ETH Fees Too High and Lookin' for an Alternative? Make Sure You Know These Things!
Smart Contracts

ETH Fees Too High and Lookin' for an Alternative? Make Sure You Know These Things!

By Michael @ CryptoEQ | CryptoEQ | 23 Feb 2021


Yes, ETH fees are pricing out many users. And far be it from some person on the internet to tell you which blockchain to use BUT it is always important to know the trade-offs involved. So here are a few "ETH killers" and some of the downsides to their platforms. This way you can feel confident with whatever you choose because you now know the ugly down side potential of each project and feel comfortable with that risk!

 

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Many "ETH killers" have fallen by the way side and include substantial downside risk as illustrated by the "Deficient" rating.

 

Let's get the easy one out of the way to start, EOS. I don't think many people are looking to turn to EOS but for a while it was considered a "serious" competitor to Ethereum. 

EOS Vulnerabilities

EOS cannot be 51% attacked like traditional PoW assets and has designed the blockchain with specific measures in place to combat similar attacks. Instead of relying on massive computing power to prevent a 51% attack, the software instead allows a supermajority of Block producers (15/21) to initiate reversal transactions or account blacklisting. The reliance on voting within this system presents a weakness, as the community must remain engaged in order to ensure that the system is responsive to misbehavior.

Block producers have a great deal of responsibility for the responsible operation of the network. Huobi has been accused of vote buying and collusion with other block producers, which Huobi denied. Despite this, Huobi is still the top-voted block producer, indicating a lack of voter responsiveness to (perceived) misbehaving block producers. In December 2018, block producer Starteos was accused of vote buying as well, illustrating the potential for vote buying to remain an ongoing issue unless addressed by the community.

Block.one, the company that launched the EOS blockchain with its infamous $4 billion , year-long ICO, has stated it plans to start actively staking their 100 million EOS and vote on the network in Q2 2020. This is somewhat concerning considering the history of collusion and manipulation among BPs even before Block.one entered with nearly 10% of the total supply. Their large proportion of token holdings could enable the company to significantly influence the block producer rankings and direction of upgrade proposals. In defense of Block.one, they did not reveal how many tokens they plan to stake and they cannot stake all 100 million currently as only a fraction has actually vested. However, if the company ends up staking even some of its holdings, it will instantly be one of the most influential powers on the network.

There have been several substantial hacks of EOS projects, including an exchange on EOS that accepted tokens called “EOS” without making sure they were legitimate EOS created by the system account. In addition, a gambling dApp called EOSBet has been hacked twice.

Decentralization, or the lack thereof, remains one of the biggest disadvantages of EOS. Block Producers have proven their ability to freeze user accounts without warning or reason, highlighting EOS’s lack of censorship resistance, compared to competing blockchains like Ethereum.

 

Ethereum Classic (ETC) Vulnerabilities 

Another one that's nearly too easy to pick on, Ethereum Classic (ETC).

The software for ETC is entirely open-source, and it is one of the most transparent platforms today. The ETC, IOHK, and Ethereum code repositories are all open-source, and the community provides regular discussions on their forum, Discord channel, and Gitter account. Furthermore, the community releases a bi-annual report summarizing major developments over each half of the year. The Ethereum Classic Project Github repo is sizable, but does not come close to rivaling Ethereum or Bitcoin in terms of engagement and has seen extremely low levels of activity since late 2018. 

Ethereum Classic suffers from similar potential weaknesses as PoW ASIC mining blockchain networks like Ethereum (currently) and Bitcoin only to a much greater degree due to the smaller overall market cap. Mining pools control large portions of the hash power making a 51 percent attack possible while suppressed prices make an attack cheaper.

To date, ETC has suffered at least four successful 51% attacks, deteriorating trust in the network and requiring weeks for a transaction to be successfully completed and validated. The cost to execute a 51% attack on ETC is estimated to only cost ~$4,300 per hour. Comparatively, the same attack on ETH would be ~65x more costly and for bitcoin, ~100x

Another alarming weakness and point of centralization in ETC is developer activity and commits on their Github. In 2017, greater than 70% of the commits to the go-ethereum repository were completed by one individual, whilei. Similarly, in mid-2018, total commit numbers plummeted. During the first half of 2018, go-ethereum commits totaled ~500, compared to just ~40 total commits in the second half of 2018. The repository has since been archived. A new repo now displays current Github commits and averages ~10/day. 

Similar to development progress, user adoption in ETC remains near zero. According to DappDirect, there are only 10 dApps that have had any users within the last 3 days and none over 75 users. In contrast, Ethereum has nearly 3000 dApps, many with tens of thousands of users and billions in value locked up. Ethereum’s lead in users, developers, network effects, projects, security, relevance, and market share cannot be overstated when compared to Ethereum Classic. 

Overall, ETC will remain an insecure chain as long as it continues to use the same hashing algorithm as ETH and remains a small portion of the overall Ethhash hashing power. At the same time, because of the prior 51% attacks and little barrier to future attacks, the Ethereum Classic chain is a network devoid of users, use cases, and security which suffers from mining, wealth centralization, and no clear competitive advantage over other smart contract blockchains

 

Tezos (XTZ) Vulnerabilities 

Tezos is another "early" smart contract competitor to ETH. While it has faired better than EOS in almost every metric since the 2017 days, it is still a bit of an afterthought in the very crowded Smart Contract space.

The Tezos development process is open source and can be found on their GitHub and GitLab with the latter containing the more recent activity. The technological development of the Tezos blockchain has been nearly trouble-free and without major issues, although in November 2018 the blockchain was halted for 90 minutes due to a bug involving attempted double spends and slashing of funds. Tezos developers have since developed a temporary patch with a more permanent solution to be rolled out in future Tezos upgrades.

The company operates a bug bounty program that incentivizes hackers to report exploits to the Tezos Foundation. Although delegated PoS consensus mechanisms are less provenly secure than PoW, the LPoS model deployed by Tezos, in which delegates are “randomly” selected from a large pool of potential candidates, is theoretically arguably more robust. The issue lies in their random number generator and the ongoing debate behind whether or not they can create truly random numbers.

Additional centralization concerns continue to materialize around the custodial staking with centralized exchanges. As of Q2 2020, the top 1000 accounts now hold ~65% of total supply. Exchange centralization due to “lazy stakers” who prefer to delegate staking duties to exchanges remains a top concern among all PoS coins. The top 10 addresses constitute nearly 50% of all transacted coins suggesting that nearly the only use for XTZ at the moment remains staking on exchanges.

 

NEO Vulnerabilities

NEO is another legacy chain and is often called the "Chinese Ethereum." While it has had lasting power to some extent, it is arguably a centralized, permissioned blockchain (like BSC) and thus not an apples to apples comparison with some of the others discussed here that actually strive for decentralization (although how much they actually deliver on that goal is up for debate).

As it is standard in the blockchain space, all the NEO code is available open-source on GitHub. The main NEO repository exhibits scarce levels of activity since launching, barely receiving 5+ commits per day. The development is led by the team around Erik Zhang and NEO Global Development. City of Zion is supposedly contributing to the development to the NEO ecosystem, although their GitHub has gone inactive since mid 2018.

NEO also experienced an incident in March 2019 where block production got delayed by approximately 127 minutes. While this was not an attack or bug but rather an anomaly in the consensus design, it still highlights some drawbacks of the dBFT system.

NEO is not yet decentralized, which is one of the strongest criticisms against the platform. As it is currently operating, it is not appropriate to compare NEO to other smart contract projects like Ethereum and Tezos.

 

Binance Chain/ Binance Smart Chain (BNB/BSC) Vulnerabilities 

As a fairly centralized tool facilitating the financial products for a for-profit company, many of the challenges inherent in decentralized blockchains are not relevant to BNB. However, the opposite is also true. BNB is not an open-source blockchain and is controlled by a private company. There is no argument that BNB users incur extreme centralization risk when holding BNB. With greater than 80% of BNB either owned or custodied by Binance, the potential catastrophic downside risk for the token becomes even greater. Exchange hacks are an ever constant threat as are failed crypto businesses. The BNB token is exposed to both of these (regular) downside events unlike a traditional cryptocurrency like Bitcoin or Ethereum.

Highlighting BNB’s centralization risks was the discovery in January 2020 that Binance discreetly edited the original wording in the BNB whitepaper to remove the “20%” burn benchmark without publicly disclosing the change. Binance made the unannounced edits nine months prior in March 2019. The lack of transparency surrounding the changes to the monetary policy highlight the trusted nature in an exchange token and should serve as a red flag for future investors.

In another example of Binance going back on their own word, in May 2020, Binance reneged on their original stance concerning the controversial Justin Sun-supported Steem hardfork and began supporting the fork essentially controlled solely by Justin Sun. Binance originally declined to support the network upgrade, saying they “do not condone this type of behavior,” and then only to announce support a few days later. 

In a mark against the company’s operational security, hackers stole $40 million USD in a single transaction from high net worth accounts on Binance in May 2019. The funds were not recovered. Additionally, a hack of Binance’s former third party Know-Your-Customer (KYC) provider leaked 60,000 users ’ sensitive personal data including photos, physical addresses, and crypto amounts putting many in potential harm’s way as future targets for theft, cyber or physical. In response to the negligence, Binance gave lifetime VIP memberships to those affected for their very site that just proved itself irresponsible and unsafe to use. 

Another key risk variable when discussing BNB is the regulatory risk from governments. Binance, in its short three year history, has moved headquarters from China to Japan to Malta in an attempt to avoid regulation. Most recently, Binance has taken the stance that there is not a Binance headquarters after news broke that Malta denied their application under its jurisdiction. This represents an inordinate amount of regulatory risk as businesses must fall under some jurisdiction. It is unprecedented for a legitimate business to not submit to some regulation scheme. In addition, the BNB token could be susceptible to US security laws, discussed in greater detail in the Regulation section.

 

 

Now for some of the newer, more reputable challengers to Ethereum's throne atop the smart contracting space.

 

Polkadot (DOT) Vulnerabilities

Since Polkadot has a very limited history of being a live project with active users and is still a work in progress, much of the criticism surrounding the project stems from these issues. Polkadot is competing in a crowded space of general-purpose smart contracting Proof of Stake blockchains like Tezos, Cosmos, Cardano, NEAR, Solana, soon to be Ethereum 2.0, and many others. It remains to be seen which project(s) the market will adopt but for now, all are playing catch up to Ethereum which has the industry’s only meaningful adoption. Fortunately for Polkadot, it has plenty of funds for development and a highly respectable team but as for now, VC-funded, Ethereum-competitor chains have yet to gain meaningful adoption. 

In a crowded smart contract space, every project is competing for developers. In Polkadot’s case, there are a couple obstacles in attracting developers and projects to build on a parachain architecture. One such obstacle is that to launch an application on existing parachains the functionality must already exist on a current parachain, creating a chicken-or-the-egg dynamic. Another issue is that launching a parachain requires upfront capital in the form of DOT thus pricing out some smaller, more experimental use cases. 

Additionally, Polkadot still has much to prove as it remains a somewhat incomplete project. Part of this is delivering on useful projects and meaningful decentralization from the Web3 Foundation and Parity group. Up until recently with the latest mainnet release, all DOT nodes were controlled by a Proof of Authority consensus network in a centralized manner. 

From a technical perspective, Polkadot has suffered no known critical bugs since mainnet launch. The post-ICO multi-sig wallet hack marked the second time the team’s wallets had been hacked because of a code vulnerability. The first hack took place earlier in July 2017 in which ~$33 million was drained before the attack was stopped by a group of hackers known as the White Hat Group. 

 

Cardano (ADA) Vulnerabilities

 

Since Cardano has a very limited history of being a live project with active users and is still a work in progress, much of the criticism surrounding the project stems from these issues. Cardano is competing in a crowded space of general-purpose smart contracting Proof of Stake blockchains like Tezos, Cosmos, Polkadot, NEAR, Solana, soon to be Ethereum 2.0, and many others. It remains to be seen which project(s) the market will adopt but for now, all are playing catch up to Ethereum which has the industry’s only meaningful adoption. 

Beyond competition, Cardano still has much to prove as it remains incomplete. Part of this is delivering on meaningful decentralization from the three aforementioned Cardano entities. Up until recently with the Shelley release, all ADA nodes were controlled by IOHK, EMURGO, and the Cardano Foundation in a centralized manner. Since then, the transition to a more community-driven control has been underway but until the final stage, Voltaire, is released, the project, technical developments, and decisions will still be driven by the three entities. 

Another potential attack vector built directly into the Cardano project is the ability for the project to essentially censor certain types of transactions and use cases within the network.

The CCL deals with the “why” of the ADA transactions and is where smart contracts come into play, versus the CSL which handles the accounting of the movement of assets. The activities/reasons behind certain applications running on a blockchain may not be ones supported or endorsed by all in the network. 

Because of this, Cardano decided to split the CCL and CSL into distinct layers. Decentralized programs will require some form of gas and nodes will have the option of whether to include the transactions from those programs in their blocks. This gives nodes leverage over the types of behavior they deem permissible on the Cardano blockchain. 

While this sounds like an overall positive feature, it introduces subjectivity, moralism, and politics into a decentralized digital world. This, in a worst-case scenario, could open the door for potential social engineering attacks and even censorship.

 Others that CryptoEQ has yet to cover include TRON (no plans to cover this asset or give any time/spotlight to such a scammy project), ATOM (look for a report soon!), SOL (in the future), AVA (no plans currently), NEAR, and others.


Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ


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