Ethereum's fleet of scientists and developers have been trying to find an adequate solution for improving the scalability of the network. Some improvements were made and the fruits of the hard work are finally becoming visible.
Ethereum brings together the largest community of developers in the entire crypto world. Among them are some of the most brilliant minds led by Vitalik Buterin. Despite the fleet of developers, adequate scaling of Ethereum presents a major challenge that will be dealt with for several more years.
Why is the scalability of Ethereum a hot topic?
You might wonder what we are talking about and why scalability is so important? Ethereum suffers from similar problems as Bitcoin, but in Ethereum's case, they are more prominent because of the complexity and huge amount of data that Ethereum has to process.
Remember, Bitcoin can currently process about 7 transactions per second, while Ethereum is slightly more advanced due to faster blocks and can process about 15 transactions per second.
Ethereum has more ambitious goals than Bitcoin. Decentralization of payment transactions through Ethereum cryptocurrency ETH is just one of many goals. Before we proceed with the story about scaling, let us remind ourselves what Ethereum is and what its purpose is.
Ethereum's goal
The motto of Ethereum as a platform was best described by the founder - Vitalik Buterin. In the original introductory post on the Bitcointalk forum back in 2014, which now seems a long time ago he stated:
Ethereum is a modular, stateful, Turing-complete contract scripting system married to a blockchain and developed with a philosophy of simplicity, universal accessibility and generalization. Our goal is to provide a platform for decentralized applications - an android of the cryptocurrency world, where all efforts can share a common set of APIs, trustless interactions and no compromises.
Big ambitions with a lot of goals with a common denominator that simply wants to decentralize the entire internet.
Emphasis on DeFi
In recent weeks, the emphasis has been on decentralized finances (DeFi), whose popularity is growing rapidly. Maker DAO and its fierce rival Compound protocol are the most popular decentralized DeFi services built on the Ethereum platform.
Maker and Compound tokens live on the Ethereum network and must pay fees for execution in ETH. In addition, ETH coins serve as collateral for various types of loans – currently around 3m ETH coins are in various smart contracts.
This increases the demand for ETH coins, which in simplified theory means greater popularity of Ethereum and the growth of its value.
Be careful when using DeFi services; smart contracts can contain security lapses, the value of centralized tokens can fall overnight while fees can eat up potential profits. When using loans, make sure you have enough collateral to cover extremely volatile price changes.