Sunday, February 5

Operation: Save the Ethereum Soldier in the Battle for Web3

Ethereum is looking more and more like a wounded soldier in the midst of a raging war to lead the industry in decentralized Web3 applications. The expression may be a bit extreme to represent the current state of the second largest cryptocurrency network in the world. But what is clear is that Ethereum needs urgent attention to successfully deal with the wounds of the competition.

When Vitalik Buterin started his project, a good part of the crypto community perceived that they were facing a “Bitcoin-killer”. In other words, Ethereum was the promise of everything that seemed to be far from Bitcoin, especially its advanced capabilities for generating smart contracts. Competitions that today take us flying to Web3, NTFTs, DAOs, metaverses and much more. However, despite the years that have passed, many people still consider that Ethereum has not yet been able to surpass Bitcoin.

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Ethereum and the Web3

At present, Ethereum’s halo of luminosity seems to have languished, presenting itself to the world with an air of defeat. When it was born, Ethereum was unique. Its smart contracts and its ability to develop dApps were practically unattainable. He was like the typical Hollywood superhero that the movies show us and that they come to save the world and show us the right path. The apparent superiority of Ethereum began to be disputed a couple of years ago. The first line of dispute arose from the side of Bitcoin, with its advanced sidechains. Cases such as RSK and Stacks allow Bitcoin to talk about you to Ethereum in terms of the capabilities of smart contracts.

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Later, the arrival of networks such as Polygon (MATIC), Binance Smart Chain (BSC), Algorand, Solana, Terra, Polkadot, Kusama or Cosmos began to put more pressure on Ethereum. Currently, the battle for “the Web3 blockchain” has intensified and Ethereum does not seem to be in the best position to face it. Its high commissions, transactions that can stay for hours on the network or even be returned, have led many projects to migrate to other networks. More and more companies are choosing networks with greater scalability, speed and better commissions than Ethereum to start deploying their Web3 services.

Despite its still strength, Ethereum knows its weakness. Vitalik is aware of the enormous problem represented by the uncontrolled costs that Ethereum transactions can reach. In that sense, their efforts were concentrated on the launch of EIP-1559, an improvement that sought to lower the total cost of gas in Ethereum.

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EIP-1559 and its incomplete solution to commissions in Ethereum

However, it seems like an incomplete solution to the problem. in the paper «Transaction Fees on a Honeymoon: Ethereum’s EIP-1559 One Month Later», available on the scientific platform Arxiv, there is an image that tells us that the impact of EIP-1559 has been minimal. Not to mention practically non-existent in the average cost of transactions in Ethereum.

Saving the Ethereum soldier

A palpable reality in everyday life

In any case, it is not necessary to resort to a scientific study to verify that the high commissions in Ethereum continue to be a problem. For example, in Etherscan we can see that a simple operation, such as moving an ETH or an ERC-20, could cost an average of $15.

Saving the Ethereum soldier

The cost increases if we operate with NFTs or if we want to use DEX, such as Uniswap, where, depending on the operation, the cost can range between $40 and $120, not counting the DEX commission and the exchange slippage. In this sense, Bitcoin, the most reviled network for the cost of its commissions, is now one of the cheapest to use in the crypto world.

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Commissions in the Bitcoin network

ETH 2.0, the long debt to the community

The next attempt to save Ethereum was Ethereum 2.0, the promised technological leap that would see Ethereum become a Proof of Stake network, leaving Proof of Work behind. The change would speed up Ethereum’s speed and make it more eco-friendly.

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While all of this is true, ETH 2.0 is what many in the community refer to as “the promise that never quite comes true.” The development of ETH 2.0 began in 2018, when we saw the birth of spin-off projects such as the PoA Network (an Ethereum fork based on Proof of Authority). Binance Smart Chain, which is a derivative of Ethereum, has been using the Proof of Stake Authority (PoSA) system since its launch, a mechanism very similar to PoS that seeks to use ETH 2.0. Even Polygon, being all sidechain that it is, uses the Proof of Stake protocol, with a fully Ethereum-compatible EVM implementation showing enormous potential.

We are talking about networks that are used in production at the moment, that started their development derived from Ethereum and that have presented a complete solution to deal with Ethereum 1.0 and its limitations. Although Ethereum 2.0, the development under the auspices of Vitalik and his hundreds of developers, does not yet have an official date to come to light, its deployment has already begun.

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A development in parts and with delays

On December 1, 2020, the ETH 2.0 Beacon Chain began to function, which will become the mainnet once ETH 2.0 is fully released. The problem is that it is a network where only a few technically gifted can participate. Creating a node on the network requires a procedure that most novice users cannot perform. In addition, the 32 ETH node staking fee, once placed, cannot be withdrawn.

Once you take the 32 ETH that the staking nodes system in ETH 2.0 asks for at least, you cannot withdraw them because the ETH 2.0 network is isolated from everything. ETH 2.0 is just there writing an empty history that already occupies more than 94,669 epochs ( about 3,029,405 blocks).

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ETH 2.0, the huge blockchain of empty history

To say that Bitcoin uses its mining power on “nothing” and to see ETH 2.0 doing that in every way is also a plot twist that few are willing to accept. Some will say that PoS spends less energy, but the reality is that those who manage the satking within ETH 2.0 are energy-hungry monsters in many ways.

ETH2.0 and its long history of "empty"

Beyond all these issues, Vitalik promised that ETH 2.0 would start its Phase 1 in October 2021 and that we would finally see ETH 2.0 running as the Ethereum mainnet. But it was not possible, being announced for December 2021. However, the project was delayed again until an undefined date of 2022. Thus, the event known as «The Merge», could be fulfilled between Q2 and Q3 of 2022, if there is no new delay, leaving the last phase of Ethereum (the launch of sharding) for a date that many analysts place in 2024. This would make ETH 2.0 one of the projects most retarded in the crypto world.

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A competition that continues to take spaces

Meanwhile, the competition from Ethereum continues to gain ground. Polygon, for example, has become one of the fastest growing networks. In fact, with its more than 3 million daily transactions (with peaks of 12 million), a capitalization of over 10,000 million, more than 132 million active addresses, it shows itself to be a worthy opponent. An opponent that has started to develop solutions beyond Ethereum.

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Fortunately, Ethereum holds a potential that no one could overlook. But as “Operation: Save the Ethereum Soldier” does not complete successfully, either significantly lowering fees now and accelerating the exit of ETH 2.0, Ethereum will be in deep trouble.

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