The Ethereum network was created to provide innovative tools for developers to contribute to the future of technology. Since the beginning, Ethereum introduced the concept of smart contracts, decentralized applications, and decentralized autonomous organizations, through which transactions, apps, and voting systems are transparent, efficient, and censorship-resistant.
Although these technologies didn’t affect the Ethereum price USD, they contributed to the emergence of these ecosystems, considering that users solely used Ether to exchange products and services in the blockchain. These continuous activities on the network led to congestion, which posed several challenges to scalability.
The impact of increased scalability led to higher transaction costs and slower processing times. Compared to Visa, a centralized transaction company that has a capacity of over 24,000 TPS, Ethereum can only handle 30 TPS.
Lately, a few updates were introduced to mitigate scalability, such as the Dencun one. However, experts believe it’ll take more than this to solve the problem.
What is the Dencun Upgrade?
The Dencun update is part of the Ethereum roadmap, being a significant part of the multitude of updates that will improve Ethereum. It’s set to happen in the first quarter of 2024 and will introduce a unique concept into the network called proto-dank sharding, which can reduce transaction costs.
The strategy for lowering these costs stands in leveraging data blobs instead of calldata that improve storage through compressing transactions. Hence, storage on the blockchain will be increased, and gas fees will be diminished, leading to a superior experience for developers and network users.
However, The Update Might Not Be Sufficient
Many experts confirmed that Dencun is only a temporary fixture of the issue, and the long-term challenge stands in capacity. Ethereum needs to extend the network’s capacity to withstand the number of transactions, which requires several additional updates.
Some of these solutions include multi-chain technologies, such as rollups and appchains. Ethereum rollups already exist, and they consist of layer 2 scaling solutions that extend between optimistic and zero knowledge. Rollups have been beneficial for scaling, low gas fees and fast transactions, as they allow transactions to be processed off-chain while zk-proofs would validate them.
On the other hand, appchains, or application-specific blockchains, are blockchain networks that leverage storage and power through a single application. Appchains can be built on top of Ethereum or layer-2 chains and have the potential to increase network capacity.
Multi-Chain Solutions Must Be Approached Properly
As advantageous as they are, multi-chain solutions are not that easy to implement. That’s because they must be managed between different chains, so anyone handling them must be a pro using cross-chain communication and integration techniques. The complexity of these solutions is also given by the security requirements for multiple chains.
The technology behind multi-chain solutions is not that easy to master, meaning it can’t be implemented if it’s not handled by the right team. However, it’s a necessary update that could make Ethereum just right.
Other Potential Scalability Solutions
There are many other potential solutions to enhance Ethereum’s scalability. First, sharding is where dank-sharding started, and it involved dividing chain states into shards with the help of fewer nodes for process transactions to improve network throughput.
State channels are also useful, as they manage on-chain and off-chain operations and only require proof to the main chain for transactions. Finally, plasma is another scalability solution for Ethereum that prioritizes off-chain transactions while interacting less with the main chain.
Although they’re more common, introducing these solutions within the network can pose several challenges. First, sharding has the risk of centralization as a single miners’ shard. Then, state channels require updates that are critical to manage, as they must be configured properly for both parties to confirm the transaction. Finally, plasma requires child blockchains in which parties might choose to exit at the same time, leaving all control to one entity.
Ethereum Can Learn From These Blockchains
It’s not a secret that Ethereum has massive competition from blockchains and networks with superior scalability and better services. Ethereum may be more famous and with an extensive market capitalization, but that doesn’t mean it’s superior to all blockchains.
Solana, for example, was introduced to the market in 2019 and provides smart contracts, decentralized finance ecosystems and dApps. The proof-of-stake blockchain combines staking and proof-of-history that make transactions cheap and fast. Moreover, Solana has a unique NFT marketplace.
There’s also Cardano, which appeared in 2015 with the purpose of introducing the most efficient blockchain based on science. Cardano is highly scalable, fast and affordable since it began with PoS and is considered efficient for smart contracts and NFTs.
Polkadot is another option for Ethereum, as its uniqueness helps blockchains become compatible with each other. It uses sharding technology to allow users to connect blockchains to other chains so crypto or digital assets can be exchanged easily. Although smart chains are not available for Polkadot, they can be used in side chains.
Is Ethereum a Long-Term Solution for Developers?
Many consider Ethereum to be approaching its glory, even being capable of overthrowing Bitcoin. However, others are skeptical of Ethereum’s capacity to become such an important blockchain and cryptocurrency because it has struggled with scalability since its beginnings. Indeed, it attracts numerous developers and curious users, as the ecosystem is vast and leverages plentiful tools and technologies.
Still, when it comes to scalability, proper transaction prices and speeds, Ethereum has a lot of work to do. We hope that the updates to follow will contribute to a better blockchain, but it might take up to ten years for it to become reliable and scalable totally. Until then, one of its competitors might become more popular and extend, but there’s no certainty for that yet.
Bottom Line
The Dencun update of the Ethereum blockchain is set to occur at the beginning of 2024 and will deal with scalability issues. The purpose is to lower gas fees, which are significant at the moment, and lower transaction speeds that can take up to a few days for some to be processed. Still, experts believe it’ll take more than the Dencun update for the network to be completely scalable, and more solutions are required.