What is Ethereum?
Put simply, Ethereum is an open software platform which allows for the deployment of decentralized applications via smart contracts. A new concept can enter the crypto space by building their idea on the ethereum network, giving them the ease of access to enter the cryptocurrency space, without having to create their own blockchain. They can either start off as a token on the ethereum network and transition onto their own blockchain when the time / funds allow, or they can piggyback off of the ethereum network on a permenant basis.
Whereby Bitcoin allows for peer-to-peer transactions of digital currency and has one primary use, Ethereum is multi-purpose; it can be utilized both as a means of digital currency, and also as a platform for tokens to be built upon, via the smart contracts.
This concept was the first of its kind, with the ‘first movers advantage’ before Neo, Lisk, Stratis and other competitors trying to achieve the same goal appeared on the Coin Market Cap website. They are all now working towards gaining momentum and reaching the next stage in their development (the whole industry is still relatively new).
The one issue with the Ethereum network is that as we saw with Cryptokitties, or as we see with the large number of ICOs which have been conceived on the Ethereum Virtual Machine, it can get rather congested at times so sometimes there can be long delays in trying to transact with Ethereum or Ethereum-based tokens.
This is why scalability solutions are crucial for the success of Ethereum moving forward. Both keen investors and crypto asset experts eagerly anticipate ‘the year of integration’, moving further away from the speculatory bubble critiques, which currently plague the mainstream headlines when cryptocurrencies are mentioned.
The belief is that, when we start to see real-use cases with reputable enteprises using this technology, we will see a huge spike in popularity which will be unprecedented, even taking the bountiful past of Bitcoin into consideration. So if there are problems on the Ethereum network now, scaling solutions need to be implemented as soon as possible, before the next bull run commences and the Ethereum network receives an influx of activity from both developers of tokens and the investors/users of the tokens.
Below we can see some of the solutions being worked on:
Scaling Solutions on Ethereum
|#||Scalability Solution||What is it?||Limitations|
|1||Sharding||Sharding will allow nodes to validate more transactions at once. Instead of putting all the data into one node, it could spread out to different nodes which only have to validate small amounts of each transactions and compute less of each transaction.||Complicated solution; the nodes will need to process transactions in parallel. Further work needed to decide which node processes which shard.|
|2||Raiden||Raiden proposes the scale of the Ethereum network off chain, so it does not occur on the Ethereum network. The need for global consensus will be removed.||Project was supposed to launch in March 2017. Issues with scalable routing; finding the path from the sender to the receiver is very difficult without the full view of all channels.|
|3||Plasma||Plasma works via child blockchains (blockchains that are built on top of blockchains), which are created through a smart contract and are governed by their own rules and restraints.||Controvercy about not being able to provide the latency and low fee properties that Raiden Network will provide.|
|4||Loom||Loom aims to scale online games on the blockchain and social apps such as twitter. This is done by relying on sidechains, which essentially get their own chains but are still tied to the security of the ethereum network.||Sidechains in themselves can increase scale but not scalability, any more than increasing blocksize. Also there can be a decreased level of security with sidechains.|
The Future of Ethereum
With different scaling solutions being worked on by technological pioneers and great minds across the globe, Ethereum’s current ’15 transactions a second’ capability will soon be a thing of the past.
Currently, Visa’s transactions equate to roughly 45,000 TPS (transactions per second). It has been estimated that Plasma will be able to acheive over a million TPS in the near, or not so near future. So it is a battle against the clock as there are fresh, young blockchains all competing for the title of “ethereum killer”, such as Cardano, Lisk, Neo, EOS and Stratis to name a few.
As we are at the bleeding edge of this technology and these projects are at the infancy stages of their development (comparable to the first car by Henry Ford), there may be enough room for a few of this type of blockchains to flourish, whilst co-inhabiting this corner of the cryptocurrency space. Who knows what will happen, maybe the biggest coin of the year 2020 hasn’t even been conceived yet.