Ethereum has long been considered the best blockchain for smart contracts and decentralized application (dApp) development, a title it has earned mostly by being the first to offer such capabilities. Thanks to its first mover advantage, Ethereum is still the most popular platform for building dApps even though it has failed to keep up with the innovation its smaller competitors have accomplished. Despite its prominent position, Ethereum remains a deeply flawed platform for several reasons.
On one hand, scalability concerns persist, largely because its blockchain has responded poorly in moments when the network is under strain. On the other, Ethereum remains a resource-intensive blockchain to operate and mine. These problems are all relevant to the network’s speed and reliability. Moreover, Ethereum’s smart contracts remain vulnerable to attacks and other exploits that can wipe out millions of dollars in value.
New blockchain protocols have been on the rise for several years now, with companies offering significant improvements in all of these areas. The question now is whether Ethereum can keep up with the wave of progress, or whether it will be overtaken by the younger upstarts with great potential.
Failure to Scale
Its tremendous promise notwithstanding, Ethereum continues to be held back by many of the problems that affected it at launch. The blockchain’s ability to host a completely decentralized ecosystem has yet to materialize, a problem that falls squarely on its technical limitations. The well-publicized “CryptoKitties” incident, where a game hosted on the Ethereum chain grew to take up 20% of the network’s computations and stalled verification and transaction speeds, remains a cautionary tale about scalability issues.
Another problem is Ethereum’s reliance on Proof of Work (PoW), which is resource-intensive and inefficient as the network expands. Moreover, PoW rewards centralization, as the high costs of mining force increased specialization and more expensive equipment. While the platform is working on finally making the switch to Proof of Stake (PoS), it is still a step behind many of its younger competitors in that regard.
For instance, TRON, a blockchain-based operating system that focuses on social networking and entertainment dApps, uses a modified version of PoS that significantly cuts down on resource consumption and improves transaction and verification speed. The company’s blockchain already offers an impressive 1,200 transactions per second thanks to its faster consensus mechanism, and its recent acquisition of popular peer-to-peer platform BitTorrent makes it a prime candidate to scale rapidly enough to supplant Ethereum thanks to its more than 100 million users. TRON also recently ditched Ethereum’s network for its own.
Likewise, new blockchains have become more flexible regarding their scalability, while Ethereum—in a similar decision to bitcoin’s—has remained steadfast in some design philosophies that negatively affect it. The network’s recent expansion to over 1TB of size is a sign that it is becoming expensive to maintain for individual users and could lead to further centralization.
EOS, another highly touted Ethereum rival, uses its PoS consensus mechanism to give delegates authority to freeze applications that are broken, or ones that could slow down the system. These changes make blockchains faster and easier to scale and use consensus mechanisms that are more cost effective.
Ethereum has announced plans to make a switch from its original PoW model to a PoS, but it has fallen several steps behind the curve. It is still some ways off from fully being deployed, and with no clear timeline, other faster blockchains could easily pass it by sooner than later.
Large Security Vulnerabilities in Ethereum
Speed and scalability are serious concerns, but security remains a major issue as well for Ethereum. Although blockchains are theoretically highly secure, smart contracts on Ethereum have proven in the past to be a weak spot on the platform. From high-profile cases such as the DAO hack, to newer problems such as the Parity freeze, projects resting on Ethereum have repeatedly been put at risk by errors in code and vulnerabilities in the platform’s Solidity language.
The security issue is large enough that it is a serious stumbling block for Ethereum. A recent study found that more than 3,000 Ethereum smart contracts have serious security flaws. If developers cannot be confident their smart contracts are secure, they will find other platforms that are.
In this department, applications like Qtum, which combines the security features of bitcoin’s blockchain with Ethereum’s dApp development tools, offer significantly better safety features. Basically, Qtum takes the “best of both worlds”, representing what could eventually be a next phase of blockchain.
The company is aiming at non blockchain enterprise business, looking for “BaaS”, or “blockchain as a service” with QtumX which is aimed at helping big corporations utilize optimized smart contract automation and the other tech features of blockchain technology.
As part of the effort, Qtum has been fully integrated by Amazon AWS, meaning AWS users and developers can launch smart contracts in seconds via the AWS marketplace.
Even here, competitors are finding solutions that improve overall network speed and efficiency. Lisk, for instance, allows for completely independent side chains that do not affect the main chain’s performance. Systems like these reduce the overall strain on the blockchain’s resources and provide better security for applications and the main chain.
A Rapidly Fading Lead
Ethereum remains the king for now as its competitors continue to find their footing and attempt to gather recognition. To its credit, the platform is working on improvements—including making the switch to PoS consensus and implementing the lightning network for off-chain transactions—but it is fair to question if it is too little, too late.
What is true is that for now, Ethereum’s competitors are gunning for the top spot, and they provide a significant upgrade on all fronts from the original ecosystem’s tools. If Ethereum cannot catch up, it will lose its advantage sooner rather than later.