Ethereum has proven to be a formidable force. While its major issues have spawned other coins aimed at addressing them, Ethereum looks to shed its old
Ethereum has proven to be a formidable force. While its major issues have spawned other coins aimed at addressing them, Ethereum looks to shed its old skin with the release of Ethereum 2.0.
Despite the fact that Ethereum was created six years after Bitcoin (BTC) and the introduction of blockchain technology, the digital asset Ether (ETH) has grown to be the second most valuable cryptocurrency in terms of market capitalization, surpassing coins such as Litecoin (LTC), Ripple (XRP), Dash (DASH) and Monero (XMR), which were launched before it.
The technology behind the Ethereum blockchain is the primary reason for its meteoric rise.
Vitalik Buterin, the Canadian-Russian programmer and co-founder of Ethereum, explained to Business Insider that the Ethereum blockchain is intended to address Bitcoin’s “limited functionality.”
The Ethereum blockchain seeks to foster innovation by enabling the development of decentralized applications (DApps). This is the foundation of nonfungible tokens (NFTs) and the Metaverse concept.
While Ethereum has solved the problem of limited functionality, it hasn’t addressed some of the major concerns associated with Bitcoin and most blockchains because it relies heavily on the proof-of-work (PoW) consensus.
Low scalability, network congestion, high gas fees and environmental concerns are some of the major issues, all of which are related to the PoW consensus mechanism used by Bitcoin and Ethereum.
As a result, Ethereum has been making preparations to transition to proof-of-stake (PoS) for some time now in the soon-to-be-launched Ethereum 2.0.
Proof-of-work vs. proof-of-stake
The network verifies transactions on a blockchain using a consensus mechanism, which helps to ensure that no one spends the same money twice. The consensus mechanism is used to validate transactions, add them to the blockchain and generate new coins. PoW and PoS are the two main consensus mechanisms used to achieve this.
Proof-of-work as a consensus mechanism uses mining to verify transactions. The computers in the network must solve a puzzle, and the first to do so gets to validate the most recent transaction and add it to the blockchain. The network rewards the first person who solves this puzzle and verifies the transaction with a token.
While PoW contributes to the security of the blockchain, the issue with this consensus mechanism is its association with mining. The computers involved in mining use a significant amount of energy while attempting to solve these mathematical puzzles.
According to data from the University of Cambridge, Bitcoin consumes more power than Argentina, the Netherlands and the United Arab Emirates. This raises significant environmental concerns.
Furthermore, due to the reliance on mining, blockchains like Ethereum that run a large number of transactions are slow in terms of transaction speed, resulting in network congestion and, as a result, higher gas fees.
The PoS consensus mechanism uses staking instead of mining to verify and include new transactions in the blockchain. PoS requires coin holders to stake their coins in a staking pool, which allows the stakers to validate new transactions to be added to the blockchain.
Moreover, PoS eliminates the environmental issues associated with mining, allowing transactions to be completed faster and at a lower cost.
Related: DAOs: A blockchain-based replacement for traditional crowdfunding
The birth of Ethereum killers
Ethereum killers are networks that seek to unseat Ethereum by addressing its blockchain issues such as low scalability, high fees, low transactions per second (TPS) and environmental concerns. They intend to accomplish this through the use of the proof-of-scale consensus mechanism. Cardano, Solana, Polkadot and Tezos are among the most well-known.
Cardano
Cardano, for example, employs Ouroboros, a consensus and security protocol based on PoS. The Cardano blockchain is highly scalable thanks to the use of Ouroboros, allowing for faster transaction speeds and lower fees.
Furthermore, Cardano’s Hydra project aims to increase its speed by more than 300%. Currently, Cardano can process about 250 TPS. However, the developers are working on a scaling solution to aim for a 1,000 TPS. The Cardano blockchain is energy efficient and addresses the environmental concerns associated with the Bitcoin and Ethereum blockchains because it uses a PoS consensus mechanism.
Cardano also has 579 decentralized applications (DApps), according to Cardano ecosystem tracker Cardano Cube. This number is much lower than Ethereum’s nearly 3,000 DApps with more than 50,000 daily active users and 126,000 transactions per day, according to State of the DApps.
Tezos
Tezos is another contender that stands out due to its unique governance model.
Tezos, unlike other blockchains, is self-governed in the sense that users are given the opportunity to upgrade and make design decisions. Because the governance is in the network itself rather than a development team, it has been…
cointelegraph.com