He did not exactly use these words yet that was the point of his message. In a frank admission, Vitalik Buterin, co-founder of Ethereum, admitted that the blockhain is basically useless for most applications. Of late, the chain got a great deal of attention for its high fees and slow transaction time. The plan is to switch from a PoW to a PoS system. Unfortunately, that is not likely to happen for a couple of years.
Scalability is always something that is being raised as an issue within the cryptocurrency circles. Both Bitcoin and Ethereum, the two leading chains, are hindered by the inability to process more than a handful of transactions per second. In comparison, payment networks such as Visa do tens of thousands of transactions most times during the day.
If blockchain is going to present an alternative to the present financial system, as well as data, then scaling is at the top of the list. Buterin's admission opens up the conversation of where to go from here.
Of course, he also mentioned the fact that, since the base layer is "gassed", it is best to look to the second layer for scaling solutions. This is really the only choice left. It mirrors what Bitcoin is doing with the Lightning Network.
This does bring up the question as to why would one opt for a blockchain where the scaling is limited and requiring an additional layer?
Here is where we see some of the drawbacks to the earlier chains. Over the last few years, since Ethereum burst onto the scene, we saw a number of blockchains that are far more capable in terms of the throughput than what the top two can offer.
If we think of blockchains as roads, Bitcoin and Ethereum are side streets that were built long ago. Since their construction, we saw super highways enter the picture that takes the bulk of the traffic. The side streets still have value and can handle some big loads, yet volume is not their forte.
By looking into layer 2, the data will be processed off-chain. This brings up an interesting situation as to what exactly is taking place. One of the biggest benefits of blockchain, at least with the base layer, is the immutability and transparency. This gets a bit sketchy when dealing with layer 2 solutions.
It is fascinating to watch the development of the chain that was touted as the world's virtual computer. As we are seeing, in a world of AI chips, this is akin to running on a 486.
Fortunately, if we step back a bit more, we see how there is a solution. Interoperability is starting to really come into play. Most realize that we are not going to live in a "one blockchain for all" world. There will be thousands of chains out there, catering to many different needs. The key will be tying them together the same way one can travel around to any webpage without interruption.
Hive, for example, offers fast and feeless transactions. This is one of the better chains in terms of transactions capability. However, since it lacks smart contract abilities at the base layer, this limits what can be done on the chain. Just like Ethereum, there are limitations.
Interoperability solves much of the problem by moving activity to where it is best served. DeFi is making a lot of noise because the trust is generated by the coding in the smart contract. Obviously, this is something that will not be present on Hive. Nevertheless, when it comes to a gaming application, Hive could be a much better solution.
Presently, the overall transaction numbers for the blockchain world are rather small. The site blocktivity.info has roughly 100 million transactions per day listed on the chains it follows. Again, compared to a Visa, this is nothing.
As this number grows, other chains could find itself in a similar situation. EOS, for example, has the most traffic, the majority of it bots. However, if that does get some applications with a lot of genuine traffic, the price of RAM could escalate just like it did a couple years ago.
Data decentralization is a process that is already happening. How quickly it moves remains to be seen. However, it is unlikely that any of this is going away. Thus, over the next few years, we will see the number of transactions growing, meaning more bandwidth will be required. Either individual chains start solving the scaling issue or applications start to develop the ability to operate cross-chain to meet all their needs.
In the future, a great deal of the choice that coders make could be based upon who has bandwidth. We are in a world of instant results, negating the desire for people to have to way hours for a transaction to complete.
Technology's natural path is greater capabilities for less cost. If transaction fees are going up, that is operating in a reverse manner. Cryptocurrency presented an alternative to the banking system because it offered faster times for less money. If this is being negated, then people will look elsewhere.
In the end, a great deal of this will be figured out. It is likely that Ethereum does make the switch in due time which will allow scaling. However, in the meantime, there are opportunities for other developments to step up and fill the gap.
Another tendency with technology, the early days are usually the hardest. It takes time to work through all the obstacles that arise.
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