Ethereum has proven to be an impressive force. While its main issues have spawned other coins aiming to address them, Ethereum looks to shed its old skin with the release of Ethereum 2.0.
Despite the fact that Ethereum was founded six years after Bitcoin (BTC) and the introduction of blockchain technology, the digital asset Ether (ETH) has become the second most valuable cryptocurrency in terms of market capitalization, surpassing coins like Litecoin (LTC) , Ripple (XRP), Dash (DASH) and Monero (XMR) that were launched before.
The technology behind the Ethereum blockchain is the main reason behind its meteoric rise.
Vitalik Buterin, the Canadian-Russian programmer and co-founder of Ethereum, told Business Insider that the Ethereum blockchain is designed to address Bitcoin’s “limited functionality.”
The Ethereum blockchain aims to foster innovation by enabling the development of decentralized applications (DApps). This is the basis of Nonfungible Tokens (NFTs) and the Metaverse concept.
While Ethereum has solved the limited functionality issue, it hasn’t addressed some of the biggest concerns related to Bitcoin and most blockchains because it relies heavily on the Proof-of-Work (PoW) consensus.
Low scalability, network congestion, high gas fees, and environmental concerns are some of the main issues, all related to the PoW consensus mechanism used by Bitcoin and Ethereum.
For this reason, Ethereum has been preparing for the transition to Proof-of-Stake (PoS) in the upcoming Ethereum 2.0 for some time.
Proof of Work vs. Proof of Stake
The network verifies transactions on a blockchain using a consensus mechanism that helps ensure no one spends the same money twice. The consensus mechanism is used to validate transactions, add them to the blockchain and generate new coins. PoW and PoS are the two main consensus mechanisms used to achieve this.
Proof-of-work as a consensus mechanism uses mining to verify transactions. The computers on the network have a puzzle to solve, and the first to do so will validate the most recent transaction and add it to the blockchain. The network rewards the first person to solve this puzzle and verify the transaction with a token.
While PoW helps keep the blockchain secure, the problem with this consensus mechanism is its connection to mining. The computers involved in mining use a significant amount of energy while attempting to solve these mathematical puzzles.
Bitcoin consumes more electricity than Argentina, the Netherlands and the United Arab Emirates, according to data from the University of Cambridge. This raises significant environmental concerns.
In addition, blockchains such as Ethereum, which perform a large number of transactions, are slow in terms of transaction speed due to the reliance on mining, which leads to network congestion and thus higher gas fees.
The PoS consensus mechanism uses staking instead of mining to validate new transactions and add them to the blockchain. PoS requires coin holders to stake their coins in a staking pool, which allows stakers to validate new transactions to be added to the blockchain.
In addition, PoS eliminates the environmental issues associated with mining, allowing transactions to be completed faster and at a lower cost.
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The Birth of the Ethereum Killers
Ethereum killers are networks trying to take down Ethereum by addressing its blockchain issues such as low scalability, high fees, low transactions per second (TPS) and environmental concerns. They intend to achieve this by using the proof-of-scale consensus mechanism. Cardano, Solana, Polkadot, and Tezos are among the best known.
For example, Cardano uses Ouroboros, a consensus and security protocol based on PoS. The Cardano blockchain is highly scalable thanks to the use of Ouroboros, which allows for faster transaction speeds and lower fees.
Additionally, Cardano’s Hydra project aims to increase its speed by more than 300%. Currently, Cardano can handle around 250 TPS. However, the developers are working on a scaling solution to aim for 1,000 TPS. The Cardano blockchain is energy efficient and addresses the environmental concerns associated with the Bitcoin and Ethereum blockchains as it uses a PoS consensus mechanism.
Cardano also has 579 decentralized applications (DApps), according to Cardano Ecosystem Tracker Cardano Cube. This number is much lower than Ethereum’s nearly 3,000 DApps with more than 50,000 active users and 126,000 transactions per day, according to State of the DApps.
Tezos is another competitor that stands out for its unique governance model.
Tezos, unlike other blockchains, is self-governing in the sense that users have the ability to upgrade and make design decisions. Because governance resides within the network itself rather than a development team, it has been dubbed “the blockchain to evolve.”
Tezos uses PoS in addition to its Liquid Proof-of-Stake (LPoS) mechanism, which allows coin holders to transfer validation rights of their tokens to another user without necessarily losing ownership.
In addition, Tezos has an upgrade ahead called Octez v13, which the team says will increase its transaction speed from 215 TPS to almost 1,000 TPS.
The Solana blockchain is compromised on a fundamental building block of blockchain technology known as decentralization to achieve faster transactions and a more secure blockchain. It does this by integrating a core node into the network that serves as a secure determination of the time that the entire network agrees on, known as Proof-of-History (PoH).
To achieve even faster transactions, Solana uses a PoS consensus mechanism called Tower BFT, which is based on the PoH mechanism. As the blockchain with the highest deployment value of $37 billion, Solana can process up to 50,000 TPS at very low fees, ranging from $0.00001 to $0.00025.
However, several reports of Solana transactions failing due to instability have surfaced. A major network congestion on the Solana blockchain occurred sometime in January and lasted more than 30 hours, causing transaction failures and subsequent liquidations. This was due to bots spamming the network with duplicate transactions.
Solana still doesn’t have many DApps on board. According to DappRadar, the largest PoS blockchain has just 71 decentralized applications across different categories including decentralized finance (DeFi), gaming, and decentralized exchanges (DEXs).
It is also important to note that Solana is one of the largest platforms for non-fungible tokens (NFTs). According to CryptoSlam, Solana’s 24-hour NFT sales volume is roughly hitting the $23 million mark at the time of writing.
Ethereum has planned to move to PoS from the start and significant preparations have been made. The Ethereum 2.0 or Serenity upgrade aims to increase the scalability of the Ethereum blockchain, improve transaction speeds and reduce gas fees.
Eth2 will be implemented in three stages.
The first phase, called Beacon Chain, went live on December 1, 2020, signaling the start of the upgrade. Holders will have the opportunity to stake their tokens during the Beacon Chain stages as the launch completes.
The second phase, scheduled to take place in the second quarter of 2022, is called The Merge, which will integrate the Beacon Chain into the Ethereum mainnet
However, George Harrap, co-founder of Step Finance, believes that transaction throughput and fees will still be an issue for Ethereum regardless, noting that these will likely be resolved in the coming years, although other blockchains and Layer 2s have done so have “extraordinarily good” in combat.
Harrap told Cointelegraph that “Ethereum still has a long way to go to be competitive there, but The Merge is still moving forward.”
Bart, pseudonymous community moment and operations supporter of Harvest Finance, believes The Merge is a step forward in solidifying Ethereum as the original blockchain and “the chain to use.” He told Cointelegraph that layer-2s like Arbitrum or Optimism will continue to gain strength. “Alt chains like Polygon, Avalanche, and Solana have seen strong growth recently, and I expect that to continue after The Merge.”
“The biggest impact for users is that now anyone can become a validator – as long as you have 32 ETH. This is one of the main reasons for moving to proof-of-stake. Proof-of-work requires more technical skills, knowledge, and hardware to set up,” Bart told Cointelegraph.
On the other hand, Kadal Stadelman, Komodo’s Chief Technology Officer, doesn’t seem to be very optimistic about Eth2. Stadelman told Cointelegraph that big Ethereum killers will still thrive after The Merge because they have “the great benefit of ultra-low end-user gas fees.” He noted that “the upcoming merger will not reduce gas fees on Ethereum. It will only change how blocks are produced,” he said, adding:
“I don’t think The Merge alone will result in an influx of new Ethereum-based projects. Until Ethereum gas fees are significantly reduced, projects will likely adopt Ethereum Layer 2 solutions rather than Layer 1 solutions. The more likely scenario is that new projects will continue to use alternative blockchain networks that offer Layer 1 scalability and Ethereum Virtual Machine/Solidity compatibility.”
John Letey, co-founder of KYVE, told Cointelegraph about post-merger data validation: “While many people are looking at a variety of changes that The Merge will bring, the importance to data validation, while important, has not been as much of a topic of discussion .”
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Once The Merge occurs, Letey says no more historical data will be needed to validate the chain. This means that there is no incentive for nodes to carry this data around. Hence, EIP-4444 was born, a proposal to automatically prune data older than a year. In other words, full nodes and remote procedure call (RPC) endpoints cannot synchronize directly off the chain and must rely on centralized endpoints.
“As a result, new nodes must get their data from a snapshot. This means that services that offer truly decentralized access to validation and storage will become critical to projects and not just an option,” he added.
As problems with the second largest blockchain mount, so-called Ethereum killers see an opportunity. For example, Ethereum’s PoW working mechanism can only handle 15 TPS, while other competitors aim for thousands of transactions per second.
On the other hand, Ethereum 2.0 is said to be the solution to many problems with the current Ethereum mainnet. While the project is expected to be completed next year, the crypto community is anticipating the second phase, The Merge, in this second quarter. It remains to be seen how comprehensively these issues will be addressed.
https://cointelegraph.com/news/the-birth-of-ethereum-killers-can-they-take-ethereum-s-throne The Birth of the “Ethereum Killers”, Can They Take the Throne of Ethereum?