📍 Las Vegas, NV, USA. on 23rd Oct 2022 at 00:00
6 mins read
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Things are no longer the same for the second-largest cryptocurrency project by market capitalization, Ethereum. It has been a struggle to keep afloat, majorly sustained by a controversial stable coin, Tether. This development leads a prominent personality in the crypto industry, Samson Mow, to slam the digital asset, suggesting it is at a “technological dead end”.
Since being created in 2013, Ethereum has been admired by developers, programmers, and enterprises for its real-world easy to follow approach. Its smart contract platform technology has been used by many alt coins, enterprises, and startups to develop their projects’ fundamental principles.
Ethereum’s capacity earned it second position in CoinMarketCap’s top 10. Its ROI is about 8,418.58% circulating supply and the total supply is reported as 106,100,450 ETH.
In May, the Ethereum market cap was at 25,597,335,047 USD, but the price fell to stay above $185 against the USD. The downward trend saw the coin going down to $162 and it has struggled more than bitcoin. It continued to maintain a strong resistance around $170 and $175, and the current price is 87% down from the all-time high.
The transactions came down from its peak in January 2018, though the fees are far lower than bitcoin, they are volatile.
Issues Surrounding Ethereum That Affect Its Growth
Ethereum has the same unaddressed scaling issues which have limited the first tier cryptocurrencies like bitcoin. These issues brought its network utilization to 90%. The network utilization is presently sourced from Tether (USDT), indicating a surge in on-chain transaction fees which may be too high for developers. For this same limitation, developers will be forced to migrate to other chains.
The Ethereum 2.0 was designed to initiate proof-of-stake and sharding solutions to the network and fix the current scaling issues.
To this, Samson Mow explained that the Ethereum technology which is supposed to become stronger as it is used, rather dies faster the more it is used. Unfortunately for Ethereum, Tether also operates on the same Liquid Network that is more scalable. Mow suggests that Lightning Network can be created of Tether assets.
Ethereum Network Is Almost Full
The Ethereum creator, Vitalik Buterin responded to Mow’s statement, explaining that full network utilization is not peculiar to Ethereum but all the first tier digital assets like Bitcoin. He went further to point out that his network is not the only one facing the scaling issues, other blockchain projects are also having the same issue because the available scaling solutions have not been able to solve their problems.
Buterin pointed out that the number one digital asset, Bitcoin, is also as full as Ethereum. He thinks it is still okay to develop apps even with the current situation, but not anything substantial that can create higher transaction fees which will culminate in growing demand for Ethereum.
It is expected that the ETH 2.0 sharding will fix this issue in the long term. Ethereum 2.0 will change the whole of its technology, so the second-largest crypto project team is still trying to figure out how everything is going to work. But the major challenge is that developers are not likely to wait until the implementation of Ethereum 2.0, some have already migrated to other platforms.
Currently, Ethereum has adopted a different kind of transaction verification, known as miners to verify transactions and it is moving to stake. But there is no proven guarantee this is going to work.
Tether Has Taken Up Much Of Ethereum’s Capacity
A couple of years back, the Ethereum network became saturated as the digital game CryptoKitties came into existence. Most of the initial coin offerings turned out to be scams and also took up space on the network. As the majority of those ICOs were trashed out, a new project, which is Tether, is occupying the space.
Tether keeps on growing as more coins are issued. Recently hitting a market capitalization of $4 billion from $2.7 billion it was a year ago, according to coinmarketcap.com.
About 40% of Tether transactions run on Ethereum. Other developers don’t have enough space to run on Ethereum since more of it is taken up by Tether. In the past one month, Tether paid computers processing transactions on Ethereum’s digital ledger $260,000 in fees.
DappRadar.com report shows that Ethereum was created to improve upon Bitcoin limitations, this stirred up the interest of enthusiasts because it enables them to automate tasks using its extra features. It can also be used to set up an autonomous corporation that runs via software. These apps are now on digital ledgers.
Other Issues Plaguing Ethereum Network
Ethereum intends to support as many users as possible, according to Vitalik, the long term goal is for the platform to be able to process transactions at the level of Visa or even more. Now Ethereum blockchain currently supports 15 transactions per second compared to the 45,000 processed by Visa.
This transaction rate is a far cry compared to what is expected of the project, but its architects believe Ethereum can still meet up with expectations.
Difficulty in Scaling
One of the reasons why it is difficult for Ethereum to scale is that it uses some technical strategies and incentives just like Bitcoin, to keep track of who owns what, without a central authority.
The difficulty in safekeeping all these records and growing the number of users is that the Ethereum platform depends on a network of nodes. Each of these nodes stores all the transaction history such as state of account balances, contracts, and storages. Every 10 – 20 seconds, the total number of transactions increases with each new block, making this record-keeping a difficult task.
Developers can’t increase the block size to accommodate more transactions because the data will be too large for the node, throwing out some people out of the network. On the other hand, enlarging the node will still affect scalability since it is only a few organizations can afford the cost.
Each node on the Ethereum network needs to store the update on every account, sharding breaks database into pieces and positions each part on a different server.
Sharding removes networks from requiring full nodes, which stores the state of the network and every transaction that took place. The problem here is that the nodes need to rely on other nodes.
Ethereum plans to solve this problem using the blockchain technology to ensure there is correct interaction between nodes.
Though all these issues have limited Ethereum’s growth, making it unable to meet the expectations of developers and programmers, the team is still nursing an ambitious move to salvage the network.
Taking in tow with Bitcoin could help Ethereum expand its technological capacity by using the Lightning Network. This is a second layer solution, built separately on top of a network to interact with the network and enable it to perform faster.
Application of Lightning-style ‘off-chain’ transactions could help the network scale-up to expectation. Most of the transactions will be made on ‘off-chain’ micropayment channels to reduce the burden on the network. This will yield a better result because the parties can end the transaction at will just by pushing it back to the blockchain.
So, even if the computation limit is not extensively expanded, the network users can run a full node. However, reviving the Ethereum network should be the ultimate plan for the team right now, developers and other users may not be patient enough to hang around for so long.