Ethereum with a makeover: How these new darlings of the crypto space are looking to change blockchain forever
Angela Guan
In the era of the blockchain, Ethereum’s creation is perhaps one of the most significant of its generation. Whilst Satoshi initially brought the idea of the peer to peer network to the public eye, it is Ethereum that truly provided the fuel for the crypto rocket to take off. Before the creation of Ethereum, the crypto space was mostly limited to projects that were developed exclusively for the use as cryptocurrencies. Ethereum provided developers with a platform where anyone can build an application without having to build an entirely new blockchain. This gave birth to the time of the ICOs where thousands of projects are able to utilise the Ethereum platform and smart contracts to decentralise a project with simple measures. In just the span of a few months, the crypto space exploded with ICOs.
ICOs for days as one may like to call it.
Along in the pool with rubbish ICOs looking to propagandise the average Joe in to handing in his hard earned cash are actually amazing projects that have opened up the horizons of the crypto space. With the industries and places that these daring ideas are attempting to reach, what seems to be the case is that the technology behind it is simply not yet up to speed. Shortfalls of the network that once remained hidden now stands conspicuous as real life applications are looking to be applied. Right now, the market cap of Ethereum Blockchain ran projects and tokens rocks up to a staggering 90% of the cryptocurrency market. The strain that the transactions of these ERC20 tokens can have on the blockchain proves to be very significant.
As we might remember just a few months ago, a virtual cat collection game nearly crashed the Ethereum Network; clogging up the blockchain, causing gas fees to go up the roof. What I got from this bizarre event is that firstly, people really made a crapload of money during the ICO frenzy to be spending a fortune on buying virtual cats with strange moustaches and upside down hats. And secondly, if the network is not able to harness the transactions made on buying weird internet cats, how would it play out if actual businesses take upon the idea of the blockchain and millions of transactions would have to be processed on a daily basis?
Piling on gas fees simply to compete with the lady behind you for your morning Starbucks?
Not likely.
Scalability and TPS
I think one of the most cardinal issue that the broader blockchain is facing right now is the scalability of the network. One thing that should be noted is that CryptoKitty is not even entirely decentralised, most of the game logic runs on Cryptokitties’ servers, not in the ethereum smart contacts. If this partially decentralised application is able to congest the Network, it says a lot about how much progress that really needs to be made.
“For Ethereum to compete with more mainstream systems like Visa and Paypal,” BlockGeeks writes, “they need to seriously step up their game when it comes to transaction times. While paypal manages 193 transactions per second and visa manages 1667 transactions per second, Ethereum does only 20 transactions per second.”
I think the crypto community has definitely reached a consensus here towards tackling the scaling problem that the Ethereum blockchain is facing. One of the more significant efforts to date is Raiden Network.
Raiden uses off-chain technology to increase the network capacity. Operating as an infrastructure layer over the Ethereum Blockchain, Raiden will do this by “leveraging a network of payment channels which allow to securely transfer value off-chain, i.e without involving the blockchain for every transfer”. Removing the need for a global consensus for every transaction. Previously, every participant needed to learn about every single update to the shared ledger. The hardware and bandwidth constraints setting a limit to the number of update per second that can be shared on the decentralised network. Raiden’s vision is to eliminate this bottleneck and allow transactions by privately exchanging messages without involving the global consensus protocol.
By acting like an off chain credit system, no actual transactions are actually processed until the very end. All the information is kept tracked of off chain by opening a payment channel between the two participants. In this case, the number of transactions can theoretically scale infinitely. The only ‘on-chain’ transaction would be when the channel between the payer and payee closes and the net tally is exchanged.
Once the Raiden Network expands, the efficiency of this system will also increase exponentially. Not every transaction will need to open a direct payment channel. If a route exists through the network of channels that connect the two parties, this will allow for the routing and interlocking of channel transfers; increased transaction speed.
Raiden is also ERC20 compatible, as for the 90% of the tokens currently circulating the market (as well as Ethereum) are now able to exploit the scalability of the network.
One of the other more recent progress is the Loom Network. This project differentiates from Raiden as instead of off-chain protocols, Loom adopts ‘dappchain’ technology; which are essentially mini blockchains.
Loom Network attaches the side chain of specific projects to the main Ethereum blockchain. These dapp-chains are different in the respect that they are specific to tackle the scaling issue of the Ethereum Network, lifting the traffic from the mainnet.
One of the problems that Loom Network does face is its level of privacy. Indeed, Loom admits “It’s not going to have the same level of security that the main ethereum network will have.” As the Scalability Trilemma by the creator of the ether, Vitalik Buterin proposes, the scalability of the blockchain ought to have its tradeoffs. Although using dappchains alongside with the main Ethereum blockchain will release much of the stress over the main chain. These side chains are ultimately centralised under Loom Network’s control. As for the actions that are deemed not ‘worthy’ of being sent over the ethereum blockchain will be kept tracked of by Loom.
Privacy
In tandem to our previous case, it is not only the ‘centralisation’ of the blockchain that may inflict harm to the level of privacy we are entitled to, the decentralised blockchain alike, also has its downfalls. Indeed, the public blockchain’s highlighted strengths are its transparency, audibility and so forth, attracting many established companies and big banks to the idea of incorporating blockchain technology to their services. However, due to the very nature of the distributed ledger technology, current blockchain use unavoidably allows close to full transparency. Every transaction over the public blockchain has to reach a global consensus, hence the privacy of your data is really not so private as every minor detail is before the public eye. For blockchain to truly go mainstream, it is essential that some information can not be accessible by just anyone.
“As seductive as a blockchain’s other advantages are, neither companies or individuals are particularly keen on publishing all of their information onto a public database that can be arbitrarily read without any restrictions by one’s own government, foreign governments, family members, coworkers and business competitors”
Vitalik Buterin, co-founder of Ethereum
Keep network
Complementary tech to Ethereum
It’s a sobering thought. We talk a lot about “being your own bank” and financial empowerment, but we’re still advocating the use of a public, easily traceable ledger. What better way to invite public opinion and interference than opening all of our finances to the world?