Natasha Prayag
By Natasha Prayag

The reason why no one is giving up on Ethereum

Ethereum is a global, open-source, decentralised blockchain that uses smart contracts and tokens to run decentralised applications (dApps). These dApps enable users to make agreements, transact, buy and sell goods and services all without the need for a middle man. Ethereum was founded in 2014 by Vitalik Buterin, and has grown into the second largest blockchain by market cap (at the time of writing).

However, despite Etheruem’s success, it still faces the scalability issues that come with being built on a PoW (Proof of Work) consensus algorithm. At the moment, Ethereum’s blockchain can only process 15 transactions a second, to put that into perspective, Visa processes 45,000 per second.

But the reason why no one is giving up on Ethereum? It’s still a super successful blockchain with a lot of potential.

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The scalability problem

Ethereum, with its coin (ETH), was launched with the purpose of being a “world computer” – a network where many dApps could run, much like on a cloud deployment but with the added safety, speed, and decentralisation that comes with being built on a blockchain.

And ultimately, that’s precisely what Ethereum has managed to accomplish – what they didn’t expect was the “ICO craze” where multiple people and businesses were creating tokens on the blockchain, simply to take money from investors. This caused masses of new users and transactions to occur on the blockchain, which can only take 15 transactions a second.

The Ethereum blockchain became increasingly busy, and the costs of using the network (or transaction fees) increased. What Ethereum is experiencing is known as a scalability issue, which refers to the amount of transactions that the network can accommodate at a given time.

So, what is the scalability problem? Essentially, the scalability issues that Ethereum faces are intrinsic to the consensus algorithm that the blockchain is built on. This is because all transactions over the network have to be broadcasted to every node, so there can be no direct scaling of a transaction without increasing the size of individual blocks.

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What can be done? 

So, what can be done? At the moment, the main solution seems to be to switch to another consensus mechanism: Proof of Stake (PoS). A PoS algorithm functions on fundamental, democratic governing principles that focus on identifying bad actors (those who would clog the blockchain in PoW), by forcing them to stake some of their ETH in a smart contract in order to validate transactions.

Joseph Lubin, a co-founder of the Ethereum blockchain, recently revealed to Cointelegraph that the network would become “1,000 times more scalable in 18 to 24 months.”

Lubin also noted that switching to a Proof of Stake mechanism would bring about a massive increase in scalability, that the ecosystem would split again and be renamed Ethereum 2.0, or Serenity. He stated that the project has already been divided into four phases, with eight teams of developing clients for the new blockchain.

Switching to a PoS algorithm allows for much faster transaction speeds too, as validating nodes no longer need to have a copy of the entire blockchain, but only of the transactions that take place on the network. PoS blockchains are far more scalable, and are also more resistant to 51% attacks, making this the ideal move for Ethereum.

All of these factors combined contribute to the reason why it appears no one is giving up on Ethereum, not now and not in the near future.

Ethereum: a long journey ahead

Ethereum, and its coin (ETH), still have a long journey ahead. The scalability issues are as apparent as they are with other PoW cryptos. Still, with incredible leadership in the form of Vitalik Buterin and Joseph Lubin, the second largest blockchain by market cap is going places.

The news that the network is switching to a PoS consensus algorithm has been vital in renewing the crypto community’s excitement about the blockchain, and is a huge part of the reason why no one is giving up on Ethereum any time soon. Things are heating up around these parts, and we’re really looking forward to seeing what happens in the future.

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