This page will include updates in the Ethereum Ecosystem.
Ethereum is a blockchain designed for users to build smart contracts on top of (smart contract platform). This allows companies to use blockchains to carry out a wide variety of functions.
Ethereum uses a proof of work consensus algorithm. Approximately every 12–15 seconds, a miner finds a block. If miners start to solve the puzzles more quickly or slowly than this, the algorithm automatically readjusts the difficulty of the problem so that miners spring back to roughly the 12-second solution time. The miners randomly earn these ether (ethereum’s currency), and their profitability depends on the amount of computing power they devote to the network. The specific proof-of-work algorithm that ethereum uses is called ‘ethash’, designed to require more memory to make it harder to mine using expensive ASICs – specialized mining chips that are now the only profitable way of mining bitcoin.
Ethereum might not need miners forever. Developers plan to ditch proof-of-work for a proof of stake consensus algorithm. The project to shift the network to proof of stake is called “Casper”.
Ethereum’s first mover advantage and dedicated developer community gives it a good chance to maintain its status as the main platform for a decentralized applications as many developers are currently working on ways to address the system’s limitations. However, the system’s limitations are significant. For example, parties attempting to use the ethereum platform for ICOs with high initial demand for the token at ICO have slowed down the network. There is also the infamous crypto-kitties incident. Being able to process enough transactions per second why platforms like facebook or banks cannot currently use blockchains to process their transactions. Facebook for example, has 52,000 likes per second.
Ethereum is written in a programming language called solidity. This is hypothetically a weakness as most programmers are use java for their applications. However, this is also a problem that can be solved by their developers.
The Ethereum network also has problems syncing across all of the wallets or dapps. This is a problem developers are working on. This can cause problems with transaction times or software updates.
ETH’s value should continue to increase in the medium term as smart contracts continue to be built on its network. The network is vulnerable in the long run if their developers fail to solve some of the inherent limitations to the system. Keeping up to date with the progress of their developers will be important to project market share going forward.
The Road Ahead
Here is a good explanation of the road ahead. I will be summarizing this in more detail as we move forward. But briefly, there are 4 stages of development for Ethereum. We are currently in the second one, and the third and fourth ones are meant to help the network scale. The four stages are:
- The first stage was called Frontier. This was the phase of the network everyone got when Ethereum was first launched.
- The second phase was Homestead. This stage is where we’re at as of the writing of this article.
- Metropolis is the upcoming phase. It includes the implementation of a feature called Zk-Snarks, early proof of stake implementation, improved flexibility and robustness of smart contracts, and account abstraction. ZK-snarks allows proof that parameters of a smart contract have been executed without saying what the parameters are. This will be very important for smart contracts companies may want to carry out without but not broadcast parameters to the rest of the world. For example, suppose you have entered a smart contract with party Z. This contract specifies that you will only get the payment if you do A, B and C.If you don’t want to reveal the details of A, B, and C because they are confidential to your company, this would be a problem under the homestead stage of ethereum. Zk-Snarks proves that those steps have been taken in the smart contract without revealing what those steps actually are. The first ZK-snark fork happened in September of 2017. Metropolis includes the first step to switching to a proof of stake system. Mining will become exponentially harder. This is meant to disincentivize a hard fork if miners feel that they would stand to profit more from the current proof of work program. Moreover, ethereum will allow for greater flexibility and robustness of smart contracts by allowing them to not exhaust all the ether set to execute if the parties in the contract decide not to execute it. In other words, the contracts could be amended. Finally, the account abstraction feature will allow a user interface that makes users of ETH not even aware that they’re using smart contracts.
- Serenity is the final stage of the development of the ethereum network. It is meant to be the final implementation of proof of stake.
Ethereum’s founder Vitalik Buterin has also teamed up with co-author of the first lightning network paper Joseph Poon, to implement a lightning network on the Ethereum blockchain. This system would be called Plasma. This would allow scaling of the ethereum network as it would allow most ethereum transactions to be processed on side chains. The Raiden Network is a project currently being developed with the same goals. Finally, Ethereum is also trying to fix this process via sharding.
With so many developers trying to find a way to scale the Ethereum network, there is a good chance that it happens in the future. The main question is whether these developments can happen in time for Ethereum to maintain its role as THE smart contracts platform since there are many other projects aiming to create more scalable smart contract networks. EOS and Cardano come to mind.