Understanding why crypto payments haven’t taken off yet
In the last few years, the crypto industry has witnessed tremendous growth, but the use of cryptocurrencies has not yet accelerated among the mainstream population. There are a growing number of businesses today that accept crypto as a payment option, most preferably Bitcoin, but the general public still prefers their local currency over crypto.
Though governments across the world have been hostile when it comes to the use of cryptocurrencies as legal tender, that’s not the only reason behind the slow adoption of crypto as a payment method. Cryptocurrency transactions need to be more straightforward, decentralized, transparent, and safe if they are to be widely adopted.
Crypto newbies are required to go through a fairly complicated process before interacting with any decentralized application to make a transaction. Typically, this includes setting up a wallet, doing KYC in order to purchase cryptocurrency from an exchange, transferring these tokens to your wallet, and managing gas costs. This alone will turn away the majority of first-timers. Even for those who are familiar with cryptocurrency, not having the required native token means you’d need to acquire it, which would add time and cost for any user.
In this blog, let’s find out how enabling gasless payment in dApps simplifies user onboarding and paves the path for mainstream adoption of crypto:
What is a gasless transaction?
Before understanding gasless transactions, let’s take a look at what is gas. The term “gas” refers to the unit that calculates the amount of computational power needed to carry out a particular activity on the Ethereum network.
Each Ethereum transaction has a cost since they all need computing resources to execute the transaction and the fee needed to complete a transaction on Ethereum is referred to as “gas.” A similar transaction fee is charged by other blockchains too.
Basically, gas fees must be paid in order for a transaction to be completed. This cannot be avoided. What do gasless transactions mean then? Gasless refers to a model in which users do not bear the cost of transaction fees. However, someone pays for the gas for a transaction to be completed. Sometimes development teams or project owners pay for the gas fee, allowing end-users to only pay for the services availed.
Why gasless transactions are needed to accelerate crypto adoption?
Transaction fees, such as gas, are common for financial transactions but are usually not borne by the end users. For example, transaction fees on credit cards typically cost 1.5% to 3.5% of each transaction’s total and are usually incurred by the payment recipient business instead of the user.
Similarly, in the case of gasless transactions, a dApp can incur transaction fees allowing users to only pay for the services availed without worrying about gas and other associated charges. Web3 ecosystem with a gasless experience for the end-users has an infinite scale similar to current Web2 applications. The future Web3 economy will require blockchain networks that offer frictionless experiences. In such an economy, users should be able to freely roam applications without paying a fractional fee for each transaction.
How to enable gasless payments in your dApp?
The most convenient way to enable gasless payment in your dApp is through relayer infrastructure. In a relayer network, the user forwards their request to a relayer node (executor) who then manages the transaction on behalf of the user. The dApp can then refund this relayer node with the gas fee for the transaction so the user does not have to incur gas or any other associated charges.
For example, Cardstack’s Card Protocol enables gasless transactions across layer 1 and layer 2. On Layer 1, Ethereum dApps can pay for optimal gas on behalf of their end-users. Card Protocol manages the gas fees on behalf of the dApp and end-users and optimizes the cost to ensure transactions are successfully executed.
On layer 2, Cardstack supports chain agnostic transactions. What this means is, dApps on layer 2 that integrate Cardstack would not require their end-users to switch RPC networks to use their tools, enabling a seamless, gasless payment experience for end-users.
Article originally published on Cardstack's Medium Page
Want to learn more about Card Protocol? Write to us at communications@cardstack.com
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