The current scene of Decentralized Computers
Let us start from the beginning and understand the features of Ethereum, the first decentralized computer brought to the blockchain space and then look at the current space.
Bitcoin vs Ethereum: The advent of Decentralized Computing
Bitcoin was the first true cryptocurrency and has been in circulation since 2009. Ethereum started much later in 2015.
In the time between Bitcoin and Ethereum’s release, lots of other cryptocurrencies emerged. Mostly, however, they were limited to trying to improve on aspects of Bitcoin’s performance — for example, increasing speed of transactions or improving the security or anonymity of transactions.
Ethereum is certainly faster than Bitcoin — with transactions typically settling in seconds, rather than minutes. But it also takes things further. While still blockchain based, and operating as a store of value, its fans and evangelists see it as a platform for distributed computing, which comes with its own built-in currency, called Ether.
While the Bitcoin blockchain can simply be pictured as a database of accounts (or wallets) with an amount of currency stored in each, the Ethereum network blockchain is a more sophisticated construction, capable of storing computer code — applications — that can use the CPU power going into the network to execute.
The currency — Ether — represents this CPU power — so the idea is that Ether will be bought and sold by businesses, governments or individuals to allow them to tap into the vast, distributed resources of the Ethereum network to run their own apps.
The first of these applications are known as “smart contracts”. This is a way of automating contracts and agreements so they will execute when consensus says that conditions have been filled. Though simple, their use cases are potentially widespread — such as enabling payment systems which will release funds on completion of work, or authorising the transfer of ownership of goods when payment has been made.
The Ethereum network also allows the creation of other cryptocurrencies, or tokens, using the same protocol as Ether but distributed on different blockchains, which can be public or private. This means they can be created by organizations to represent shares, voting rights or as means of proving identity or authorization credentials.
Think of ethereum network like an amusement park where to take part in any ride or purchase any goods inside the park you need ETH, the value token used inside the park. Ethereum is the most popular amusement park out there currently with applications ranging from DeFi, NFT’s, Fractional Assets, ICO’s etc. Taking ETH token to the number 2 in the crypto marketcap sitting only behind the leader BTC.
The Problem with Ethereum
When making an Ethereum transaction there is always a fee, called Gas, which must be paid in ETH.
Gas is “… the fee, or pricing value, required to successfully conduct a transaction or execute a contract on the Ethereum blockchain platform” — Investopedia
As the network got more and more popular the gas needed to be paid for the transaction kept increasing. The price has been seen to reach upwards $100 even for simple erc20 transfers between wallets/users and transaction times >8mins. This makes the use of the network unsustainable since the smaller players with <$100 worth of eth can not use the network.
The Solutions
The most sustainable solution to Ethereum’s pressing issues lies in its transition to a Proof of Stake (PoS) blockchain that will use sharding to break down large amounts of data into smaller pieces (ETH 2.0). That’s still some ways off with estimations starting from the first half of 2022 to the end of 2023.
Seeing the blockchain industry grow at a rapid pace in the last few years, other competitors have stepped into the space. Most notably -
- Binance Smart Chain
- Cardano
- Polkadot
- Matic
Binance Smart Chain
This dual-chain architecture will empower its users to build their decentralized apps and digital assets on one blockchain and take advantage of the fast transfers to the exchanges on the other.
Started by the popular exchange Binance, Binance Smart chain launched and gained prominence in early 2021.
The Binance Smart Chain is a speedy and low-cost decentralised computing network for developers to create Dapps. Transaction fees are as low as $0.14 with transaction times of 5 seconds. This has been a popular alternative to ethereum and as of writing the article , the market cap of BNB ( native token of BSC ) is in the top 5 cryptocurrencies.
Cardano
Cardano was started by Charles Hoskinson, one of the co-founders of ethereum. He started Cardano seeing the scaling issues with ethereum, and is looking to replace ethereum.
Cardano regained it’s fame in the beginning of 2021 with the launch of its mainnet. Although Cardano is yet to have live apps running in its network , the team has been sticking to their deadlines, and the community finds cardano very promising as evidenced by the coin market cap increasing in 2021 making it a top5 coin by market cap. The network aims to have fees as low as $0.3 and transaction time of 20s.
Polkadot (DOT)
Started by Dr. Gavin Wood, a computer scientist who holds a Ph.D. in human-computer interfacing. Gavin is also the founder of the Web3 Foundation, a Swiss nonprofit, which oversees the development of Polkadot (DOT), and is the founder of Parity Technologies, which is a profit software development company based in the UK. It is commissioned by the Web3 Foundation to develop and maintain Polkadot (DOT).
Polkadot is one of the most successful ICOs of 2017. A total of 5 million DOT tokens were sold at a price of 0.109 ETH, which means more than $150 million of total value. Allowing over 1500 transactions per second in the network, polkadot is another blockchain eyeing to fill the gap ethereum has left behind. This has brought the token to the top 10 market cap of crypto’s.
Polygon (Previously MATIC)
Polygon — an Indian origin network was built by four software engineers — Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Mihailo Bjelic. This startup is based out of Mumbai.
Polygon has recently shot to fame with its lightning fast transaction times (<2s) and low transaction fees ($0.0001). With its growing fame most apps are looking to move onto polygon.
For example, as of June 13, popular automated market maker SushiSwap has more than 15,000 unique active wallets on Polygon, while on Ethereum that number was around 4,194, according to data provided by crypto data site DappRadar — meaning there are more SushiSwap users on Polygon than there are on Ethereum.
A June 10 report by DappRadar also highlighted that in May alone DeFi money market Aave logged a daily average of $6.75 billion in transaction volume on Polygon compared to $2.48 billion and $2.28 billion for Aave and Aave version 2, respectively, on Ethereum.
Although it’s currently sitting at top 15 tokens by Market Cap, Polygon aims to be in the top 3 crypto’s very soon.
Conclusion
While ethereum aims to solve its scaling issues it is facing currently and takes time to bring out eth2.0. other players have come in to fill the gap of decentralized computing space. The networks mentioned in this article are among the top 20 tokens in the crypto space and there are many more trying to compete with them.
The aim of this article as well as the coming few articles are to give you an understanding of the crypto-tokens that are in the space currently, and what better place to start than the base layer protocols aka decentralised computers powering the crypto space.
