Ethereum: How Did It All Go So Wrong?

It wasn't too long ago that Ethereum was regarded as one of the hottest projects in the blockchain space. With its promise of smart contracts, decentralised apps, and more, the project had a lot of promise. But over the past few years, Ethereum has seen its share of struggles. From scalability issues to the rise of competing projects, the Ethereum network has had a difficult time staying afloat. So, how did it all go so wrong?

Gas Fees

The Ethereum network is the backbone of many of the most popular DeFi projects, but it's a double-edged sword. While it offers a robust platform for decentralised applications, it also has a significant problem with gas fees.

Gas is the fee charged to users for executing transactions on the Ethereum blockchain. As network usage has grown, the fees have skyrocketed, making it difficult for some users to use the network.

As a result, we have seen layer-two solutions like Polygon arise to solve the problem of Gas fees and scaling problems.

The Scalability Problem

One of the biggest issues facing Ethereum is scalability. The Ethereum blockchain can only handle a limited number of transactions per second (TPS). This problem was well-known to developers from the start, but it has been exacerbated by the growth in the network's popularity. As more users join the network, the demand for transactions increases, which creates a bottleneck for the network.

The result is that users are often forced to wait for hours, or even days, for their transactions to be processed. This is a major problem for developers looking to build applications on the Ethereum network. It has led to frustration, and many have abandoned the project in favour of other networks.

In 2021, we saw record congestion and high Gas fees create the perfect crypto storm. The long-awaited event, dubbed "The Merge", would bring down Ethereum's footprint by introducing Proof-of-Stake (PoS), but the issues around Gas fees and performance problems would remain.

While there was a lot of hype around "The Merge", it has been a failure. Despite the environmental improvements, nothing has been improved on a technical level.

Competing Projects

In addition to the scalability problem, Ethereum has also had to contend with the rise of competing projects. Over the past few years, many new blockchain projects have emerged that are faster, more secure, and more efficient than Ethereum. These projects have attracted a lot of attention, and many developers and users have moved away from Ethereum in favour of these new projects.

The result is that Ethereum has seen its market share drop significantly. It is now market capitalisation's fourth largest blockchain project, behind Bitcoin, Ethereum Classic, and Ripple. This has put a lot of pressure on the Ethereum team to come up with solutions to their scalability problem, but so far, they have failed to deliver.

What's Next?

At this point, it's unclear what the future holds for Ethereum. The project is still popular amongst NFT projects and in some circles, but it has been surpassed many of its competitors in terms of usability and functionality. The scalability issue remains, and it's unclear if the Ethereum team will be able to deliver a solution in time to save the project.

Only time will tell if Ethereum can recover from its current struggles, but one thing is certain: the project has had a difficult few years, and it's unclear where it will go from here.

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