Ethereum is by far the most popular blockchain for DeFi, gaming and NFT projects. About 59% of the decentralized applications are based on Ethereum. However, it is plagued with sky-high gas charges and slow transaction processing. A transaction on the Ethereum blockchain currently takes between 30 seconds and 16 minutes.
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The upcoming Ethereum 2.0 seems like the panacea that would solve all of these problems. Until then, the competing blockchains have an open window to attract developers and users looking for alternatives to Ethereum.
As DeFi and NFTs gained prominence over the last year, they exposed the boundaries of Ethereum. The network is struggling to cope with the influx of new users. Ethereum has become untenable for retail investors and traders. The fees don’t make sense if your transaction sizes are up. The average gas price on Ethereum is 58 GWEI compared to just 6.1 GWEI on the Binance Smart Chain.
Ethereum 2.0: how long do we have to wait?
The community is eagerly waiting for the release of ETH 2.0 aka Serenity. The upcoming upgrade would make it safer, more scalable, and more sustainable. It is switching from the Proof of Work (PoW) consensus mechanism to Proof of Stake (PoS), which would reduce energy consumption by more than 99% and increase transaction speed from the current 15 transactions per second to around 100,000 TPS.
The transition to Ethereum 2.0 will take place in three different phases. The first phase – the Beacon Chain – has been live since December 2020. It laid the foundation for future upgrades. In the second phase, called The Merge, the Ethereum network will switch to the Beacon Chain as a consensus mechanism. There’s no specific date for this, but it will likely happen towards the end of 2021. It will enable the Ethereum network to be staked out and put an end to energy-intensive mining.
The final phase – shard chains – will arrive sometime in 2022. It will involve breaking up the Ethereum network to further increase its ability to validate transactions, store data, and improve performance over time. The inclusion of Shard Chains marks the official completion of the Ethereum 2.0 upgrade.
The story goes on
Charles Hoskinson, who co-founded Ethereum and later launched the Cardano platform, said in an interview with Bloomberg News that “the most significant hard work in their (Ethereum) upgrade strategy will take place in 2022.” Hoskinson believes Ethereum will complete the transition and upgrade in late 2022 or early 2023.
Ethereum co-founder Vitalik Buterin has also admitted that ETH 2.0 will take much longer than expected. “We thought it would take a year to do the proof of stake, but it actually takes six years,” he said.
Alternatives, alternatives, alternatives
Ethereum competitors have taken advantage of the ETH 2.0 delay to strengthen their ecosystems. Binance Smart Chain is only about a year old, but it processes more transactions than Ethereum.
BSC is a hard fork of the Go Ethereum (Geth) protocol, so it has many similarities with Ethereum. Decentralized apps and tokens based on BSC are fully compatible with the Ethereum Virtual Machine (EVM). In fact, the public wallet addresses for BSC and Ethereum are the same.
Binance Smart Chain is more scalable as it uses a fully delegated Proof of Staked Authority (PoSA) consensus mechanism. The low transaction costs reduce the entry barriers for small traders and investors. In June there were around 2,000 dApps on Ethereum and only a little more than 800 on BSC. But when you consider that Ethereum has been around much longer than the Binance Smart Chain, the growth of the one-year chain is admirable.
Meanwhile, Qtum, a proof-of-stake blockchain that leverages the best of Bitcoin and Ethereum to offer faster, safer transactions, has seen a token jump of more than 500% this year as its focus on decentralized finance has relocated. Network developers are riding the DeFi boom.
Qtum uses Bitcoin’s UTXO transaction model in combination with an adaptation layer interface to the Ethereum Virtual Machine (EVM). Great efforts are being made to attract developers. The Qtum network has transitioned from a 128-second block average to a 32-second block average. It also has one of the largest network of nodes in any blockchain. As of May 2021, there will be a total of 1,200 Qtum nodes distributed across 60 countries, making it one of the most open and decentralized blockchains.
Then there is Cardano, which aims to be a force for good and to provide dApps, systems and societies with “unparalleled” security and sustainability. Cardano has received a lot of attention from developers since announcing the launch of the smart contract functionality on September 12th. Smart contracts will make it possible to compete directly with other programmable blockchain networks.
Cardano’s ADA token has become the third largest in the world with a market capitalization of $ 90 billion. The two tokens in front of it are Bitcoin and Ethereum. Smart contracts will enable the Cardano network to provide lucrative services such as DeFi loans, loans, gaming applications, NFTs, etc.
Polkadot is also in the race to become the blockchain network for dApps. In fact, it is emerging as a viable alternative to Ethereum. Polkadot is a fully decentralized Web 3.0 blockchain platform that bridges the independent blockchains to enable seamless asset transfer and communication between them. It uses sharding mechanisms to offer cheaper, faster transactions.
There are more than a thousand public blockchains and we are moving towards a multi-chain universe. As a result, Polkadot’s cross-chain interoperability is becoming more important than ever.
Polkadot enables developers to create and launch specialized blockchain platforms that are connected to form a unified network. Projects within the ecosystem can communicate with each other and transfer assets. You can also communicate and conduct transactions with external public blockchains like Ethereum and Bitcoin.
Another group of networks like Biconomy focuses on making it easier for newbies to get started in the DeFi space. Biconomy is a new blockchain network that simplifies Web 3.0 and helps developers build simpler and more user-friendly applications. It eliminates the friction points that overwhelm new users when interacting with dApps.
Proof of stake – or a variant of it – is the future of decentralized financing. Ethereum was the dominant blockchain network, but the delay in introducing ETH 2.0 could make it expensive. Competitors like BSC, Qtum, Cardano and others go the extra mile to attract developers and take advantage of the network effect. Only time will tell whether Ethereum 2.0 will arrive in time to assert its dominance or cede it to competitors.