What's Holding Ethereum Back?


Ethereum network and ethereum scalability

  With Ethereum’s current price rise it appears the network may be on the rebound from the gigantic market correction that has been taking place over the last few months, that saw it’s $1200 price dip down below $400. With the interest returning to the market it will be important for investors, both new and old to understand the restrictions and issues that are currently facing the Ethereum network.

The Problem

   Scalability and the number of transactions/processes that can be handled at once by the network are currently very limited. It is estimated that Visa’s network currently has the ability to process in the ballpark of 55,000 transactions a second, compared to the Ethereum network which is currently holding around 20 a second.  While there have been many companies over the last year that have claimed to have developed a method to solve this issue, as of yet, the issue still remains. While most Ethereum developers will hype the network and the flexibility of the smart contract platform, the truth is, until this one major issue can be solved the network will remain a “good idea for the future” to most larger companies that need the ability to process thousands of transactions a second.


Ethereum transactions, ethereum, ether, ethereum scaleability

   So, what is the catch with making the Ethereum network scale? Right now it comes down to really one thing, the network itself, relies on a series of “nodes”. Each node right now must hold the entirety of the Ethereum network ledger, including transaction history, current account balances, contracts, and storage. This is a huge task, especially when the amount of data is increasing with each new block that is produced. The main concern of developers when trying to scale is that if the size of each new block is increased, it will require each node to carry more data - eventually kicking smaller users off of their network. If this continued it would eventually come down to only a few large companies or data centers having the resources to run it. Despite this issue when using the network, running a full node is still the best way to take advantage of the privacy and security offered by Ethereum.

The Solutions:


   There are a few new projects that are coming in 2018 to Ethereum that are showing promise of being able to eliminate this scaling issue. “Sharding” is an idea that is based on a traditional scaling process called “database sharding”. This process is aimed at moving away from the full node idea, no longer requiring each one of them to store the full and complete Ethereum ledger. Instead, it would require each node to only hold a subset of the data on the ledger that would be used to verify transactions. If the node needed info on a certain block and it was not storing it, it would look for a node that did hold that data set and send a request.

The main issue with this solutions is the system would not be a trustless solution, since, in this model, each node would require assistance or information from other nodes on the networks. Given the promise of this solution, Ethereum is trying to solve this issue using what they are calling “cyptoeconomic incentives”. In other words paying people who operate nodes to act in a certain way, in this situation, ensuring that their nodes are online and are only relaying valid information.

Off-Chain transactions

A much more aggressive project that is currently being researched and discussed, is an idea that pulls from Bitcoin’s Lightning Network. This type of idea would see the network operate in a more layered fashion that more closely resembled how the internet currently works. The end user would begin to see the type of capabilities that were used to pitch and sell the network, incredibly fast and nearly limitless, while still not requiring users to trust any type of intermediary party.

This solution will utilize off-chain micropayment channels that will remove the network processing burden from the underlying network. The reason this work, is in theory, either or both parties will have the ability to kick the transaction back to the blockchain at anytime, giving both parties the ability to end the interaction or transaction. Using this solution the computational power of the Ethereum network would not need to increase by a drastic amount, with the hope being that the smaller end user or enthusiast will still be able to operate a full node.

What’s The Time Frame?    

   That’s a tricky question, while many companies have tried and failed, there are several new projects, including the ones listed here and some that were not, that are attempting the fix. But, In the creator of the network, Vatilik Buterin’s own words, “the long-term goal is for the platform to be able to process transactions at a “Visa-like scale” and eventually move beyond”. But as of yet, there is still a lot of experimenting that will need to take place before any type of large-scale solution is deployed on the live network. So for the moment, it may only be able to handle a small number of transactions per second, it has its sights set on the largest transaction processors in the business.


Kenneth Starling