Ecosystem of Ethereum Scaling Solutions

The problem with Ethereum today is that the more users there are, the slower and more expensive Ethereum gets. The deteriorating user experience has invited competition from serious contenders such as Binance Smart Chain, Solana and Polkadot, for the smart contract network throne. Ethereum’s continued dominance depends on its ability to increase throughput and decrease fees.

Even if power users of Ethereum haven’t been interested in vocabulary like ZK-Rollups, Sharding, or Plasma, the future of the most active blockchain in the world depends on it. In this report, we will address Ethereum’s current scaling issues and Ethereum’s potential solutions.

The Situation

Ethereum supports an incredible amount of economic activity daily. It settles billions of dollars in transactions a day and runs tens of thousands of decentralized applications across its booming decentralized finance (DeFi) and non-fungible token (NFT) sectors. However, Ethereum blockspace is limited and all these applications compete for the same resources, meaning that transactions become more expensive and more delayed when the network is congested. Practically speaking for users, a smart contract transaction (e.g. Uniswap trade) on Ethereum could surpass hundreds of dollars depending on the congestion of the network, which results in prohibitively expensive interactions. However, this is great for miners who have benefited from such high transaction fees, cashing in on a 50% increase in revenues when compared to the highs of 2017:

Fortunately, there are several scaling solutions under development, each with their own unique optimizations and trade-offs. Strictly speaking, “scalability” is the volume of transactions processed by a single node and “throughput” is the total transaction volume by the network. For the purposes of this discussion, we speak about scalability to refer to both, the overall transactions processed.