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Vitalik Buterin is known as a thought leader for revolutionizing blockchain by co-founding Ethereum. Buterin’s aim with Ethereum’s inception was to create a cryptocurrency unlike Bitcoin, which primarily functioned as a digital currency. Though it experienced huge success and dominance over the blockchain space, constant battles with scalability issues have been associated with Ethereum.
Let’s explore in detail the key decisions taken by Vitalik Buterin for Ethereum, how these have impacted its scalability and the current position of Ethereum in the crypto market.
When Buterin introduced Ethereum, he wanted to create a blockchain that did more than just facilitate financial transactions. Ethereum was founded to create a decentralized platform in 2015, with the capacity to support smart contracts and dApps.
To achieve network security and decentralization, Buterin opted to implement a Proof-of-Work consensus mechanism similar to the one used by Bitcoin. PoW was considered a reliable method for securing a blockchain network. This reliability came from validating transactions by getting the miners to solve difficult mathematical problems. However, it also came with two theoretical constraints on transaction speed and scalability.
Due to its popularity, Ethereum started to face network congestion, high transaction fees, and slow processing times. The rapid emergence of new apps and users' interest in them showed the network limitations with the scalability issue. This made Buterin realize that PoW was not good enough with an increased scale without significant upgrades.
As a result of Ethereum's scaling problem, Vitalik Buterin and the Ethereum team developed Ethereum 2.0 and changed from a Proof-of-Work (PoW) to a much more energy-friendly Proof-of-Stake (PoS) consensus mechanism. PoS needs less energy consumption and increases the load of transactions making it a wiser choice to scale Ethereum.
However, even after these efforts Ethereum still can only handle 15 transactions-per-second (TPS), which is far behind competitors like Solana. Layer 2 solutions like rollups and sidechains help with congestion on the network by processing transactions off-chain but make for complicated development. This also lowers the quality of the user experience because of the use of extra layers.
The choice of PoW in Ethereum's early years greatly influenced the scalability of the network it has today. Although it was secure and decentralized, PoW made it impossible for Ethereum to process more than a certain number of transactions per second. This creates a bottleneck and a source of blockchain network congestion on Ethereum, especially when the demand is very high, besides high gas fees.
Transiting from PoW to PoS is probably one of the toughest challenges Ethereum has been experiencing. Still, today, even after Buterin and other development teams have worked on Ethereum 2.0, the rollout process remains slower than expected. This shift to PoS had promised higher throughput and reduced transaction fees but due to the extended timeline, it opened up the gates for other blockchain networks to come in as strong competitors.
Network upgrades and, in particular, the long-awaited Ethereum 2.0 deployment are difficult and time-consuming. Finding a balance between security, decentralization, and scalability requires much thought, thus, the need for a seamless transition slowed the rollout of some essential upgrades. The result is that Ethereum still lives on under the shackles of PoW, which only adds to its scaling problem.
Ethereum's low scalability, the heavy fees for transactions, and the increasing fees that the users have to pay as the network grows thicker are reducing its popularity. It has become challenging and less easy for small users to access Ethereum's main net because of high transaction costs. Thus, it forces developers to look for a different sort of blockchain, with much cheaper costs, and faster processing time.
To scale up quickly, Ethereum increasingly relies on Layer 2 solutions, which raises many challenges for the network. The development team is trying to relieve pressures on the main network by allowing more offloading of transactions through layer 2 solutions. However, they add complexity and place an additional layer of fragmentation within the Ethereum ecosystem. This hampers the user experience in comparison with a more streamlined blockchain network like Solana.
Vitalik Buterin created a giant in blockchain technology with Ethereum’s birth but also limited its scalability. Delays in transitioning from PoW to PoS and doing complex upgrades are among the factors that have held up the expansion of its capacity and increased gas fees. Despite the promise of Ethereum 2.0, critical issues remain in the form of scalability.
Thus, it remains to be seen whether Buterin and the development team will be able to solve these issues in the coming years or not.
