Iโve recently seen some discussions about ETH vs. stablecoins as the medium of exchange and economic currency.
There are clear benefits to using stablecoins as the MoE.They are easier for new users to understand, thereโs no need to explain an new unfamiliar asset, its purpose, or its pricing, and they eliminate concerns about volatility. This is especially important for users earning onchain who need to pay taxes later (otherwise, they would face extreme FX risk unless they sell enough funds on the spot to cover taxes). Itโs also valuable for developers who want to sponsor their users' gas fees and need cost predictability, buying and selling goods onchain would be challenging with a volatile asset. Imagine an Amazon where all prices are denominated in BTC or ETH, it would be a logistical nightmare.
The user flow is far more intuitive with stablecoins. For instance, if a new user comes onchain with $100 today, they could have 10% less or more purchasing power tomorrow due to volatility. This introduces unnecessary risk and friction for users.
Stablecoins as MoE simplify this process, and the distinction between USD value in a database and USD value onchain will fade. Over time, stablecoins will likely just be referred to as "dollars."
Using stablecoins as gas tokens also establishes a stable economic currency for the entire network. For example, with Validiums, transaction costs are so low that developers can absorb their usersโ costs. To create cost predictability, adopting stablecoins as gas tokens is the logical step forward. Imagine if AWS charged developers in a volatile currency while they earned revenue in a stable currency, it would create an fx burden and hinder adoption.
Six months ago, we made a bold decision to use the Aave-native stablecoin GHO as the gas token for the Lens Network for these exact reasons. Since Lens Network is a Validium, this makes sense since the "ETH bill" that needs to be paid to Ethereum is significantly smaller compared to rollups.
Achieving the same for rollups is more challenging due to the costs associated with storing the entire state on L1. For instance, when blob prices are high, this creates unexpected volatility, making it difficult to collect L2 fees in stablecoins to settle the ETH bill. On the other hand, for L1-like chains such as Gnosis Chain, itโs much easier to implement, as these L1s have greater sovereignty over fee costs and have already had xDAI in production for years.
From ETHโs perspective, thereโs no reason to worry. ETH doesnโt need to be the MoE across all L2s if thatโs not ideal for those layers. ETHโs primary use case should be to pay for execution and storage on the most secure, Turing-complete execution environment. This alone is a massive use case as the world transitions to onchain.
splasher
voicedeep.eth on ENS
