A lot of the people see the future in Ethereum, they think it’s just a matter of time when Ethereum will overcome Bitcoin. I did some research and from my point of view Ethereum has big problems.
I posted a video with my concerns about it.
What really Ethereum was build for is to be a platform for decentralized applications, it was designed to be a place where smart contracts live. Yes, you can possibly write any smart contract, for example Ethereum casino with transparent commissions and honest games. Then why no such casino has been created yet?
First, because smart contracts are very limited inside a blockchain. For example, you can’t generate trully random number just using smart contracts. And second, because smart contracts are very expensive! For each operation you must pay gas. And if you pay too small miners won’t include your operations into a block. And our casino will experience delays.
Expensiveness exists because of physical limit of transactions per second and it is imposible to increase right now. And naturally while such a limit exists miners are going to chose transactions that bring them more money.
So, back to our casino, when you bet it's one transaction, spin of the wheel is another transaction, random number generation can be couple of transactions (if you generate it outside the blockchain), and finally paying the winners it’s one more transaction. Every spin will spend couple of dollars in gas and couple of blocks in time. So it’s why nobody gonna play it.
This Ethereum bottleneck or scalability problem is very well known by Ethereum developers. They propose to solve it by sharding or another minor improvements like decreasing size of each transaction, moving to proof of stake can speed up block generation. But not much they can do about it because it's the core problem.
Ethereum became a platform for passive smart contracts that sleep most of the time and don’t consume much of a gas and don’t keep much of data. This limits ethereum platform a lot. In other words ethereum can’t be fully used what it was designed for. And now we have only one popular usecase for ethereum smart contracts. It’s ICO’s of other tokens.
Second huge concern we have about legallity of initial presale of Ether tokens. In summer 2014 Ethereum foundation was selling Ether tokens that were supposed to be changed to Ether after the launch of Ethereum blockchain.
It was was stated : “Ether is simply a token useful for paying transaction fees or building or purchasing decentralized application services on the Ethereum platform”. But in fact it was selling of unlicensed and unregistered securities. Even though they did it from Switzerland it’s subject to US jurisdiction because they sell contracts to US citizens. The hands of US jurisdiction are very long and SEC can come to Ethereum foundation at any time and consequences of this will be very unpleasant for all Ethereum community. I recommend watching video from Tone Vays about the details of Ethereum project from legal perspective which is available here
Another weakness of Ethereum is centralisation of Ether coins. With recent ICO boom a lot of Ether has been accumulated by different startups. And these companies have to pay their bills in real money currencies. They don’t have any intention to hold their Ether forever because they are not investors. Eventually they will sell it. Imagine price go down and these startups start selling Ether because now the price is not matching their plans. It can create avalanche and the price can drop very much. This instability is bad for the Ethereum ecosystem and bad for future trust.
Centralization of Ether is bad. And with future move to Proof-of-Stake (that is planned to the end of 2017) there are more incentives for centralization because PoS literally gives the power to those who accumulate a lot of Ether on their account. Theoretically any big company like a bank can buy a lot of Ether and be the main miner of the blockchain and dictate its own rules (for example set price of gas, include selected transactions into block etc.).
One more Ethereum problem is Ethereum foundation itself which is the center of decision making process in Ethereum. They decide everything: Ether Monetary inflation, switching to PoS, making other important changes, they can even roll back the blockchain. We witnessed it already after the DAO hack. And they did show us that their blockchain is not immutable. For example, one day they can decide that we need more Ether and double the issuance. Nothing in Ethereum is written on the stone and everything can be changed.
To sum up, things I mentioned are the big concerns. As for me, these concerns are so big that I would say Ethereum is far from the bright future and the chances are it’s not going to come.
This is my first post on steemit, so feedback is welcomed!
