The headlines in crypto for the last year have been all about fraud, regulatory crackdowns, and the general dysfunction of the industry. This makes it easy to overlook the fact that blockchain technology is moving forward and that, even amid all the scandals, crypto is getting better and easier to use.
I was reminded of this recently when I spoke to Henri Viès of Matter Labs, an outfit that's raised around $460 million to develop a complement to the Ethereum blockchain that makes transactions faster and cheaper by using so-called zero-knowledge technology. The specifics are complicated, but the basic idea is that Matter Labs takes batches of transactions and processes them in bulk before stamping a tamper-proof record on the main Ethereum blockchain.
This is not exactly new. Developers have been building these sorts of layer-2s for years, and two projects, Arbitrum and Optimism, that use a rival method to zero knowledge are well-established in the crypto world and worth billions of dollars. What's different now is that the layer-2 projects seem to be on the cusp of delivering on their promise. According to Viès, Matter Labs' tech—known as zkSync—makes transactions around 80% cheaper, and they're poised to get much cheaper than that.
Just as important, Viès says the layer-2 projects are making big strides in fixing their godawful user experience, which typically involves having to buy something called "wrapped Ethereum" or another token and then jump through hoops to make it work. Refreshingly, Viès conceded the current experience is a "nightmare" and—along with the high costs of using the main Ethereum blockchain—make most people not want to have anything to do with crypto.
If he's right, then crypto newbies will be able to easily interact with blockchains without getting torched by sudden fees of $20 or more that have led many sensible people to throw up their hands and not return. Meanwhile, businesses of all stripes—Viès says every big tech, finance, and retail company has a team tinkering with blockchain—are exploring ways to take advantage of Ethereum's powerful ledger and smart contracts. It's not crazy to think that, two years from now, Ethereum will have a mainstream role in everything from payments to loyalty programs.
We've heard such promises for years, of course, but something just feels different this time. The ends of previous Crypto Winters have seen the technology take a giant leap forward in terms of cost and ease of use, and this is likely to happen again. As for which layer-2s will prevail, Viès predicts the field will come to take on an Uber/Lyft dynamic with one company winning around 80% of the market share and one rival picking up most of the rest. Right now, relative newcomer zkSync ranks third, but it's still early enough for things to shift dramatically.
I can't predict who will win or just when this new era of cheap, easy-to-use crypto will begin—especially as the industry has a habit of shooting itself in the foot. But the accelerating popularity of layer-2s, and their focus on making blockchain cheap and easy to use, suggests crypto is going in the right direction.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
