ETH 2.0 is being hailed as the blockchain Messiah of Ethereum. The problem is, it isn’t. The long-awaited changes are unlikely to solve the network’s fundamental issues, which are impeding widespread adoption.
ETH 2.0 Isn’t All It’s Cracked Up To Be
To address long-standing concerns with Ethereum, its administrators announced the introduction of Eth 2.0, which includes a transition to proof-of-stake (PoS) and sharding. According to the proof-of-stake concept, individuals may mine blocks and verify transactions depending on the number of coins they possess. According to the Ethereum Foundation, the shift to PoS will be complete by the end of 2021. The Ethereum Foundation has said in a blog post that “energy requirements remain unchanged” when compared to the previous PoW algorithm.
Vitalik Buterin, the creative mind behind the Ethereum blockchain, recently said in an interview with Forkast news that the people that work with Ethereum are a bigger problem than the platform itself. While the project’s personnel may or may not be a source of contention, they are far from the sole issue. While the latest rollout may seem enticing, the software upgrades will not solve the network’s long-term problems that have stopped it from reaching the heights envisioned by Buterin and his supporters.
Ethereum presently employs a proof-of-work (PoW) algorithm that supports only around 15 transactions per second — about twice the pace of the Bitcoin (BTC) blockchain — and is widely considered as unsuitable for creating a large-scale decentralized finance (DeFi) ecosystem. As a consequence, the gas costs for Ethereum are very expensive. Due to the low number of transactions per second, the cost of processing more quickly becomes competitive. Dune Analytics estimates that between 2% and 5% of transactions on Ethereum-based decentralized exchanges (DEXs) fail due to problems such as insufficient gas price.
Another significant problem that the Ethereum network faces is a lack of user experience (UX) design, which is often ignored. As a result, the majority of users interested in decentralized finance applications (DApps) or a nonfungible token (NFT) marketplace, for example, will avoid doing so because the majority of user interfaces are not only unintuitive, but also lack sufficient educational resources to teach users how to use the platform.
Users will be required to define transaction fees and gas limitations in the gas price for transaction processing. How many people, though, are aware of this without diving into the jargon and statistics around cryptocurrency? 25 percent of people in the United States, according to Insider Intelligence, do not understand or know how to invest in digital currencies. Without access to proper teaching tools, how are users to know that sending money from two separate wallets to the same receiving address would not result in a nonces conflict? The overwhelming majority of regular users would very certainly be totally ignorant of such a problem in the first place.
Upgrades to Eth 2.0 Aren’t Really Helpful
The most recent modifications are designed to be more environmentally friendly while simultaneously increasing transaction processing speed. Along with these improvements, the blockchain programming language is expected to grow from the basic Ethereum Virtual Machine (EVM) to one that can be utilized by developers that use C++ or Rust, allowing for simpler browser-based development. While infrastructure upgrades are beneficial in certain areas, such as increasing transaction throughput, they fall short in others.
To begin, Ethereum 2.0 has been under development for years, keeping many users in the dark about when the full update would be ready. While proof-of-stake is intended to lower mining costs and energy usage, the network speed can only be improved by reducing block timings and/or block sizes. Additionally, sharding is beneficial for applications that can run separately and just need periodic synchronization. However, due to DeFi’s inherent decentralized and open-source nature, sharding-style processing would need the routing of transactions via a relay chain, which would significantly slow down the whole process.
Another problem is that transactions have lengthy confirmation times, which usually results in delays, asynchronous transaction submission, and confirmation messages, in addition to the lingering gas cost parameter issues. Often, a user will not get confirmation immediately after completing a transaction, leaving the user in the dark about whether or not the intended recipient received the transaction. This is an odd and unpleasant user experience for those used to instantaneous results on the web, such as in e-commerce scenarios.
While Ethereum may be the blockchain world’s darling, the frenzy around the project may out to be little more than hype at some point, and the long-awaited upgrade is unlikely to gain widespread adoption. It is unknown if the planned improvements will be sufficient to maintain the promises of the Ethereum Foundation’s senior executives. Eth 2.0 is unlikely to have a significant impact on anybody outside of the Ethereum community unless and until Ethereum addresses some of the bigger issues at hand. Ethereum 2.0 is now more of a cosmetic update than a much-needed game changer.