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On a, perhaps, contrarian tip, VenkateshRao says TransactionCosts are going up :


Hypothesis: real transaction costs are skyrocketing in illegible ways and will stay high for decades, and we’re headed to opposite end of the Coasean social-institutional design space from what we thought we were in 2000. Search, negotiation, and monitoring costs all ↗️

Ethereum gas fees aren’t a weird artifact of blockchain technology. They’re just legible real transaction costs priced in energy dollars. Any tx that looks much cheaper hides things like petrodollar externality costs, crime, employment uncertainty, contract break penalties etc

Cost of capital is at historic lows but cost of transacting with that capital is really really high. Perhaps historically so.

Transaction costs don’t exist in a vacuum. They’re a real measure of environmental noise (search costs), trust levels (negotiation and monitoring costs).

Plus non-transactional social costs like pollution or carbon tend to get priced in via transaction costs. Like if you’re cheating or gaming a carbon tax or cap-and-trade regime, the cost shows up in trust component of transaction costs.

If you’re literally at war with Russia, the cost of international transactions goes very high on average via local spikes, and short-term interbank liquidity (apparently Russian forex is a big market-maker there) goes up

If you trade on Craigslist a lot, the cost of the risk of getting possibly killed, robbed or cheated or even simply no-showed on, is illegible transaction cost. Filtering out fake reviews on Amazon is a transaction cost.

Since I mentioned Ethereum — high gas is not just a PoW artifact. The reason lower energy protocols like PoS are cheaper is they give up some trust by accepting risk where fraud payoff is higher than cost of losing your stake.

In optimistic rollups, you get cheaper fees by betting most people won’t cheat most of the time in your particular app, and still pay a higher time cost for unchallenged tx. I haven’t thought through whether ZKRollups represent a free lunch but I doubt it.

It’s not a metaphor. It’s literal. If you could trust people more you could do bigger, more optimistic rollups for eg. Trust everyone in your village? Write one rollup of local tx to mainnet a month or year. Think everyone is out to cheat you? Every atomic tx goes on mainnet.

Valid point if inequality is low enough and basic standard of living is sufficiently high relative to tx fees. See for eg Barbara Ehrenteich’s Nickel and Dimed for an old view of how the poor pay higher tx costs. Or Portfolios of the Poor.

CategoryCopyrightRisk, CategoryEconomics

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