In recent years, we have seen an explosion in the number of cryptocurrencies. Ethereum is an adaptable blockchain on which Turing-complete “smart contracts” can be programmed to implement a mind-boggling assortment of applications. The ability of Ethereum to effectively emulate other cryptocurrency schemes raises the question of whether we should continue to develop separate blockchains, or just use Ethereum for everything. (We justify our decision to build our own, native chain protocol here.) Building everything on Ethereum would simplify many aspects of the crypto economy and make developers’ lives easier. Nevertheless, there will continue to be a proliferation of new blockchains, for good reasons.
One of Ethereum’s most glaring shortcomings is its long latency and low throughput. At a maximum of about 15 transactions per second Ethereum is considerably faster than Bitcoin (4 per second), disrupting the credit card industry would require matching Visa’s maximum rate of at least 45,000. There are proposals to increase the throughput of Ethereum to this level but these proposals are complex and have yet to be tested in practice and at scale. At this time, there are many implementations underway for faster blockchains, so it is likely that one of those will fulfill the demands of high-throughput applications before Ethereum can.
An important facet of Ethereum’s transaction and contract system is the use of the “gas” currency to “fuel” processes. Each transaction includes a certain amount of gas, that is paid for by the sender to process the contract programs. This is an elegant solution to the problem of preventing arbitrary smart contracts from wasting compute time, but for more specialized blockchain applications, it is an unnecessary feature that complicates or even hinders use. In fact, for many applications, including nCent, gas prices are simply too high to make them practicable. nCent allows smart contract issuers to control the cost of their applications by allowing them to pay “up front” and make the transaction experience frictionless for end users.
Ethereum’s consensus protocol is based on proof of work, requiring the consumption of an incredible amount of energy to work effectively. Ethereum is currently estimated to have an annual electricity consumption of about 21 terawatt hours. About 2 million U.S. households could be powered by Ethereum, and the energy consumption only increases as the network grows. Proof of work has been used by many blockchains since it was employed in the original Nakamoto Consensus. While it has been proven in practice as well as theory to uphold the security notions desired by most blockchains, it comes at an environmental cost, and there are a variety of other more efficient consensus protocols being researched and deployed.
The invention of general-purpose computing revolutionized the world. But there have been many, many revisions of that general purpose architecture over the decades, and special-purpose processors are widely used for applications from signal processing to smart cards because generality has a high cost in performance, space, and energy. The evolution of blockchains will be similar. Ethereum proved that a general-purpose blockchain could be used for countless applications, including many not imagined by the inventors of Ethereum. But there will continue to be advances in general-purpose blockchains that address the limitations of Ethereum, and bespoke blockchains will be essential for the extreme needs of specialized applications.