“If it ain’t broke, don’t fix it.”
That’s the cliche on many people’s minds as Ethereum approaches a massive overhaul with 2.0 scheduled to roll out later this year. Ethereum is already the second biggest blockchain in the world (by market cap). It is, without a doubt, one of the biggest success stories out of the cryptocurrency world so it might seem strange to tinker with what is already working fairly well.
The reality is that Ethereum isn’t completely without issues and 2.0 could help push the platform to new heights. Today we take a deeper look at some of those issues and how 2.0 might rectify them.
Ethereum has played second fiddle to Bitcoin since its inception, but both blockchain platforms are facing the same issues, and each needs to change its course if it wants to hold off competition from emerging blockchain companies. These new blockchain companies all aim to solve the issues that both Bitcoin and Ethereum now face, which are: scalability, proof-of-work consensus, and security.
Scalability
One of the ultimate goals of Ethereum is to become the “world’s computer”, but the problem with this goal is that currently, the Ethereum can only process 15 transactions per second. That is not scalable to the needs that would exist if the platform was to reach that goal. The congestion of the ledger combined with the slow transaction speed has made it extremely costly to use the blockchain, and so big companies have shied away from using Ethereum as their platform.
Meanwhile, budding blockchain projects frequently have transaction speeds in the hundreds, if not thousands, per second. If Ethereum wants to compete long-term, rather than be a steppingstone for other company’s progression in the blockchain industry, increasing scalability is a major necessity.
Proof-of-Work
The next issue facing Ethereum is its current proof-of-work consensus algorithm. There is nothing wrong with the way proof-of-work, well, works, but rather an issue in its long-term utility in relation to cost effectiveness. Bitcoin also uses proof of work, and currently a one Bitcoin transaction costs a miner enough electricity to power an American household for 1.57 days. Apart from this resulting in an expensive transaction fee, it is also wasteful and unsustainable for mass adoption. Ethereum 2.0 aims to switch Ethereum to a hybrid proof of work/proof-of-stake algorithm.
Security
The third main issue facing Ethereum is security in relation to using a proof-of-stake system rather than their current proof of work one. Proof-of-work, partially due to the costs associated with programming an attack against the network, is extremely safe. Bad actors get cut out of the network thanks to technological and economic disincentives, and it would likely cost more resources than you could reap if you tried to attack the current proof of work system. The issue for Ethereum then is not its current security, but its security once it switches to a proof-of-stake system with Ethereum 2.0. Proof-of-stake presents the issue of “nothing at stake”, an issue that will be discussed later in the article.