A new technology that circumvents the problems of existing solutions in different industries is coming to market. A website is a wholly automated cryptocurrency platform offering the best features like liquidity, trading tools, and customer support. The blockchain is already revolutionizing how we do business and transactions, and with its Ethereum variant, intelligent contracts have become even more relevant. If you are interested in Ethereum trading, you may also consider knowing about the ethereum-trader.app, a user-friendly trading platform.
In this below-mentioned portion, we explore the potential benefits and drawbacks of using Ethereum versus other blockchain technologies. We identify the pros and cons and give you a summarized review of one of the most important innovations of our time.
It has been around since 2013 and is one of many other blockchain technologies like Bitcoin, Litecoin, and Ripple. While the concept behind all these platforms is the same (to create a new currency based on blockchain technology), there are some fundamental differences between these platforms.
Ethereum’s smart contracts differ from Bitcoin’s as they can be more complex than simple payments such as bitcoins. Ethereum’s blockchain technology is also more flexible for multiple purposes other than currency. In terms of flexible, intelligent contracts, Ethereum has the potential to become a more widely adopted blockchain technology in the future.
What Can You Do With Ethereum?
Ethereum’s blockchain technology allows you to program a transaction with the particular rules of said transaction. You can program payments, rules, and other requirements into a blockchain based on Ethereum’s protocol. With this potential, two major categories can use Ethereum as their backbone: Financial Markets & Payments and Digital content rights management. Let’s discuss the disadvantages of Ethereum over another blockchain network.
1. Higher transaction fees:
Ethereum has higher transaction fees as compared to Bitcoin and Ripple. The current average transaction fee for bitcoins is not that high, while Ripple’s average transaction cost is around 10 cents. Ethereum’s transaction fees are based on gas, the price you are charged for each operation of the smart contract code inside Ethereum’s blockchain.
Generally, the higher the gas price, the more expensive a transaction will be in terms of Ether. Typically, transactions with very cheap inputs will have lower transaction fees but a slightly larger maximum block size, which means it can take longer to verify them. Gas fees are one of the reasons why Bitcoin is used more frequently to make payments. In Ethereum, gas fees are a little bit high, but soon, Ethereum will reduce the cost of gas.
Apart from this, you also have no way of tracking every transaction through the blockchain to ensure that it is true and accurate. Governments are wary of this technology as they cannot tax transactions, and they cannot control users who use Ethereum’s blockchain protocol. The government might start a war against Ethereum shortly, but now it is safe to use Ethereum for transactions.
2. Scalability- the most significant issue:
Ethereum’s technology is still in development, and it plans to make it more scalable shortly. The main problem with Ethereum’s scalability is how the off-chain transactions work. Ethereum cannot scale up due to the transaction that occurs inside its blockchain on top of the Ethereum blockchain. But, as a response, Ethereum will soon launch its second layer called sharding, which supposedly targets scaling issues of bitcoin and Ethereum separately. The reasons behind Ethereum’s lesser scalability are as follows:
(i) A high number of costly intelligent contracts are being run on the blockchain, which increases the size of the blockchain, and so it decreases its scalability.
(ii) Every transaction on Ethereum’s blockchain takes a small amount of gas, which has to be paid by users. As a result, it increases the transaction fees and makes it more expensive to use Ethereum’s smart contracts.
3. Cyber-security problems:
Ethereum is still developing and has yet to be fully secure against cyber-attacks. The biggest problem now is that Ethereum’s software has yet to handle all denial of service (DoS) attacks effectively. Finding a correct solution to such problems is challenging as Ethereum is still in development.
4. Ethereum has a complicated programming language:
Ethereum is complex blockchain technology, and it takes time to understand its blockchains and programming language. Ethereum’s programming language is called Solidity, a complex programming language designed for programmers to write smart contracts. However, Ethereum’s intelligent contracts still need to be developed, so there are a few bugs in the source code of smart contracts that make it difficult for the developer to write the correct code.
5. Congestion issues:
Ethereum’s blockchain can only handle some of the transactions due to its high number of transactions per day. Some experts also say that Ethereum cannot scale up because of this problem, as there will be more transactions than its machines handle.
6. Failure in executing smart contracts:
Ethereum’s smart contracts are a relatively new technology, and the developers who write these contracts need to correct their coding of these codes. A recent study shows that around 7% of total Ethereum transactions are failed intelligent contracts. Most failures occur because of issues such as transaction rollbacks (20%), exceptions (17%), and executions, 10% of which caused the failure of smart contracts.
Conclusion
As already stressed in the abovementioned portion, Ethereum is currently not scalable. Blockchain technology, by definition, will always have to face problems regarding scalability, however big or small they may be.