Re: your on chain transactions argument, you’re completely over looking (intentionally?) the fact that day to day transactions don’t need to be on chain. In fact many would argue that they shouldn’t be on chain. Layer 2 protocols can handle all of that.
Just one example scenario could be…
Step 1. Your employer opens a Lightning Network channel to your node (self hosted, or not, your call). This requires one on chain transaction (actually, there are enhancements that allow opening multiple channels in a single transaction, but that’s beyond the scope of this conversation.) Step 2. Every month, your employer pays you over this channel. No new on chain transactions happen for this. Step 3. You use the channel to pay your rent/mortage, utility bill, etc. Still, no new on chain transactions. Step 4. You continue to use the channel to buy groceries, lunch, drinks for friends, a massage, etc. No on chain transactions. Step 5. Oops, you’ve got a bill that needs to be paid in fiat. What now?!? Use the channel to transfer some Bitcoin to your bank account, where it’s automatically converted into fiat. Pay your bill from there. Still no on chain transactions. Step 6. Return to step 2. Still no on chain transactions. … Step 3,658,423. 6 years later, you leave your job, Your employer closes the channel. Any Bitcoin left on your side of the channel (if any) is sent to an on chain address that you provided in step 1. This requires one more on chain transaction.
Total number of on chain transactions in 6 years and countless payments: 2
In reality, that’s probably not exactly how it would work. For instance, I would quickly just send my entire paycheck back out on the channel to a different LN channel I had open with a reliable node operator so that I wasn’t dependent on my employer keeping their node running over the weekend so I could pick up the tab at the bar. Etc
Regardless, that’s how it could work. There are countless other ways it could work, limited only by the desires and imagination of those setting up their channels, and all allowing for countless transactions over months, years, even decades, to be represented by two small on chain transactions.