27 September 2021: The basis of a fundamentally solid blockchain network should ultimately exceed in providing two factors: usability and decentralization. In its current iteration, Ethereum has some obvious, glaring issues. While many had thought that operational changes integrated at the London hardfork would help small traders on the platform, nothing has in fact improved on the front. This article will explore the present shortcomings of the Ethereum network and inquire about the longevity of Ethereum as ETH2.0 grows closer.
Growing Pains of Ethereum
As more and more formidable alternatives continue to accelerate in development in competition with Ethereum, many users continue to struggle with ongoing problems on the network. The biggest of these problems is undoubtedly the notoriously high gas fees associated with using the network. For many users attempting to move around their smaller bags, gas fees can be impossibly high - sometimes as high as 60% or more of the funds being moved.
This is obviously a massive problem as for widespread, mainstream adoption. Not having the ability to move funds less than $1,000 without paying a massive fee is simply unsustainable for the majority of people Ethereum is attempting to reach. While the London update was not necessarily integrated into the Ethereum network to fully assist in lowering these fees, with many comparable competitors offering higher speeds and significantly lower transaction fees, it does beg the question about the actual longevity of Ethereum as a whole.
The Increasingly Centralized House of Cards
Many would obviously point towards Ethereum's massive hold of total market cap within the cryptocurrency space and the large amount of dApps that have been developed on the Ethereum blockchain. While true, if the network itself is flawed, those dApps are more or less built on a house of cards. Another glaring issue on the Ethereum network is the increasing barrier to entry for those that wish to participate in governance effectively and/or run a node to support the decentralization of the network. Running a node comes with an increasingly high price - in both ETH and in the hardware required.
Ultimately, the network will be dominated by early adopters are large institutional players - not by daily users or small traders. While with ETH2.0 staking in pools could assist with decentralization, this does not help to reverse the growing costs of running a node. This in itself points to possible future issues in the actual decentralization of the Ethereum network - a problem that could have major implications down the road as the burning of ETH and increasing amounts of major institutional players continue to push the price out of reach for normal, everyday Ethereum users in terms of governance.
The Longevity of Ethereum & ETH2.0
Obviously problems with scaling, gas fees, and decentralization are all worrying points for the Ethereum network. That said, the coming major network overhaul of ETH2.0 is aiming to reverse or repair these known issues. First up, the integration of Polygon to assist in the scaling of the Ethereum network should also be effective in reducing gas fees for normal users. Additionally, this scaling should help the Ethereum network run more effectively, process transactions smoothly, and would help to increase the overall positive sentiment associated with Etheruem.
With that in mind, a switch from PoW (Proof-of-Work) to PoS (Proof-of-Stake), while eliminating miners, will help the network become more efficient over the long term and provide incentives for those who own ETH to stake and support the integrity of the network. Still, the problem of increasing centralization and the massive, growing barrier to entry to be able to run a node on the network will not help Ethereum become more decentralized. This is not to say Ethereum is centralized, rather just more centralized than other options within the cryptocurrency space.
Currently, it takes 32 ETH to run a node on the network - at current valuations that is a whopping $96,000. On top of that, as described above, the costs of funding the hardware to even run the node puts many people well outside the ability to be a node operator. Thus, outside of very early adopters, no small players will ever be able to afford to run a node on the network. This is a major issue in terms of decentralization. With a large barrier to entry, nodes will be increasingly run by centralized parties, effectively creating future centralized points of failure on the network and hurting the chances of widespread adoption and longevity.
The Good News
Ethereum being the very first blockchain to employ smart contracts and allow for the construction of dApps on the network, Ethereum was bound to have setbacks and shortcomings. Being first in such a rapidy innovative field puts Ethereum at a disadvantage. However, the good news is precisely that second point - innovation can occurr quickly and if the Ethereum development team is able to recognize these potential long term issues and act accordingly, Ethereum has a major headstart in adoption, market penetration, and overall dApp development on the blockchain.
In short, all of these problems can be addressed with the right community pushes and the right EIPs.
While this was a more negative outlook on Ethereum, the immensely important innovation that Ethereum has brought, and continues to bring, to the cryptocurrency space should not be understated. Ethereum is one of the most important technological projects of the century. While the project has some hurdles it must jump over to effectively allow for mainstream adoption, this is by no means an impossible feat.
Providing a robust product to allow new users joining the cryptocurrency space a positive step into the world of decentralized finance and internet is essential to the longevity of the Ethereum network. Major competitors such as Algorand, Polkadot, Cardano, and others also have their own issues, but they have been able to capitalize on the learning opportunity from watching what Ethereum did well - and what Ethereum didn't do so well with.
Ethereum now have the exact same opportunity to fight back with innovation and improve its own product. Time will tell whether the implementation of ETH2.0 is the path forward for this to happen. What are your thoughts on Ethereum? Leave your thoughts in the comments below!
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