In today's booming era of digital currency, Ethereum, as a leading smart contract platform, bears the pressure of countless transactions and applications. However, with its rising transaction costs and the emergence of scalability issues, the Ethereum network is facing huge challenges, and network bottlenecks are gradually emerging.

 The pain of transaction costs

Ethereum's transaction costs have been rising, making ordinary users discouraged. Transactions that were once cheap and fast have become expensive and slow. For example, just a simple token transfer may cost tens of dollars in transaction fees. This has frustrated many users and even started looking for alternatives.

The root of this problem lies in Ethereum's Gas fee mechanism. Gas fees are the unit of measurement of transaction complexity in the Ethereum network, and Gas prices are the amount of Gas fees that users are willing to pay. As the congestion of the Ethereum network increases, Gas prices continue to rise, causing transaction costs to soar. This phenomenon makes small transactions impractical, and users have to choose to give up or delay transactions.

 The dilemma of scalability

In addition to rising transaction costs, Ethereum is also facing severe scalability issues. With the booming development of DeFi (decentralized finance) applications, the throughput of the Ethereum network has gradually reached its limit. Whenever the network is at peak times, transaction confirmation time becomes unusually slow, and even congestion occurs, resulting in transaction failure or delay.

Ethereum's network scalability problem mainly stems from its consensus mechanism and the design of the blockchain structure. At present, the proof-of-work (PoW) consensus mechanism adopted by Ethereum sacrifices some efficiency while ensuring security. As the transaction volume increases, the PoW mechanism becomes increasingly inefficient and cannot meet the growing user needs.

 Challenges and countermeasures

Faced with the dual dilemma of soaring transaction costs and network expansion bottlenecks, Ethereum urgently needs to take measures to deal with it. First of all, the upgrade of Ethereum 2.0 will be a key step in solving the scalability problem. The introduction of a consensus mechanism based on proof of stake (PoS) will greatly increase the network's throughput, reduce transaction confirmation time, and thus alleviate network congestion.

In addition, the widespread application of Layer 2 solutions will also bring new possibilities to Ethereum. By transferring some transactions to side chains or state channels, the burden on the main chain can be greatly reduced and the processing capacity of the overall network can be improved. The application of technologies such as Optimistic Rollups and zkRollups will provide a practical solution to Ethereum's scalability problem.

In general, as a leader in the blockchain field, Ethereum faces many challenges, but it also breeds unlimited possibilities. Through continuous upgrading and optimization, Ethereum is expected to get rid of the problems of high transaction costs and scalability issues and usher in a more prosperous and diversified future. In this fiercely competitive world of digital currencies, Ethereum will continue to move forward and write its own glorious chapter.

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Ethereum's high transaction fees and scalability issues cause network bottlenecks! According to foreign media reports on July 28, major players in the Ethereum ecosystem and blockchain researchers said that rising fees and expansion issues have caused major problems for the Ethereum network.

Ethereum's transaction fees are too high, with an average transaction fee of $0.46 at press time.

The transaction fee income of the Ethereum network is currently close to half of the block reward income. This risk actually makes Ethereum "less" safe. Adjustments to the transaction fee market (EIP
1559) can fix this problem, which is another reason why this EIP (Ethereum Improvement Protocol) is so important: pic.twitter.com/eqU3tAMh67-vitalik.eth
July 21, 2020

In addition, network congestion has begun to become a bottleneck for the Ethereum network, which has caused transaction fees to be higher than current levels. To make matters worse, the scalability solutions that Ethereum protocol developers claim are needed to solve these problems seem to be a few years away. The expansion of Ethereum is just an experiment.

 Institutions have no interest in Ethereum

Galaxy Digital CEO Mike Novogratz said:

I would like to remind you that Ethereum is not a finished product yet. We will try to move to Ethereum 2.0. But it may take 4 to 5 years, maybe longer, before Ethereum can really reach the scale of industrial use. Galaxy
Digital does not see institutional money coming into Ethereum, and we hope to see cryptocurrency money flowing into Ethereum.

Ethereum's protocol is constantly changing. It plans several network updates designed to improve the network and help it scale, the most major of which is the hard fork to Ethereum 2.0. However, the upgrade has been postponed and it looks like it will take at least a few years to actually happen.

It is challenging for any business to build a business on Ethereum to upgrade the network as planned, and it is also unattractive to institutional investors. It is impossible to build a multi-million dollar business on a constantly changing protocol. If Ethereum's protocol changes frequently, what the project built using the protocol last year may be invalid a year later.

 Why build on Ethereum

Ethereum doesn't scale, transactions are expensive, and a network bottleneck similar to what happened in December 2017 is coming.

There is no reason for people to build on Ethereum, especially when there are so many networks that have already scaled and can do everything Ethereum can do.

DeFi (decentralized finance) and Ethereum are not ready for mainstream adoption right now, and if you use it today, you are a pioneer of a new technology.

It's just the simple reality that it will get better over time, don't miss the forest for a few trees. - Anthony Sassanoeth July 20, 2020

Anthony Sassano, co-founder of Ethhub, said that Ethereum is not ready for mainstream use. What business is willing to spend 4 to 5 years waiting for the network to find a scalable solution? Why would serious businesses build their projects on Ethereum? No company is willing to take a risk on a potential solution that it can't see, and no serious business will build on Ethereum.