Thread by @LocalCryptosEN

Gas prices are above 500 Gwei again.

LocalCryptos isn't celebrating

Here's why:

High network fees hurt the underserved the most. They're a further blow to communities that are already excluded financially from the rest of the world.

(source: @etherscan)

Let's talk about Venezuela.

As far as we know, more Venezuelans use LocalCryptos than any other #Ethereum DApp. LocalCryptos is the most popular $ETH decentralized application among Venezuelans.

However the way Venezuelans use LocalCryptos is different to the rest of the world.

Venezuelans are in a dire situation. The bolívar has already lost 85% of its value since January, and it is constantly losing more of it every day.

We're not making this up. The bolívar loses value EVERY SINGLE DAY… (cont)

efe.com/efe/america/ec…

...to the point that prices for goods and services are changing all the time.

A mix of crippling economy, hyperinflation, loss of trust on their own currency — not to mention foreign currency exchange controls — renders the bolívar unusable.

reuters.com/article/us-ven…

Along with the USD, Venezuelans use cryptocurencies as an escape valve to cope with the deep economic crisis that plagues the country.

The 2017 crypto fever helped raise awareness of cryptocurrencies among the people. One of these cryptos was $ETH.

Crypto mining in Venezuela was highly profitable. As an Ethereum mining rig was cheaper than a Bitcoin mining hardware, it became a no-thinker for many.

But selling the earned $ETH in a secure, P2P way was very difficult with the lack of proper platforms.

Enter LocalCryptos.

Most Venezuelans use LocalCryptos to safely change small amounts of ETH to bolívars and back.

They use this money to pay for goods and services most of the time, so they usually exchange the exact amount they need.

On the other hand, they use crypto to get paid for online work, they use ETH to avoid hyperinflation, they use ETH to send money back to their family.

bbc.com/news/business-…

More than 70% of ETH trades on LocalCryptos by Venezuelans are under ~$40. That compares to more than ~$400 in China, ~$175 in the US, ~$440 in Russia.

The median trade size in Venezuela is the bolívar equivalent of US$20.

Despite gas optimizations, a LocalCryptos ETH escrow uses between 102K - 130K gas from start to finish.

At low gas prices, that's 20¢. At 500 Gwei, the network fee adds up to more than $21!

Yes, if a Venezuelan wants to trade $20 worth of ETH peer-to-peer, it will cost $21 in gas in these conditions.

500 Gwei makes trading completely nonviable for the average user in Venezuela. The network fee is >100%!

Meanwhile, to the average trader in high-GDP countries, 500 Gwei gas prices adds a few percentage points. Sucks, but it’s not nearly as bad.

To the whale, $21 is nothing: on a $50K trade, that's just 0.042%.

But DeFi shouldn't just be for the whales.

DeFi is meant to be inclusive. To enable the unbanked and the underbanked to get access to these financial instruments with little to no requirements.

And with fees this high, they're left out. Again...

In Venezuela the only viable alternative nowadays is to use a centralized peer-to-peer platform. But as we saw yesterday, these choices are becoming fewer by the minute.

news.bitcoin.com/p2p-bitcoin-ex…

In light of the high gas fees, we've been working on various solutions.

The Ethereum escrow smart contract is already optimized for gas consumption. We’re adding further optimizations, however we don’t expect a significant improvement.

Another solution is adding more cryptos. #Litecoin is seeing a huge surge in trading volume lately, and we think it also has to do with its little-to-no fees, excellent for small trades.

Additionally, #Dash (another crypto with almost zero fees) is coming soon to LocalCryptos.

Last — but definitely not least — there are Layer-2 solutions.

These can actually reduce ETH network fees by moving transactions off-chain. If done correctly, they can be a great alternative.

This is where LocalCryptos is aggressively researching and experimenting.

A well-implemented Layer-2 solution will leverage many of the properties of blockchain such as security, immutability and decentralisation, without its caveats (slow confirmation times, high transaction costs, etc.)

@loopringorg @omgnetworkhq @maticnetwork @zksync @fuellabs_

Regardless, we think there’s something to reflect on here. The future of crypto should be built with the underserved in mind, for these are going to be the most benefited, giving even more value to the industry and, by extension, prompting massive adoption of the technology.