processes around 1,700 transactions per second on average, you can really see the problem with scaling Bitcoin to a mainstream payments system.
Alternatives are better – but still not great
When you’re looking to process millions of transactions per second, efficiency and low energy usage are non-negotiable. That’s where innovations like Ethereum come in.
But while Bitcoin definitely isn’t efficient enough to perform as a functional mainstream payments network – even Ethereum doesn’t do enough to close the gap.
One Ethereum transaction uses 238 kWh. Let’s use Visa as a point of reference again: 100,000 Visa transactions use just 148.6 kWh. Ethereum fees are at an all time high and scalability is limited to just 13 transactions per second.
In other words – it’s completely unrealistic to think that these blockchains in their current state will ever be able to rival traditional payments systems.
Looking beyond layer 1
This is where layer 2 solutions come in. Designed to play well with layer 1 blockchains like Bitcoin and Ethereum, but with faster and cheaper transactions, you get all of the benefits of the legacy blockchains, but upgraded.
Aventus, for example, uses 0.02 kWh per transaction – which we expect to further reduce with future optimisations.
The Aventus Network can also scale to 2,000+ transactions per second per parachain, and process a token transfer within 0.13 seconds at an average cost of $0.01 per transaction – 100x the speed and at 1% of the cost of Ethereum – with no volatility on price.
For payments and beyond
As blockchains are becoming more and more efficient, both in terms of transaction speed and energy consumption, their potential use cases extend far beyond payments – from gaming, ticketing and NFTs, to supply chain provenance, loyalty schemes and cargo management, the opportunities are literally endless.
So far, barriers surrounding simplicity and ease of use have prevented the widespread adoption of blockchains by businesses solving real world problems. We’ve identified this problem at Aventus. By carefully creating a series of interoperable, enterprise-grade, modular building blocks, we make building on layer 1s, including Ethereum, Polkadot and beyond, accessible for real businesses solving real problems.