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I went on a vacation in Cyprus and was surprised by the use of crypto in the payments and money transfers. The more surprising thing to me was seeing that no one uses Ethereum or L2 for payments, and almost all of them use Tron only. I had a chance to talk with the local exchange owners and want to summarize their thoughts on Ethereum & L2 & payments in general.
No Narrative, Touch the Users: Payments.
Our industry loves new narratives, especially if it’s about infrastructure. However, when we look at the reality, no infrastructure project has a product that touches users. It stands out as one of the “best” use cases that found its PMF and can touch the end users. What users call payment is a stablecoin transfer, and unfortunately, Tron is one of the leaders right now in the economic activity of stable coin payments. Most stablecoin transfers are happening on Tron, which is a highly centralized and expensive (fee is 1$) chain.
In Tron’s earlier days, Tron and Binance were working together (I don’t know why), and sending stable coins with Tron was free on Binance Exchanges. Everyone used TRC20 addresses as it has zero fee. Tron also made a massive operation in the African market with Binance in the earlier days of the adoption, and they’re the leader in the African market. According to Chainalysis, Nigeria stands out as a leader in the adoption of peer-to-peer (P2P) volume over-the-counter markets, underlining the country's innovative approach to cryptocurrency use and its pivotal role in the digital finance landscape of Africa.
Why do Africa, Nigeria and other driving markets matter? Stable Coins solve a real pain for users in developing markets: Accessing global dollar liquidity and sending money globally. And as Cyprus’s one of the local newspapers say, more than 30k Nigerian students are already in Cyprus which led Crypto adoption in Cyprus. These users are more powerful than everyone thinks.
State of Crypto in Cyprus:
Northern Cyprus, officially the Turkish Republic of Northern Cyprus (TRNC), is a de facto state that comprises the northeastern portion of the island of Cyprus. It is recognized only by Turkey, and its territory is considered by all other states to be part of the Republic of Cyprus. Thus, sending and receiving money from other countries is so problematic. During my vacation, I saw more than 20 local crypto exchanges that allow the conversion of stablecoins to local currencies with 1-2% fees, but who were the main customers of these exchanges? African Students, and Gamblers and users who use payments for daily life :)
African Students and “Why” They Use Crypto for Cross-Border Money Transfer: There are a lot of African Students (more than 30k whereas the total Cyprus population is 350k.) in Cyprus, and as they’re students, they need to receive money from their families. Before crypto, it was a huge pain for them because they had to open a bank account and then receive money with huge fees + long waiting times.
During the talk with the local exchange owner who opened the exchange about seven years ago, he said that African students were one of the OGs on Bitcoin due to global money transfers. After Tron’s huge marketing and BD efforts in Africa, they became a Tron user in the earlier days of the Tron.
Since the students were using Tron for payments, the exchange owner suggested Tron for their other customers as well. I saw a scenario in which I saw the network effect with my own eyes: I was inside a local exchange, and African students were there as always. One Turkish citizen came inside and said that he wanted to sell his car to his friend but he had no bank account. The Exchange owner helped him to be a Tron user and The Turkish Citizen left the exchange with being a Tron user. He will also probably use Tron in Turkey too.
I guess this is how Tron created a huge network effect and I also asked this question to the exchange owner: Why don't they use Ethereum? He said they’re escaping when they hear Ethereum’s name due to high fees.
So what those crypto users want is:
Cheap Fees - this is where Ethereum failed in its earlier days
CEX integrations & On/off ramp providers - Binance P2P is also widely used on payments and the main advantage of Binance P2P and Tron is their usage everywhere. This is so important because they need to find a way to convert their local currencies with Crypto. Unfortunately CEX’s are still the best option available here.
Customers are not happy when they hear Ethereum’s name, they just think that Ethereum is a premium chain for rich users 🙂
If it is a self-custodial wallet, the users need easy recoverability, phishing resistance and good UX.
Being Able to Make USD Transfers Globally - It can be done via a stable coin or in the future CDBC?
Gambling in Cyprus and Why Crypto is Being Used in There:
Gambling is legal in Cyprus. As I have talked with locals, they said that most of the casinos accept crypto payments because it is the easiest way to send and receive money if you’re coming from outside of Cyprus. I couldn’t visit the Casinos, so I don’t have numbers for how often Casinos accept payments in stable coins and gamblers choose them. Their requirements from wallets are so similar to students, they need easy on & off ramp, CEX integrations, and cheap fees.
Some Shops Accept Crypto Payments
Crypto payments are also legal in Cyprus, almost 10% of shops that I visited were accepting crypto payments. I also talked with them and they said the same thing: most of the users are using Tron. Almost all of them use Binance Pay for accounting & calculating taxes etc. Just because it is easy to use and Binance has a great legal form for them.
How Ethereum Can Beat Tron and Be the Main Place for Payments? First of all, I’m biased as we build a payment-focused crypto application (Clave). But as an Ethereum enthusiast, I have some views on payments and how Ethereum can beat Tron:
L2’s&CEX integrations: When we look at Tron’s success we see that Binance’s and Tether’s support for Tron helped them to lead the stable coin payments in web3. We need a similar thing for Ethereum.
Focusing on Local Communities: Yes, onboarding users to crypto was problematic in the past. But right now, we have Account Abstraction, passkeys, biometrics, and many other features to serve the best UX without giving up on decentralization. But we still need an important thing: local communities, especially from driving countries, need to access dollar liquidity and the only way to touch with them is by having local GTM plans similar to what Tron did in Africa.
Building a network of networks: let your users distribute the way that users send money. We allow users to send money with a link, this means that users can send money even if the recipient doesn’t have an account and the recipient will also be a user.
No more focus on L1’s execution layer, please. We need 1 cent transactions on Layer 2’s without integrating alternative Data Availability layers.
We, Clave, are trying to fill these gaps in the Ethereum ecosystem together with zkSync and we’re trying to make Ethereum payments great again :).
Special Thanks, Eric Siu, for helping me, and Polynya for feedback.
I went on a vacation in Cyprus and was surprised by the use of crypto in the payments and money transfers. The more surprising thing to me was seeing that no one uses Ethereum or L2 for payments, and almost all of them use Tron only. I had a chance to talk with the local exchange owners and want to summarize their thoughts on Ethereum & L2 & payments in general.
No Narrative, Touch the Users: Payments.
Our industry loves new narratives, especially if it’s about infrastructure. However, when we look at the reality, no infrastructure project has a product that touches users. It stands out as one of the “best” use cases that found its PMF and can touch the end users. What users call payment is a stablecoin transfer, and unfortunately, Tron is one of the leaders right now in the economic activity of stable coin payments. Most stablecoin transfers are happening on Tron, which is a highly centralized and expensive (fee is 1$) chain.
In Tron’s earlier days, Tron and Binance were working together (I don’t know why), and sending stable coins with Tron was free on Binance Exchanges. Everyone used TRC20 addresses as it has zero fee. Tron also made a massive operation in the African market with Binance in the earlier days of the adoption, and they’re the leader in the African market. According to Chainalysis, Nigeria stands out as a leader in the adoption of peer-to-peer (P2P) volume over-the-counter markets, underlining the country's innovative approach to cryptocurrency use and its pivotal role in the digital finance landscape of Africa.
Why do Africa, Nigeria and other driving markets matter? Stable Coins solve a real pain for users in developing markets: Accessing global dollar liquidity and sending money globally. And as Cyprus’s one of the local newspapers say, more than 30k Nigerian students are already in Cyprus which led Crypto adoption in Cyprus. These users are more powerful than everyone thinks.
State of Crypto in Cyprus:
Northern Cyprus, officially the Turkish Republic of Northern Cyprus (TRNC), is a de facto state that comprises the northeastern portion of the island of Cyprus. It is recognized only by Turkey, and its territory is considered by all other states to be part of the Republic of Cyprus. Thus, sending and receiving money from other countries is so problematic. During my vacation, I saw more than 20 local crypto exchanges that allow the conversion of stablecoins to local currencies with 1-2% fees, but who were the main customers of these exchanges? African Students, and Gamblers and users who use payments for daily life :)
African Students and “Why” They Use Crypto for Cross-Border Money Transfer: There are a lot of African Students (more than 30k whereas the total Cyprus population is 350k.) in Cyprus, and as they’re students, they need to receive money from their families. Before crypto, it was a huge pain for them because they had to open a bank account and then receive money with huge fees + long waiting times.
During the talk with the local exchange owner who opened the exchange about seven years ago, he said that African students were one of the OGs on Bitcoin due to global money transfers. After Tron’s huge marketing and BD efforts in Africa, they became a Tron user in the earlier days of the Tron.
Since the students were using Tron for payments, the exchange owner suggested Tron for their other customers as well. I saw a scenario in which I saw the network effect with my own eyes: I was inside a local exchange, and African students were there as always. One Turkish citizen came inside and said that he wanted to sell his car to his friend but he had no bank account. The Exchange owner helped him to be a Tron user and The Turkish Citizen left the exchange with being a Tron user. He will also probably use Tron in Turkey too.
I guess this is how Tron created a huge network effect and I also asked this question to the exchange owner: Why don't they use Ethereum? He said they’re escaping when they hear Ethereum’s name due to high fees.
So what those crypto users want is:
Cheap Fees - this is where Ethereum failed in its earlier days
CEX integrations & On/off ramp providers - Binance P2P is also widely used on payments and the main advantage of Binance P2P and Tron is their usage everywhere. This is so important because they need to find a way to convert their local currencies with Crypto. Unfortunately CEX’s are still the best option available here.
Customers are not happy when they hear Ethereum’s name, they just think that Ethereum is a premium chain for rich users 🙂
If it is a self-custodial wallet, the users need easy recoverability, phishing resistance and good UX.
Being Able to Make USD Transfers Globally - It can be done via a stable coin or in the future CDBC?
Gambling in Cyprus and Why Crypto is Being Used in There:
Gambling is legal in Cyprus. As I have talked with locals, they said that most of the casinos accept crypto payments because it is the easiest way to send and receive money if you’re coming from outside of Cyprus. I couldn’t visit the Casinos, so I don’t have numbers for how often Casinos accept payments in stable coins and gamblers choose them. Their requirements from wallets are so similar to students, they need easy on & off ramp, CEX integrations, and cheap fees.
Some Shops Accept Crypto Payments
Crypto payments are also legal in Cyprus, almost 10% of shops that I visited were accepting crypto payments. I also talked with them and they said the same thing: most of the users are using Tron. Almost all of them use Binance Pay for accounting & calculating taxes etc. Just because it is easy to use and Binance has a great legal form for them.
How Ethereum Can Beat Tron and Be the Main Place for Payments? First of all, I’m biased as we build a payment-focused crypto application (Clave). But as an Ethereum enthusiast, I have some views on payments and how Ethereum can beat Tron:
L2’s&CEX integrations: When we look at Tron’s success we see that Binance’s and Tether’s support for Tron helped them to lead the stable coin payments in web3. We need a similar thing for Ethereum.
Focusing on Local Communities: Yes, onboarding users to crypto was problematic in the past. But right now, we have Account Abstraction, passkeys, biometrics, and many other features to serve the best UX without giving up on decentralization. But we still need an important thing: local communities, especially from driving countries, need to access dollar liquidity and the only way to touch with them is by having local GTM plans similar to what Tron did in Africa.
Building a network of networks: let your users distribute the way that users send money. We allow users to send money with a link, this means that users can send money even if the recipient doesn’t have an account and the recipient will also be a user.
No more focus on L1’s execution layer, please. We need 1 cent transactions on Layer 2’s without integrating alternative Data Availability layers.
We, Clave, are trying to fill these gaps in the Ethereum ecosystem together with zkSync and we’re trying to make Ethereum payments great again :).
Special Thanks, Eric Siu, for helping me, and Polynya for feedback.
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