According to the ETH charts, the price of Ethereum has been taking a battering so far in 2018. The number two digital asset by market capitalization reached an all-time high this January of just shy of $1,400. It has since tumbled to $202 at the time of writing. However, in the face of competition from other smart contract platforms, it remains resilient in the second place behind Bitcoin. Ethereum divides opinion amongst the cryptocurrency community. Many believe that it could be laying building blocks of a new decentralized web, whilst others think that it’s a scam that is only good for funding start-ups that couldn’t secure resources from more traditional sources.

So, what’s the truth? Is Ethereum the best blockchain platform around? Or will it become known as an early effort at a technology that was ahead of its time? Let’s look at some facts about the network.

Smart Contract Functionality

Ethereum offers a totally different value proposition to Bitcoin and other digital assets that simply aspire to be used in place of traditional, central bank issued currencies. It is a form of programmable money which comes with its own potential as well as challenges.

Many fans of the network tout the smart contract functionality that Ethereum is famed for as potentially disruptive to many industries. Developers can build decentralized applications (dApps) using the programming language directly on the Ethereum network. These applications are thought to be able to remove the middlemen from various transactions and thus speed up efficiency, reducing costs. Imagine the savings you’d make if Airbnb, for example, was built on Ethereum and you didn’t need to pay for the company to oversee transactions.

Issues with Increased Functionality

That said, there are three large drawbacks with the idea of decentralized applications. Firstly, there is a problem with scaling. We all saw what happened to the network when a simple trading game was launched in 2017. CryptoKitties involves swapping and breeding digital cats. Sounds fun, right? This simple decentralized application proved so popular that it forced the network to grind to a halt. Imagine if all the proposed ideas on Ethereum were fully working and being used by millions of people. The network simply couldn’t perform in its current form.

Another issue with the increased functionality that Ethereum brought to the blockchain space is with the smart contracts themselves. Smart contracts are incredibly difficult to program. Once they’ve been set up, vulnerabilities in the code can expose funds to attacks. By increasing the functionality of the network, the developers of Ethereum (and other smart contract platforms) have invited many additional attack vectors.

The incident of the DAO is the most famous example of a smart contract compromise that affected the Ethereum network. Not only did it highlight how temperamental designing smart contracts could be, but it also showed the power of a central authority even in supposedly decentralized systems. The main core of developers sought to rectify the mistake by returning all the funds hacked to their original investors. The ensuing disagreement between groups of developers caused the network to split into ETH and ETC. This simple example of a lack of censorship resistance could well be one of Ethereum’s stumbling blocks in the future.

Enterprise Ethereum Alliance

One of the most frequently referenced aspects of the Ethereum network that sets it apart from the competition is the interest that huge companies have in the platform. The Enterprise Ethereum Alliance features some of the largest names from a variety of industries. Each has been supposedly exploring the implications of smart contract and blockchain technology. Whereas some other smart contract platforms have received interest from massive names, none can boast quite the same roster of global firms from a veritable ‘who’s who’ of global commerce that are interested in Ethereum.

Names on the Enterprise Ethereum Alliance include AMD, Santander, BBVA, BP, Credit Suisse, Toyota Research Institute, and many more. Announcements of such a collection of names interested in the technology were one of the driving forces behind the surge in prices seen in 2017.

Largest Developer Community

Along with the EEA, Ethereum boasts the largest community of developers of any blockchain project. This bodes well for the platform from a technical standpoint. With more minds addressing the various problems mentioned already and towards the end of this article, Ethereum is better placed than any of the other smart contract platforms in crypto to achieve the loftiest of goals.

The Drawbacks

Much of the above bodes well for the future of Ethereum. However, there are drawbacks that are not unique to the platform. Whilst all blockchain projects face these, all eyes are on Ethereum to solve them as it’s one of the biggest players in the space.

Scaling

For a global computer like Ethereum to truly serve the world, it needs to be able to make many thousands, if not millions of transactions every second. Currently, Ethereum can manage about seven transactions. This wouldn’t be enough to run even a simple, popular program such as CryptoKitties. If developers were to create a truly game-changing application, it would be limited in its efficacy, as it could serve a very limited number of people. All blockchains suffer from scalability issues, especially those seeking to perform the kinds of tasks that the Ethereum developers hope to achieve. 

Competition

In addition to the technical concerns raised so far, there is also the issue of competition. Ethereum is setting out to achieve what many other platforms are also striving for. EOS, Stratis, NEO, WAVES, and Cardano are all examples of systems that want to be number one in the blockchain smart contract platform space.

Thanks to the mammoth technical issues these platforms face, it isn’t a dead certainty that any of them will become the de facto world computer. That said, any of them could have the technological breakthrough needed to ensure that they rose to the top, usurping Ethereum along the way. However, such fierce competition hasn’t affected Ethereum much so far, and it still remains number two to Bitcoin. If developers manage to offer efficient solutions to the existing issues in the coming months, this will likely consolidate Ethereum’s position among the leaders.