Ethereum's network now handles twice as many daily transactions as bitcoin, processing more than 520,000 transactions per day on average. Developers at the Ethereum Foundation and the open-source comm
Ethereum's network now handles twice as many daily transactions as bitcoin, processing more than 520,000 transactions per day on average. Developers at the Ethereum Foundation and the open-source community spent 2017 hunting for ways to make the network faster. Plasma and sharding emerged as the leading solutions for handling capacity. The recent Byzantium hard fork pursued the same objective. It gave the blockchain more room to operate so decentralized applications, their users, and businesses could function without overwhelming the system.
Byzantium targeted a specific inefficiency. Every transaction receipt carried the root of the transaction state tree, data the transaction didn't need. Removing it shrunk transaction sizes and optimized the blockchain. Mohamed Abedelmalik, Executive Director of Columbia Blockchain Lab, explained the mechanics. "Previously, each transaction's receipt included the root of the transaction state tree. That is, the root of the Merkle tree immediately after that transaction was added to the tree. The state tree root, is one of the only dependencies one transaction has to other transactions in the block. By removing this dependency and adding several optional parameters, transactions can now be processed in parallel," he said.
Plasma and similar solutions would reshape the network's design. The concept behind Plasma is an interconnected web of blockchains where users don't have to verify every scrap of data stored on the Ethereum chain. That structure would let the network handle more transaction volume daily while lowering fees.
Scalability matters for Ethereum more than bitcoin. On Ethereum, transactions aren't just payments. They're fees users pay to decentralized applications built on the protocol. Consider someone using a LinkedIn-style professional network on Ethereum. Creating a profile means deploying a smart contract to the blockchain. That costs gas, transaction fees the user must pay. If that fee exceeds a dollar, the app fails for regular users. It breaks when millions try to access it.
Ethereum leaders including Vitalik Buterin have indicated plans to move away from proof-of-work consensus. A shift to proof-of-stake, or some hybrid approach, would let the network handle more traffic. Developers have started making headway. The blockchain's capacity has grown at a steady pace, and daily transaction volume climbed in recent months.
Xapo President Ted Rogers said major bitcoin companies dealing with high fees are looking to move. "My guess is the biggest bitcoin companies are packing up to move to Bitcoin Cash or Ethereum, and will take millions of users and transactions with them. Many will still support bitcoin but it is not a focus for their future. Xapo is still bitcoin only and will implement SegWit but I wouldn't waste your time pressuring the others," Rogers said. Such a move would damage bitcoin's competitive standing.
