Ethereum: Past, Present & Future

Hey all, today we’ll be doing a deep dive into the past, present and future of the second biggest crypto.

Will Ethereum seize its potential or fall by the wayside?

Past

Ethereum’s potential was obvious right from the start. It was the first decentralized application platform.

This was a new, revolutionary idea at the time.

Decentralized applications are programs spread across many different computers. They use a unifying platform, Ethereum, to function.

Created in 2015 with the help of co founder and visionary genius Vitalik Buterin, Ethereum was followed with intense excitement. Vitalik has been compared to Steve Jobs and Bill Gates.

Ethereum’s goal was to host thousands of decentralized apps with millions of users.

Additionally, Ethereum features the ability to create smart contracts. Without making this article too complicated, smart contracts are terms of agreement written into lines of code.

These contracts could revolutionize industries as varied as real estate, healthcare and more.

So, what happened?

Ethereum was founded in 2015; why didn’t it seize the cryptocurrency world and become valued at hundreds of billions of dollars?

Cryptokitties happened.

In 2017, a game was created on the Ethereum platform called Cryptokitties.

Before this, there had been whispered concerns about scalability on the Ethereum network.

People were worried about how many people the Ethereum network could truly support.

Cryptokitties put this concern to the test, and Ethereum failed.

Cryptokitties drove the internet insane when it came out, with people purchasing digital cats for tens of thousands of dollars.

At its peak, Cryptokitties had over 14,000 daily users.

In itself, 14,000 isn’t that significant. 14,000 daily users isn’t the hundreds of thousands or millions of daily active users traditional apps get.

What is significant is that Cryptokitties crashed the Ethereum network.

Transaction prices shot through the roof. Users were priced out of being able to play games or use dapps.

The concerns about scalability went from quiet rumors to shouts: Ethereum couldn’t scale in its current form.

Present

Ethereum’s scaling issues plague it to the present day.

It still can’t achieve its vision of being the go-to platform for millions of users.

Ethereum can only process a paltry 15 transactions per second.

Compare this to Visa’s 45,000 transaction per second limit and you’ll understand the problem.

Ethereum is a decentralized app platform designed for millions of users that can’t actually host millions of users. Or anywhere close to it.

That is not good.

It’s not all doom and gloom for Ethereum, however. Ethereum has over 200 developers working on it presently, the largest team in the space.

And the primary thing that large dev team is working on is fixing Ethereum’s scaling problems.

They’re currently building “Ethereum 2.0”, a revised version of Ethereum designed to address its scaling problems. It will also transition Ethereum from Proof of Work to Proof of Stake.

Proof of Work is how Ethereum currently functions, in which people “mine” Ethereum in order to generate cryptocurrency and verify the network.

Proof of Stake is the future of Ethereum. Mining will no longer be allowed. Instead, for holding 32 Ethereum (or more) you’ll be granted roughly 5% interest per year.

Ethereum’s present circumstances are confusing. It has a lot of potential, but in its present state Ethereum is broken.

Despite being led by a genius, Ethereum’s technical difficulties have plagued it for over 4 years. What does all of this mean?

Future

I’ll summarize the pros and cons of Ethereum’s potential future:

Pros:

  • Largest dev team.
  • First mover advantage.
  • Led by one of the brightest minds in crypto.
  • The most important dapps in the space are on the Ethereum platform.

Cons:

  • Scaling issues may never be fixed (It’s been 4 years already)
  • Staking generates a paltry 5% yearly interest (The price of Ethereum often fluctuates by more than 5% in a day.)
  • Vitalik, while brilliant, is not overly concerned with the price of his own cryptocurrency.
  • Vitalik’s lack of focus on and lack of understanding of economics is dangerous to the future price of Ethereum, and therefore its success.
  • Wide dev team versus focused dev team
  • Danger that staking will generate inadequate rewards, resulting in failure of entire network.

Let’s consider the pros first.

Of any technology, Ethereum is the likeliest to solve its issues. This is because of its huge dev team.

It also has first mover advantage in the dapp space.

Vitalik Buterin was recognized as a genius at six years old. His visions of the future of technology should be respected.

The Ethereum platform has the most successful, legitimate apps.

But now, let’s consider the cons.

Beyond the paltry interest and scaling issues, there are other major concerns.

In this interview, Vitalik says a number of alarming things about Ethereum.

Let’s consider his overall view regarding Ethereum as a cryptocurrency.

When Vitalik talks about the price of Ethereum in the interview, he says that it’s important because:

  • If the price hits 0, the network can’t be secured.
  • If the price goes up, developers will have more money to work with.

… And that’s pretty much all he says.

Not “Price is essential. Without it increasing, no one will hold my crypto long term.”

Or:

“If the price of Ethereum drops to $20 and my coin is 200th on the market cap list, my technology will no longer be relevant.”

His failure to grasp just how key price is to everything he’s doing on the technology side is alarming.

No one can be an expert in everything, but I want the guy in charge of my coin to understand why price is important.

Price is the base motivator for everything in the crypto/blockchain space.

Here’s why I say that: On average, a developer is going to want to work with a large, growing cryptocurrency/blockchain if possible.

If the price of a cryptocurrency is plummeting, everyone hates it and it’s being abandoned faster than a burning house, that is not an ideal environment for future developers.

This then snowballs into existing developers leaving, a lack of development overall and soon enough your promising cryptocurrency is nothing but ashes in the wind.

Will Vitalik’s brilliance in the technology space exceed his naivete in the financial one? Time will tell, but it’s an important factor to be aware of.

It’s important to note that the Ethereum development team is hundreds of people. Many likely have the right attitude/approach to this issue, but Vitalik is the most influential person working on Ethereum.

In addition to the risks that the founder’s views present however, there’s fundamental cracks in the core of Ethereum:

– If the scalability issue isn’t fixed, Ethereum dies.
– If staking rewards are insufficiently motivating for people to verify the network, Ethereum dies.
– If the wide development team is unable to achieve consensus and focus consistently, Ethereum dies.
– If the price of Ethereum drops below $40, developers will likely abandon it. Ethereum dies.

However it’s key to note that Ethereum has one of the most talented development teams in the space, and they’re working to address all of this.

Given that, I’d put Ethereum’s chances at about 60% in the future.

The main enticement of an investment in Ethereum is the reward. As it stands, Ethereum has about a 10x risk to reward ratio.

This means for every $150 you risk, you have a potential reward of about $1300-$1,500 if Ethereum hits previous all time highs.

Ethereum is a high risk, high reward cryptocurrency.

Overall, the future of Ethereum is uncertain. Despite the grim aspects, I hope it can achieve the lofty goals Vitalik has set forth for it.

About the Author Will Salisbury

Will Salisbury is the co-founder of Blockchain Decrypted and full-time cryptocurrency trader. He also hosts the Blockchain Decrypted podcast, and when he's not talking or writing about blockchain technology and cryptos, he likes to play games and relax in his home state of Michigan.