Vitalik Buterin: Ethereum’s Scalability Issue Is Proving To Be A Formidable Impediment To Adoption By Institutions
In a recent interview with The Star on August 19, #VitalikButerin, #Ethereum co-founder has reiterated that Ethereum blockchain faces a major scalability barrier. He explained that the blockchain is “almost full” but dealing with this issue would not only foster more adoption but also reduce transaction costs.
According to Buterin:
“Scalability is a big bottleneck because Ethereum blockchain is almost full. If you’re a bigger organization, the calculus is that if we join it will not only be full but we will be competing with everyone for transaction space. It’s already expensive and it will be even five times more expensive because of us. There is pressure keeping people from joining, but improvements in scalability can do a lot in improving that.”
Ethereum’s Scalability Barrier: Every Computer Has To Verify Every Transaction
As per Buterin:
“The problem with the current blockchain is this idea that every computer has to verify every transaction.”
While plans to transition from the present Proof of Work (PoW) consensus mechanism to Proof of Stake (PoS) are still underway and could assist with its scalability issue, Vitalik also suggests shifting to a network where every computer verifies only a small portion of transactions in the system.
He, however, notes that this be accompanied by a modest security sacrifice. He then alludes that improving ethereum’s scalability would reduce transaction costs “by a factor of over 100 for every transaction”.
Governments Have An Important Role To Play In The Cryptocurrency Space
Unlike most cryptocurrency leaders, Vitalik is not opposed to government regulation. In fact, he suggests that the government can help regulate certain Initial Coin Offerings (ICO) and also classify digital currencies as securities where applicable.
He cites that governments can also boost adoption by using the blockchain technology for everyday activities and in cases where central banks are issuing their own digital currencies.
He mentioned that he has been in talks with companies and governments worldwide and he can attest to the fact that they’re “increasingly warming up to public chains.”
In April, Vitalik spoke before the South Korean National Assembly where he encouraged the South Korean government to loosen their noose on blockchain and cryptocurrency regulation. He explained that they could not ban cryptocurrencies but support blockchain as these two are interdependent.
Blockchain Is Diverse
Buterin stated that in the past, blockchain was synonymous with bitcoin but currently, blockchain has “split off into separate spaces that have a lot of different visions”.
“For bitcoin, the idea is that you have decentralized cryptocurrency running on blockchain and protected from corporate and state control that’s not going to deflate on you and it’s not going to get confiscated. The blockchain is just a tool to make that specific thing happen,” he said.
He then indicates that the Ethereum blockchain, on the other hand, has a far wider user case to pave the way for the decentralization of other things.
Notably, Vitalik is known to be a supporter of other cryptocurrencies besides Ethereum. In July, Buterin suggested using Bitcoin Cash (BCH) to solve the scalability barrier in the short-term as they figure out a more permanent solution. Additionally, early this month, he supported the idea of integrating Bitcoin Lightning Network into the Ethereum smart contracts asserting that the “future of cryptocurrencies is diverse and pluralist”.
Ethereum 2.0 is seemingly moving faster than expected
The development of ethereum 2.0 is seemingly moving faster than expected with all major clients now connected to each other in a Local Area Network (LAN) setting.
According to Adrian Manning, co-founder of Lighthouse’s Sigma Prime, various different eth 2.0 node clients written in different programming languages can now “talk.”
Manning publicly said Status’ Nimbus, PegaSy’s Artemis, Trinity, and ChainSafe’s Lodestar are all interoperable with each other.
— Adrian Manning (@AgeManning) September 9, 2019
“We didn’t expect 3-4 clients being able to communicate so early in the interop locking so we didn’t plan for that,” Mamy Ratsimbazafy of Status stated when asked of a time estimate as to when a testnet might be expected.
“We’ll release one when a sufficient number of clients are comfortable with all parts of the spec,” says Jacek Sieka, another eth 2.0 dev from the Nimbus team.
An eth 2.0 implementers call is now to be held on Thursday with the agenda to be published shortly.
That’s when they may discuss what needs to happen to get the testnet running with the Interop Meeting still continuing.
“We’re still in the middle of it and really the best time would be during the Eth2 implementers’ call,” Ratsimbazafy says in regards to a summary of the progress made so far at the meeting.
Apparently you can ask questions in the chatbox during the implementers call, with it unclear whether we might expect any surprises, like an actual testnet launch.
By the sound of it, it looks like a testnet of sorts between the clients only is already running with more than 100 epochs (a group of 64 blocks per epoch) finalized between two or more clients.
Opening that to the general public then creates the lab like environment where eth2.0 is basically running, but with play coins.
That should be out at an undetermined time but maybe sometime this month or before Devcon, with the testnet then to run for about 3-4 months prior to the main-net launch when you can transfer your eth through a deposit contract to the Proof of Stake Beacon Chain.
So it looks like this is now sort of finished, with just final touches left, refinements, strengthening up the code, getting rid of any bugs, an audit at some point, and then the launch.
The launch has a target date of January, perhaps soon after the new year, with the many implementation teams seemingly making sufficient progress to reach the target provided the testnet period goes fine.
Once out, anyone with 32 eth can just park it on the stake chain to earn more eth at a rate of 5%-8% per year.
Those with less than 32 eth can probably use a pool with companies like Coinbase likely to provide staking services.
Just what all this will look like from an end user’s perspective may well be explained further at Devcon next month when the deposit contract launches.
At that point the process begins as people start transferring eth to the deposit contract, so taking out some supply from circulation.
A lot more supply will then be removed later next year when finality is added to the Proof of Work (PoW) chain if they can manage it, at which point new supply will be reduced by 2/3rds.
Full-on sharding then follows somewhat soon after that in 2021, with it all looking like perhaps it is all coming together after about two years of research and development so far.
Wells Fargo Launches USD-Backed Coin: “Not a Crypto”
Announced Tuesday morning, Wells Fargo, an American financial powerhouse, revealed that it will be launching a stablecoin backed by the U.S. dollar. While called “Wells Fargo Digital Cash”, making it sound like the name of any old crypto asset, the firm has asserted that it shouldn’t be defined as a “cryptocurrency“.
The digital coin will purportedly be used for internal transaction settlement for cross-border branches and partners, allowing funds to be moved easily between Wells Fargo locations around the globe. “[There is] a growing demand to further reduce friction regarding traditional borders, and today’s technology puts us in a strong position to do that,” wrote the head of the Innovation Group at the bank.
This platform will purportedly involve digital ledger technology (DLT) — corporate America’s term for blockchain and similar innovations — to move money in “near real-time”.
Wells Fargo is the latest mainstream financial institution to have jumped on the bandwagon of entering the realm of ledger technologies.
Deutsche Bank, one of the world’s largest banks, recently joined a blockchain consortium headed by JP Morgan. The network is meant to allow for the sharing of key transaction details between institutions to reduce transaction times and potentially reduce costs, which is important in an industry where processes are analog and are subject to human error.
Also, JP Morgan, earlier this year unveiled JPM Coin — a stablecoin based on Quorum, the bank’s take on Ethereum technology that is private to improve efficiency and privacy.
Wells Fargo Not the Biggest Crypto Fan
Wells Fargo’s decision not to call its digital asset project a “cryptocurrency” might be for good reason.
The Silicon Valley-based bank has seen a number of run-ins with members of this budding industry over the years.
In 2017, Wells Fargo was sued (case later dropped) by Bitcoin exchange giant Bitfinex, with the exchange accusing the bank of blocking Bitfinex-issued transactions from Taiwan-based banks.
More recently, Wells Fargo made it clear on Twitter that it doesn’t allow its clients to deal with cryptocurrency transactions, becoming one of the only U.S. banks to explicitly have made such a move. By naming its new project a cryptocurrency, it may have been deemed hypocritical.
Stablecoins Under Fire
Wells Fargo’s product launch comes as stablecoin projects have come under fire from central bank leaders from across the globe. On Monday, representatives of the world’s monetary authorities convened in Switzerland to talk about the potential threats stablecoins pose.
BitPay to Allow Clients to Accept Ethereum: ETH Fundamentals
Ethereum Supported by Crypto Payment Giant
Announced Monday, clients of BitPay will be allowed to natively accept Ethereum (ETH) payments for online goods and services henceforth. A press release from BitPay revealed that this integration with allow ” wallet users [to] be able to store and use Ethereum in a BitPay wallet and BitPay Prepaid Visa Cardholders can top-up debit cards.” BitPay CEO Stephen Pair called the integration of ETH the “next logical choice” in a press comment.
Vitalik Buterin of Ethereum expressed his excitement for the integration by saying that this move “opens up a new world of possibilities for the Ethereum ecosystem”, especially in terms of building real-world use cases for this asset class.
— BitPay (@BitPay) September 16, 2019
This is Ethereum’s latest positive fundamental event.
Previously, as this outlet covered earlier, Spanish banking giant Santander revealed that it had settled a $20 million bond through ERC-20 tokens, which represented custodied cash, on the public iteration of the Ethereum blockchain. Its been previously reported:
Previously, the World Bank issued a similar blockchain bond but used a private version of ethereum. French lender Societe Generale issued a bond earlier this year on the public ethereum network but said nothing about cash on-ledger.
An executive of Santander’s digital banking initiatives later lauded the pilot transaction, claiming that he sees value in settling bonds on public blockchains like Ethereum.
This comes as Ethereum has seen a growing network usage metric. Just look to the chart from Etherscan below, which shows that for the first time in about forever, the network’s utilization (defined by average gas per block used over the gas limit per block) has consistently trended in the 90s.
BitPay Under Fire
While this move marks a positive step forward for Ethereum lovers, BitPay has been under fire as of late.
Last week, Tom Grundy of the crowd-funded Hong Kong Free Press (HKFP) called out BitPay. In the tweetstorm that can be seen below, the journalist wrote that funds from Bitcoin donations being held are a result of the use of SWIFT and “horrible customer service” and “abysmal communication” on BitPay’s end. Grundy, accentuating his concerns, even wrote:
“Never use BitPay, folks. Truly the worst experience you can imagine – poor reputation, abysmal communication, horrible customer service, *very* high fees. Almost any alternative will be better. I’ve sent you & Steve a LinkedIn message. Am ready to go to war with publicity and legal action – sort it out, guys!”
BIG THANKS to HKFP's supporters who donated HK$14,817 in Bitcoin since 2015.
— Tom Grundy (@tomgrundy) September 11, 2019
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