In the realm of cryptocurrencies, there are several fundamental challenges that have persisted over time: scalability, decentralization, energy consumption (particularly the debate between Proof of Work and Proof of Stake), and applicability across diverse scenarios. Ethereum, over the years, has made significant progress in addressing these challenges, setting itself apart from Bitcoin.
It’s worth noting that as of August 27, 2023, we have witnessed two years of secure operation since the official launch of Arbitrum One’s mainnet on August 31, 2021. This milestone unequivocally demonstrates that Rollup technology offers a robust solution to blockchain scalability issues. In fact, Ethereum’s TPS has already reached 100 transactions per second with Op-Rollup, and this figure could soar even higher with the forthcoming Cancun upgrade, leveraging zk-rollup technology to its full potential.
Rollup technology effectively tackles Ethereum’s scalability problem by optimizing the efficiency of transactions. It does this by distributing transaction security requirements across various layers, allowing for higher TPS rates. This scalability challenge initially emerged with Bitcoin, making Ethereum’s advancements all the more significant.
Decentralization, an even more formidable challenge, has been a topic of debate in the blockchain space. Ethereum has faced criticism for perceived centralization, especially when compared to Bitcoin. However, Ethereum has taken pragmatic steps to address this issue over time.
With the evolution from Proof of Work (PoW) to Proof of Stake (PoS), Ethereum’s ecosystem has shown that it can function effectively without the dominance of entities like the Ethereum Foundation and ConsenSys. The competitive landscape in application development indicates a thriving market that continually attracts developers.
In terms of protocol operation, PoS mining pool competition has intensified, with notable entities such as Lido, Binance, Coinbase, and FxS efficiently managing numerous Ethereum nodes. Individuals can establish their private pools, reducing the risk of single points of failure. This decentralization is a far cry from the early days when nodes faced the risk of singular points of failure.
Ethereum’s expansive network, boasting 240 million addresses with holdings, is unparalleled. While Ethereum initially raised questions about decentralization due to its account-based model, it has demonstrated a higher level of decentralization when combined with PoS. Ethereum is now resistant to catastrophic failures, even in the unlikely event of a major entity like Lido collapsing, where the worst-case scenario might only involve a 50% reduction in prices.
The debate around energy consumption in blockchain technology, particularly the PoW vs. PoS narrative, has also seen Ethereum make definitive strides. Ethereum’s transition to PoS, which began with the launch of the Beacon Chain on December 1, 2020, has been operational for nearly three years. This shift aligns with the industry’s growing emphasis on reducing energy usage and favoring PoS over PoW.
The full transition to PoS began on September 15, 2022, almost a year ago. The Shanghai upgrade on April 12th of this year marked the final step, allowing staking and withdrawals, solidifying Ethereum’s decentralized operation as secure and stable over an extended period.
The resilience of Ethereum’s software running securely and smoothly for a year is persuasive evidence of PoS’s viability. While the question of whether PoS surpasses PoW remains, the key takeaway is that PoS is a feasible and effective alternative.
Ethereum’s ecosystem has evolved to support a diverse range of applications, far beyond Bitcoin’s original scope. It has become indispensable for cross-border trade, serving as a crucial payment and settlement tool in various domestic and international trade scenarios. Stablecoins like Tether (USDT) exemplify this.
The Ethereum Virtual Machine (EVM) and smart contract ecosystem have paved the way for numerous applications, with DeFi and NFTs being particularly successful. Gamefi is also on the rise. In 2023, it’s aptly called the “Year of Real-World Assets” as tangible assets find their place on the blockchain. This year has witnessed the introduction of stablecoins backed by government bonds, allowing direct investment in US government bonds via the blockchain.
The trajectory suggests that Ethereum will continue to integrate with an increasing number of application scenarios, becoming an integral part of various aspects of our lives. This trend may very well become the new norm, solidifying Ethereum’s position as a trailblazing blockchain platform.
Source: WuBlockchain
