Ethereum won’t scale like you’ve been told.

If you followed the Ethereum project over the last few years you might be familiar with the great amount of hype that comes with its community and founders. No matter if it’s app developers that claim to have a “Uber killer” or a presentation about “Decentralized Commercial Banking”… big claims are made as only the sky seems to be the limit.

Ethereum founder Vitalik Buterin gave a presentation called “The Mauve Revolution” where he talks about “tens of thousands of transactions per second” for Ethereum. If we dive some further into these claims it all comes down to the following:

Founder of Ethereum Vitalik Buterin claims he has found the ultimate solution to the problem of scalability haunting cryptocurrency networks. That will be made possible with lightning networks and sharding.

The current Bitcoin blockchain is limited to around 7 transactions per second and that number is around 15 for Ethereum. When talking about Ethereum, “transactions” aren’t the only thing that counts. Ethereum is a “decentralized computer” that runs contacts and transactions are only a small part of that. But even when we look at transactions only… the “tens of thousands of transactions per second” don’t add up. This is due to some limitation of “lightning networks”. Great that we have off-blockchain transactions but every coin in a “channel” will end up on the blockchain after all. Let’s say ALICE wants to give some Ether to BOB for a game. Why would they use a lightning network? It would only lock the Ether in some off-blockchain channel where Bob can’t do anything with it except for paying someone else. The same goes for the whole idea of a “decentralized computer” where you need Ether (gas) to run code. So all coins need to end up on the blockchain anyway. But even if we assume that 95% of all transactions take place off-blockchain… Would it match the “tens of thousands of transactions per second” for the system as a whole? The answer is no, let’s see why:

10.000 x 0.05 (5%) = 500 Tps which still take place on the blockchain.

And as we learned from Vitalik himself the current Ethereum implementation is only capable of doing 15 of them. So even with a very popular lightning network the Ethereum ecosystem goes up in smoke quite fast if the transaction volume goes up.

Time to look at the second part of the solution called “Sharding”. This idea comes close to a “multi-core” implementation on regular computer chips. Only in this case we work with a combination of several blockchains (sidechains) and EVMs (Ethereum Virtual Machines). In this article the following claim is made:

After the initial basic sharding (which will result in the implementation of Ethereum 2.0) Ethereum 3.0 will be developed — a blockchain system that will be capable of infinite sharding.

This one goes to eleven? Wrong! This one will have “infinite sharding”! That’s right: with enough EVMs and sidechains Ethereum is capable of doing almost everything. Although this claim is again far from truth. Vitalik talks about a “main chain” to interact with several sidechains. Think of it like a Merkle tree-structure where the hashes of the lower blocks end up in the highest chain. This is completely different from your average Intel chip where calculations do happen in parallel. This is where the speed-improvement comes from. So can’t we run the EVMs in parallel then? No, this is extremely hard to sync as each sidechain has it’s own miners. 1 chain might have a valid block in 4 seconds while the other one takes up to 65 seconds. Just like the current network with only 1 blockchain:

Time delays will prevent Ethereum from infinite sharding.

And even if we could add 100 sidechains in parallel with a guaranteed blocktime we’re still in trouble with the 10K transactions per second. It means we have 100 Tps per chain (assuming even distribution). That’s far more than the 15 Tps which are possible at Ethereum’s current implementation. And notice that I’m talking about transactions here, not about calculations.

If we do talk about calculations by the EVM there’s 1 thing the devs don’t overhype: speed. The Ethereum EVM is a 256bit virtual machine that’s literally thousands of times slower than your smartphone. So imagine adding several thousands of them in a connection of chains. Would they calculate for a decentralized Uber? Or a decentralized bank? Or both with hundreds of other Dapps at the same time as claimed? Just think about it; you need thousands of EVMs to compete with your average smartphone and that speed gap is only getting bigger. And even if it was possible, why wouldn’t Uber get rid of all it’s computers to run the whole network on just 1 smartphone (and have 1 extra as a backup). Again, the numbers don’t add up here. But even while we’re at 1 blockchain and limited to only 15 transactions per second the dreamers keep dreaming:

In this presentation Vitalik talks about Secret sharing with DAOs. Don’t worry, this was before the great implosion of The DAO that “inspired” the Ethereum devs to fork the shit out of their decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. The hacker would’ve laughed it’s head off when he could’ve drained the whole DAO in the dark.

Overall it’s hard not to fall for Vitalik’s vision when it comes to Ethereum and the future of smart contracts. The problem is a hyped-up community while Ethereum’s emperor isn’t wearing that much clothes after all. If you make big claims you need to show big results as well. And so far we’re stuck with a user-unfriendly system that’s not that responsive as well.

Being an adviser for Zcash and defending their bizarre 20% “founder reward” isn’t helping either. Yes, it’s actually 10% somewhere in the 2030’s. But I exposed the scamonomics behind that number in this post. Saying that the Zcash devs take a 20% reward is 100% accurate util we reach some point late 2020. And Ethereum did share their 10% details as it crowdfunded their project. With Zcash the funding-page was parked several clicks away from the frontpage. Nobody had a clue about this scam when the trading started. Great to see this problem is taken care of. Their reward will soon go to 0.

The Ethereum community (including their devs) need to stop hyping their project as the truth will come to light anyway. No, you can’t run Uber, Airbnb and “decentralized banks” on a group of extremely slow 256bit virtual machines. No, you can’t have “tens of thousands of transactions per second” even while you move 95% of your transactions to a “lightning network”. No, we can’t move all our data storage and webpages to Ethereum either. In total it would add up to millions of Ethereum transactions/interactions per second while we’re stuck at 15 for quite some time now.

Don’t believe the hype…

EDIT: Here’s part 2 in which I address several comments made to this article.