What Will the Future Hold for Ethereum?
By Ethan Sidelsky on ALTCOIN MAGAZINE
Ethereum has the potential to revolutionize the way we transfer money and data as a platform for smart contracts and dApps. If this does happen, the value of Ethereum will skyrocket.
Smart contracts are programs that automate the transfer of information and currency. Complex smart contracts can be used to create decentralized applications. To learn more about smart contracts and dApps check out this article:
However, this is far from a certainty. Many questions remain as to whether or not any dApps will become mainstream. Additionally, there are a number of new competitors challenging Ethereum, known as the Ethereum Killers. But even if Ethereum loses out in the battle to become king of the dApps, it may still have value as a payment system or as a store of value.
Are dApps Important?
At the moment, the closest a dApp has come to being mainstream was CryptoKitties in 2018. CryptoKitties is a game that allows users to buy and sell digital cats using Ethereum smart contracts. Since it is stored on the blockchain and cannot be duplicated, each CryptoKitty is unique with different traits that make it potentially valuable. At its peak, some CryptoKitties were sold for over $100,000 with millions of smart contracts being used. Even then, CryptoKitties only had around 14,000 daily users. In comparison, Facebook has over 1 billion daily users. Since its peak in 2018, CryptoKitties has lost its popularity, as it now only has around 1,000 daily users. If Ethereum wants to reach its goal to revolutionize the internet, it is going to need something better than CryptoKitties.
With that being said, there are a number of promising dApps currently being developed. One example is Golem, which wants to be the AirBnB of computer storage. Golem users can lend extra computer storage space they have to those who want to store their files. Another interesting dApp is Aragon — a platform for managing a decentralized and automated organization. Instead of having a CEO and upper management control the decision making of a company, employees and shareholders could vote on major issues and have them automatically self execute.
To learn more about exciting uses of blockchain technology check out this article:
It is also possible that dApps could be at a similar stage to the early internet, where some of the best uses have yet to be created. Companies like Google, Amazon, YouTube, and Netflix were all started years after the World Wide Web.
The truth is that it is too early to determine whether or not there will be major value in dApp platforms in the future. However, there certainly are lots of potentials, which is what makes Ethereum so exciting.
Can Ethereum Handle Being King?
In in its current state, Ethereum is not capable of supporting any dApps that go mainstream. When CryptoKitties became popular in 2018, it put a huge strain on the network, which slowed down other dApps and increased the gas fee for transactions. The reason why Ethereum is so slow is that the blockchain has to keep a permanent record of every transaction that occurs on the network. As a result, Ethereum can only process roughly 15 transactions per second — the transaction can refer either to transfer of data or currency. For context, Visa can handle 45,000 transactions per second, while Facebook handles 175,000 requests per second. This shows that Ethereum is currently neither capable of being a payment processor nor is it capable of handling a popular dApp.
Efforts are currently underway to make Ethereum scalable. Ethereum was designed similarly to Bitcoin, as they both use Proof of Work to validate transactions. In this system, members of the network compete to solve complex mathematical equations in order to confirm payments. Solving the equations requires lots of computational power, which slows down the process. Ethereum developers want to switch the network to a different system known as Proof of Stake. With Proof of Stake, instead of having the fastest computers validate transactions, the users who have the largest amount of Ethereum do so. This increases the speed of the network because there are no complex mathematical equations. Once Ethereum moves to Proof of Stake, they also can implement sharding. Sharding would allow the record of the blockchain to be split into multiple records. Instead of requiring users to validate all transactions on the network at once, this process could be split amongst a number of different validators.
Proof of Stake would be like splitting work in a group. Instead of everyone individually solving each problem, different group members could work on different parts and then share the answers with everyone else.
It may still be years before Ethereum is able to solve its scaling issue. In that time, competitors could leave Ethereum in the dust.
The Competition
In the past few years, a number of new cryptocurrencies have been dubbed the ‘Ethereum Killer’. Some of the more promising candidates include EOS, NEO, Cardano, and Tron. These platforms already use Proof of Stake. As a result, they have a much clearer path to scaling than Ethereum. EOS, for example, can already handle 3,000 transactions per seconds and claims it will eventually reach 100,000. Additionally, they offer lower transaction fees than Ethereum — some of them have no fees. As a result, some developers have already started moving their dApps from Ethereum to its competitors. While Ethereum has the most dApps, EOS now has more active monthly users. However, Ethereum is still far more valuable than its competitors — Ethereum is currently around $250, while the closest Ethereum killer is EOS, which is below $7.
If Ethereum wants to justify its valuation and have strong long term growth, it will need to scale before it loses its first-mover advantage to its competition.
A more in-depth review of the Ethereum Killers is on the way — make sure to follow On the Block to be notified.
Store of Value
Some believe Ethereum will become more valuable over time as a store of value — something that is valuable and can be stored to be sold in the future — like gold. Currently, Bitcoin is by far the most popular cryptocurrency for storing value. However, Ethereum could overtake Bitcoin if the ability to execute smart contracts to build dApps becomes more important.
There are lots of reasons to be excited about the future of Ethereum. Smart contracts have the potential to revolutionize the internet, and Ethereum is poised to take advantage of that. However, Ethereum has a lot of work to do in order to make that potential a reality.
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Thanks for Reading :)
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Here are some resources I used to write this article that you may find helpful:
https://coinsutra.com/ethereum-dapps/
https://blokt.com/news/st-regis-aspen-resort-sells-tokenized-real-estate-on-the-ethereum-blockchain
https://www.ccn.com/cryptokitties-isnt-as-popular-as-you-think-it-is
https://www.stateofthedapps.com/rankings?sort=dau&order=desc
https://zephoria.com/top-15-valuable-facebook-statistics/
https://www.stateofthedapps.com/dapps/adm
https://hackernoon.com/daos-and-the-future-of-work-97b4c076f288
https://www.ccn.com/cryptokitties-reveals-ethereum-scalability-issues
https://www.coindesk.com/information/will-ethereum-scale
https://medium.com/@FEhrsam/scaling-ethereum-to-billions-of-users-f37d9f487db1
https://blockgeeks.com/guides/proof-of-work-vs-proof-of-stake/
https://blockexplorer.com/news/ethereum-scaling-roadmap-casper-plasma-sharding/
https://www.ccn.com/ethereum-killers-crypto-blockchain
