Scaling Ethereum: Past, Present And Future

In the first part of this two-part series, we looked at one of the most commonly asked questions about blockchain networks: how they can scale up to accommodate millions of transactions.

If we turn to Ethereum, we see a network that is under pressure from many different requirements, and which has been plagued with periods of congestion and high fees. Because the majority of DeFi protocols and NFT marketplaces run on Ethereum, it has in many ways become a victim of its own success.

Many people who would have otherwise wished to get started in DeFi have been deterred by high transaction fees, which have averaged around $20 for the last couple of months, rising to more than $100 at peak times. With more than 17 billion locked up in Ethereum DeFi protocols, the prospect of eye-wateringly high potential returns continues to attract large investors, but sky-high fees make it unprofitable for smaller players to participate. A collateralized loan of $1,000 makes little sense if you are paying transaction fees of up to $100 to open and then again to close the loan.

As well as high fees, unpredictable delays in processing transactions can be a problem. This is hardly a new phenomenon: at the height of the CryptoKitties craze in December 2017, one of the higher-profile casualties of Ethereum’s main net becoming clogged up with cartoon cats was SophiaTX, who were forced to delay their ICO. As well as high fees, unpredictable delays in processing transactions can be a problem. This is hardly a new phenomenon: at the height of the CryptoKitties craze in December 2017, one of the higher-profile casualties of Ethereum’s main net becoming clogged up with cartoon cats was SophiaTX, who were forced to delay their ICO.

Read the full article on Coinscrum.

I also write at greater length about scaling challenges in my book The Cryptocurrency Revolution.