Welcome to the 23rd crypto roundup brought to you by HEAT crypto. As a reminder to our regular readers, we are publishing this roundup once every 3 weeks now. Let's jump straight into it.
Ethereum Crumbles Under its Own Success
Even to date, Ethereum's 'killer app' has been ICOs. Unfortunately, no DApp is really running at full scale in a production environment on Ethereum yet, although scores of such DApps have raised tens of millions of dollars from investors to build their products. This is causing an unfortunate scenario - as most technically oriented people would have seen during the Bitcoin scaling debate, Ethereum scales even worse than Bitcoin on-chain at the current moment. Sure, there are planned improvements, but the state of the network today isn't great.
So how bad are things getting? Here are some images courtesy of MyEtherWallet, an amazing service for the Ethereum ecosystem.
First, to give a sense of the scale of unconfirmed transactions, here's the first set of 'large' ICOs in May-June - BAT (Basic Attention Token, ad-token for Brave), and MYST (Mysterium - decentralized VPN) were the largest ones. Here's a graph of unconfirmed transactions during the ICOs -
You can already see the network crumbling with the number of transactions. After the BAT ICO especially, the Ethereum blockchain was unusable for several hours after its completion, with miners just processing all the invalid transactions people had sent, long after the ICO was closed. Obviously, they take their fees.
Things only got worse from here. Here's Bancor that raised $150 million and has been criticized for its multiple shortcomings with an insufficient rebuttal from their side. Worse, their smart contract has several backdoors giving the Bancor team complete centralized power over freezing or moving tokens without owner consent. As it stands now, Bancor is as centralized a token as it gets (although $150 million richer). Here's the Ethereum network during that ICO -
Yep, much worse.
And finally, the Status ICO took things to a whole another level with lots of transactions above the gas limit and f2pool mysteriously mining a select few below that (likely belonging to them or their friends, although they deny it). Here's the Ethereum network during the recent Status sale:
Ethereum is being crushed under the weight of these ICOs, and there's not yet a single DApp today running full-production scale! Imagine how much worse things would get once all these ICOs start creating their applications to be run on Ethereum.
To top off a really bad week, the exchange GDAX encountered a strange phenomenon when someone sold enough Ether to move the orderbook from $317.81 to $224.48, a drop of around 30%. However, this snowballed due to automatic margin calls and stop-loss orders (stop loss becomes a sell market order once a trigger threshold is reached) and the price ran down to as low as $0.10! Luckily, GDAX will refund everything during this flash-crash that will likely cost them several million dollars of their own money.
Scalability and Next Gen Crypto
With all these ongoing troubles for Ethereum, it is not hard to imagine that blockchain scalability is a top priority for serious investors and players in the space. The next generation of blockchains are building scalability right into their original designs instead of after-the-fact improvements.
We already saw some previous scalable blockchains like NXT, NEM, and Bitshares that are a few years old and scale much better than Bitcoin and Ethereum. Now, the newest generation of blockchains like HEAT and EOS will lead the way to building true decentralized applications on the blockchain without causing a network outage each time the blockchain sees some additional interest.
These solutions will help the entire space move forward, not just these specific blockchains. After all, the whole idea behind Ethereum was to be able to run decentralized applications but what use is it for theoretical applications if those cannot be practically run due to technical limitations? And remember, Ethereum blockchain is hardly 2.5 years old!