Layer One: Agentic payments could cause a new blockchain scalability crunch

AVAT CEO says blockchain scalability could become a core differentiator again as agentic payments surge

It wasn't long ago that blockchain congestion was one of crypto's defining problems. At its peak in May 2021, the average transaction fee on Ethereum exceeded $50, making routine onchain activity prohibitively expensive. Around the same period, Solana suffered several major outages, including a seven-hour shutdown in 2022 after NFT minting bots generated around 6 million transaction requests per second.

The scalability question looks very different today. Ethereum has pushed activity onto Layer 2s, while newer networks such as Solana and Avalanche have taken different approaches to expanding capacity. For the most part, there is simply more blockspace available than existing users need.

So much so that at the start of this year Vitalik Buterin declared Ethereum’s own blockchain trilemma — the problem of balancing decentralization, security and scalability — effectively “solved.”

However, Avalanche Treasury Company CEO Bart Smith expects the rise of AI agents in financial markets to put this notion to the test. Speaking to The Block at the Avalanche Summit in New York last week, Smith argued that the sheer scale of transactions autonomous agents could generate may make blockchain capacity a pressing concern once again.

The early stages of this trend are already apparent. A report from Bloomberg last week said that crypto transactions on agentic rails surged by 500% in the last three months, citing figures from blockchain analytics firm Elliptic. That activity is expected to keep growing as agents are trusted to transact in a wider range of contexts.

Reports from McKinsey, Mastercard, and JPMorgan have each independently forecast that AI agent-assisted consumer spending could reach as high as $5 trillion by 2030. And that figure captures only part of the potential machine economy, excluding activity such as B2B payments, autonomous trading, and low-value machine-to-machine transactions.

Rather than transaction value, the greater issue is transaction volume. Bloomberg’s primary concerns are compliance and AML — the worry that enormous volumes of small machine transactions will be impossible to monitor and police under frameworks designed for slow-paced human use. Smith, on the other hand, identifies a more crypto-native problem.

While human blockchain users tend to transact in larger amounts and at speeds that seem glacial by machine standards, AI agents are capable of submitting thousands of sub-dollar micropayments in the same timeframe. These are necessary for functions such as API calls, data retrieval, and access to computing resources.

Current figures from Visa’s stablecoin dashboard bear this out. Agentic payments processed through the x402 and MPP protocols totaled just $7.5 million in dollar value over the past six months. However, this was spread across 100 million individual transactions, resulting in an average transaction size of $0.0746. The median transaction size is lower still at $0.0086, meaning the majority of recent agentic transactions were under a cent in value.

For comparison, the unadjusted trailing twelve-month figures for overall stablecoin activity show 18.1 billion transactions totaling $85.8 trillion in dollar value — an average of $4,740 per transaction.

These figures point toward a potential rise in congestion. Blockchains themselves are of course largely uninterested in the dollar value being transferred: a $0.001 micropayment can place just as much load on a network as a million-dollar transfer.

So even though the total agentic transaction dollar value is still limited, these payments are capable of consuming an outsized share of total transactions. As agentic activity increases onchain, the processing load this brings could quickly eclipse human-generated activity even if the latter were to remain more economically significant.

Smith believes that this will bring the technical differences between chains back into sharp focus.

Major L1 networks have taken differing pathways to meet future demand. Solana has prioritized high throughput on a shared chain, while Avalanche's architecture allows capacity to expand horizontally through independent Layer 1s. Ethereum, meanwhile, has increasingly outsourced execution to a broad ecosystem of Layer 2 rollup networks.

For now, abundant blockspace has allowed those architectural differences to fade into the background; if congestion is negligible on every chain, then the user experience is generally the same across the board. But if Smith is right, a world in which autonomous agents generate transactions at machine speed could put these technical differences to the test once again.

Podcast Recap: OpenTrade CEO cites bank lobby's $3 trillion deposit-flight warning

Last time on the podcast, we were joined by David Sutter, co-founder and CEO of OpenTrade, to discuss the evolving regulatory environment, institutional demand for DeFi and the rapid growth of stablecoins in emerging markets.

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In the Headlines: The stories driving the conversation this week

• Binance has invested $100 million in Circle as the two companies expand their partnership around USDC. The exchange purchased 1.24 million Circle shares alongside a new five-year commercial agreement to promote USDC. The leading CEX previously had its own branded BUSD stablecoin, issued by Paxos, but new minting was discontinued in 2023. BUSD now sits at just $34.5 million in value versus USDC’s $75 billion.
• Americans' willingness to use stablecoins rises from 36% to 56% when bank-level fraud protection and deposit insurance are added. A new Visa survey of 2,192 U.S. adults also found that 64% care more about the provider than the underlying technology, with commercial banks and global payment networks ranking as the most trusted entities. The survey also revealed a significant awareness gap among the general public: 56% of respondents said they had never heard of stablecoins prior to participating.
• Blockchain.com and the New York Stock Exchange have signed a deal to bring tokenized U.S. stocks and ETFs to Blockchain.com users. The service depends on the launch of the NYSE's planned digital trading platform, but would allow users to trade tokenized securities with immediate onchain settlement. The announcement comes after Ava Labs President Charley Cooper revealed that the NYSE has spent a year testing Avalanche technology for the platform, although it has not yet announced which chains the live version will use.

Top of the Charts: TPS has consistently trended up across major L1 networks

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