Coinbase CEO: The key to the success of cryptocurrency payment applications is whether the fees are cheap.

The CEO of Coinbase, Brian Armstrong, stated in a tweet that for future payment scenarios to achieve widespread adoption, they should be built on Layer2 rather than the existing mainstream Layer1. This is because in the increasingly competitive field of cryptocurrency payment services, transaction fees will be a major competitive factor.

Payment Apps Need Affordable Infrastructure

The merchant cryptocurrency payment module Coinbase Commerce provides tools for merchants to accept cryptocurrency payments, which is one of the important product lines under Coinbase.

However, some in the crypto community have discovered that the package only accepts payments from users with Coinbase accounts for cryptocurrencies like Bitcoin, Litecoin, and does not accept assets from other self-hosted wallets, causing confusion in the community. In response, Coinbase CEO Armstrong wrote an article to explain his thoughts on this matter.

The Key to Payment Apps is Network Fees, Not the Tokens Themselves

Armstrong stated that payment apps should be built on affordable mechanisms, and the most likely way to achieve this at the moment is to use Layer2 networks to establish payment services.

As long as network fees are low, it is not limited to stablecoin payments, ETH, BTC, and various tokens are suitable for payment apps.

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The Probability of Layer1 Being Used as a Payment Tool in the Future is Very Low

Currently, most L1 blockchains, including the Bitcoin network, have not reached this level, so Coinbase Commerce does not support external wallet interactions for certain tokens to ensure user experience.

Armstrong believes that the likelihood of L1 being the mainstream infrastructure for payment applications in the future is very low. Although Solana may be an exception, Coinbase will continue to focus on the development of L2 and even consider incorporating Lightning Network technology in the future.

Fierce Competition in Crypto Payments

In addition to Coinbase, payment infrastructure providers include MoonPay, Stripe, and Web2 giant PayPal. Stablecoin providers from USDT, USDC, DAI to the recently rapidly emerging FDUSD all indicate that competition in the payment sector is becoming increasingly fierce. In the absence of differentiation and clear positioning, it is gradually becoming a red ocean market.

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