SFOX, a “prime dealer of cryptoassets” for professional traders and institutional investors, has published a blog post in which it acknowledged that some potential use cases, or applications, for Ethereum (ETH) have been introduced - including Augur’s (REP) prediction markets and the popular collectibles game, known as CryptoKitties.
However, the SFOX team pointed out that most of the decentralized applications (dApps) launched on the Ethereum blockchain have “failed to attract sustained usage.” The cryptoasset dealer also revealed that data from State of the Dapps shows that the top-ranked Ethereum dApp only had around 3,000 users during a 24-hour time period (on May 24, 2019).
According to SFOX’s research team, the Ethereum network, in its present state, would not be able to accommodate dApps that have a large number of users - as it can only process around 15 transactions per second (TPS). Moreover, the team at SFOX claims that several “core projects” for Ethereum have “stalled”, while noting that ether’s market capitalization has fallen from “around 51% of Bitcoin’s market cap in January 2018 to around 17% today.”
What Does “Decentralized Smart Contract Platform” Really Mean?
SFOX’s blog states that many of Ethereum’s problems can be attributed to “shortcomings around speed and scalability.” In order to resolve these issues, the set of upgrades associated with Ethereum 2.0 will include a new proof-of-stake (PoS) algorithm and other codebase modifications such as sharding.
Clarifying what the term “decentralized smart contract platform” means, the SFOX team explained:
When people say that Ethereum is a “decentralized smart-contract platform,” they mean that the code of a smart contract is stored on every full node on the network and code has to execute across all full nodes.
SFOX’s blog added that Ethereum’s current proof-of-work (PoW) consensus algorithm takes “anywhere from three to eighteen minutes, depending on network congestion,” to process smart contracts. Due to slow processing times, “deploying code on Ethereum is orders of magnitude more expensive [and inefficient] than using a centralized service like Amazon Web Services (AWS) — and much, much slower.”
Reducing Operational Costs by Eiminating Costly PoW Mining
To address scalability issues and other performance bottlenecks which have prevented Ethereum from being used in enterprise environments, the SFOX team noted that transitioning from PoW to PoS consensus “will eliminate the need for expensive mining” (required by PoW).
Additionally, codebase modifications which will integrate sharding are expected to further enhance the the “speed and throughput of ETH transactions,” SFOX’s blog stated.
Notably, upgrading to Ethereum 2.0 will require “building out a new, separate platform from the [existing Ethereum mainnet]”, SFOX’s team explained. The cryptoasset dealer clarified that Ethereum 2.0 activation will “eventually replace” the current Ethereum network implementation.
Ethereum 2.0 Roadmap: Seven Distinct Phases
As detailed in the Ethereum wiki, Ethereum 2.0 development and activation will take “several years.” This, as the “seven distinct phases” for the system-wide Ethereum 2.0 update are “still in the research stage”, SFOX’s blog confirmed.
Before Ethereum Core developers can implement the major upgrade, the following phases must be completed (according to SFOX’s team):
- Phase 0 — Beacon Chain: The Beacon Chain is a PoS-based chain that has been designed to “run parallel” to Ethereum’s PoW chain. At first, the Beacon Chain “will be engineered for simplicity and will support neither smart contracts nor accounts.”
- Phase 1 — Basic Sharding: Sharding updates are “intended to help transactions scale by dividing the network across multiple shards, allowing the network to process many transactions concurrently.”
- Phase 2 — eWASM: The eWASM is “essentially a rebuilt Ethereum Virtual Machine (EVM)” which provides support for both PoS and sharding updates. Additionally, it will allow for “smart contracts, accounts, and more [functionality]” when Ethereum 2.0 goes live.
Buterin: "Ethereum 2.0 Will Actually Be the World Computer"
As detailed in eWasm’s spec doc:
To truly distinguish Ethereum as the World Computer we need to have a very performant VM. The current architecture of the VM is one of the greatest blockers to raw performance. WebAssembly aims to execute at near native speed by taking advantage of common hardware capabilities available on a wide range of platforms. This will open the door to a wide array of uses that require performance/throughput.
According to Ethereum co-founder Vitalik Buterin:
Ethereum 1.0 is a couple of people’s scrappy attempt to build the world computer; Ethereum 2.0 will actually be the world computer.