Something a lot of regular people may struggle to believe and institutions that thrive on rigid systems, frown upon, is that blockchain makes finance cheap and it is only going to get cheaper as the industry gains more user adoption.
This is because growing user adoption will cause an explosion in alternative developments of core products and services actively serving the ecosystem.
We'll have thousands of Uniswaps, thousands of Polymarket, millions of wallets and associated solutions, basically everything in this ecosystem will have a minimum, hundreds of competitors flooding in.
Generally, when competition grows, the leverage of being the only solution gets distributed. More often than not, this means that services get sold for much cheaper rates to steal away users from existing companies.
We can expect the same to happen with blockchain apps; products and services. Of course, sometimes the lure will be incentives, which generally will mean higher rewards offerings, but for this post, the focus is on a very niche service type and what's to be expected here will be scaled down fees and that, truly, stands to destroy the business of traditional finance institutions.
Blockchain makes finance cheap
Forget about Ethereum and Bitcoin fees, and think about every other thing, what does the cost of operating in this ecosystem look like now?
Bitcoin fees are sometimes high because of UTXOs, and other times because, well, the limited block size, but it's also been made clear to us that Bitcoin isn't for commerce, so who cares about the fees there, it's not like it will be the primary currency for trade right?
Now, when it comes to Ethereum, all I can say is that this is a giant economic layer and as such, exploitations are to be expected. Ethereum can always be cheap, maybe someday it will, but there's an incentive for it not to be and the battle is against fighting off those incentives.
Moving on, we have so many options when it comes to cheap transactions. We have fee-less chains for example, then we also have several EVM-compatible networks that's just stupidly cheap. It's everywhere, anyone can prove this a fact.
Notwithstanding, this is all just blockchains we are focusing on and there are various other reasons for why blockchains could be expensive, but they are not, still and this is how we know that traditional finance has been an exploit engine for years.
The cost of interoperability: a look at WalletConnect
We talk a lot about interoperability yet I came to realize that we never talk about things like WalletConnect, which has had interoperability monopolized for as long as, forever?
Of course, not in a traditional sense, but there's really not an alternative to WalletConnect. The average crypto user has used this without really thinking much about it, now isn't that weird?
One might ask, what does wallet connect have to do with interoperability of blockchains?
You see, blockchain is cool, but it's an idle system that needs bridges for efficient usage flow.
WalletConnect serves this purpose really well, as based on data provided on their website, they've enabled over 300 million connections, serve 48M+ unique wallets and are used by 67k+ apps.
But, what even is WalletConnect?
The WalletConnect Network is an open-source network that connects users to decentralized apps through a secure and interoperable protocol. By creating a standardized way for wallets to interact with onchain applications, WalletConnect allows users to connect their digital wallets to decentralized applications with ease, enabling millions of people to safely engage onchain.
Traditionally, connecting wallets to apps on the blockchain required complex steps, which often discouraged new users and created a fragmented ecosystem. WalletConnect simplifies this by offering a universal connection method compatible across hundreds of wallets and thousands of apps. — WalletConnect
You see, your favorite app generally is a web-app, so to effectively connect with your crypto wallet and enable you perform on-chain transactions to and from said app, you need WalletConnect, more specifically it's relay infrastructure.
WalletConnect is somewhat open-source, somewhat because from what I can gather, it's relay infrastructure isn't open-source, but there seems to be plans to build towards being a decentralized solution, a governance token was recently launched, you can read more about that here
Moving on. WalletConnect plays a critical role in over $2 trillion in value moving through decentralized applications and blockchains and it does this without end-users facing any additional cost whatsoever.
Its last self-reported revenue in 2023 was $5.7 million and that's truly insane given the service it offers. For clarity, I imagine that this shows that it's cheap to do what they do, as such, they've not needed to charge too much, despite facilitating that much value in transactions.
This would mean that they charge less than 0.0003% of the value they help move across the blockchain ecosystem. Now if we consider that not every operation results in the movement of assets, then that fee rate falls even further because that would mean that pricing isn't pegged to the value of transactions facilitated by their communication protocol.
Of course, if we flat out compare this to Swift, since WalletConnect is essentially a communication layer as SWIFT, only that it's specifically for on-chain operations, leaving everything else to blockchain Oracles, we'll find that SWIFT appears cheaper in comparison.
However, when we consider that with blockchain, there's virtually no middlemen, just middlewares(like WalletConnect) that are actively building towards decentralization, we have an ecosystem with solutions that's very much cheaper than their traditional counterparts.
It costs 5-10% to move money globally on traditional finance platforms, on blockchains, it will generally cost less than 1% in most cases and the fees don't really grow as your transaction value grows.
It's so cheap that sometimes it will feel free.