The Ethereum network was initially launched in 2015 with the aim of becoming a “blockchain computer.” However, in the last three years, the Ethereum developers have worked to transform the platform in “the world’s decentralized computer.”
During these years the ETH network managed more than 240,000,000 transactions. And more than 1,550 start-ups have launched decentralized applications using the Ethereum network. Also, the users have created more than 35,000,000 wallet addresses, because, despite being conceived mainly as a blockchain for applications, its cryptocurrency is the second in the crypto market.
It has become evident that the network needs now to process a higher number of transactions per second to avoid network congestion, so the focus of the developers of Ethereum is to find solutions for these problems.
The Ethereum blockchain, right now can only process between 7 and 15 transactions per second, while Visa can handle up to 24,000 transactions in the same amount of time; this means that, at the moment, Ethereum’s blockchain is not competitive enough to match Visa or other financial centralized operators, but it could.
To solve this obstacle, the developers have started working on several projects. The most significant upgrades for Ethereum’s future are Sharding, Plasma, Casper, and Raiden.
Sharding is a protocol that starts with the plan to scale the Ethereum network in the next three years, said Vitalik Buterin, co-founder of the network, in 2017.
The proposal wants to solve the congestion of the network by modifying its segmentation and dividing the validation between different groups of nodes and improve the “performance” to the network. The distribution proposed by the Sharding protocol works in such a way that each node will validate only a part of the transactions. By redistributing the form of validation, the Ethereum network would be able to process new blocks between every 2 and 8 seconds.
In the beginning, the developers will implement the Sharding protocol in the main chain of Ethereum, which will work with a secondary chain. The nodes of this secondary chain will operate as notaries, and after a certain number of blocks, they will add their signature to the main chain.
In this way, the main network will still contain all the information, but the nodes of the secondary chain do not need to store the complete blockchain. This means that the users interested in mining ETH do not need to save the entire chain, so it is expected that the validation of transactions to become more cost-effective.
Buterin announced the proof of concept of this protocol in late April of 2018 and assured that once the Casper protocol is fully implemented, this secondary chain will be launched gradually. This is because Sharding works with the Proof of Stake (PoS) algorithm instead of the Proof of Work (PoW).
Casper for Ethereum
Furthermore, Casper is a consensus algorithm that will change how Ethereum mining works since it implements the migration from PoW to PoS, in a hybrid way.
By implementing the PoS the developers aim to reduce electrical and equipment costs by applying a new mining algorithm that includes the pattern of the validator. This pattern must contain ether which will be used as a guarantee for the processing of the block. By using the zk-SNARKs will validate the transactions and the user will receive a reward proportional to the guarantee he made.
Casper was proposed as a consensus algorithm for a hybrid system between the PoW and the PoS. The design was made to apply a participation test every 100 transactions to progressively evaluate the performance of the working parameters. Being a tool created to review the malicious issuance of transactions, once the 100 transactions are processed, a signature validating the veracity of that block will be required by the participants in the pool of the validators. This signature is synonymous with the guarantee.
On May 8 the developers of Ethereum published Casper version 0.1.0 on GitHub. The posting disclosed some aspects of the new figure of the validator, highlighting that the minimum amount to participate as a validator in the Casper protocol will be 1,500 ETH, a high sum that responds to the small number of nodes that will be used in the test. However, after full the launch, in connection with sharding, the amount will be reduced to about 32 ETH.
They will also introduce the slashing function for reporting malicious transactions. This function will reward the community, encouraging them to maintain a secure network, since the creator of the first report of a malicious transaction will receive a reward of 4% of the trade.
The estimate for the Casper and PoS application is two years, when the Ethereum network is in its final stage, Serenity. Despite this, since January 2018, the developer team has been testing it.
Plasma is another implied solution to Ethereum’s scalability, a second layer technique created to improve smart contracts in the network.
The solution announced in August 2017 is a the core for the generation of autonomous smart contracts, called Plasma Contracts (Plasma Contracts). The original idea developed by Vitalik Buterin and Joseph Poon advanced the data reduction introduced on the main chain, making use of a daughter chain (similar to Sharding) with smart contracts to transmit data more quickly and efficiently.
The Raiden Network
Raiden is a scalable proposal focused on micro-payments on Ethereum, which has been in tests for more than two years. The Ethereum micropayment network works with ERC20 tokens based on a bidirectional payment network where data is transferred to a secondary chain. It is quite similar to Bitcoin’s Lightning Network.
At the moment, the developers have carried several with Raiden, the most recent being initiated ten days ago to solve ” minor problems ” and detect possible errors with the “state channels” before the redirection.
The Raiden network works with state channels to which both exchange parties must enter and conduct a series of private transactions. In the end, they leave the channel, and only the final balances would be added to the main chain. The first test for Raiden took place in November 2017, when they tried to test an external security structure for the solution.
Ethereum’s scalability proposals do not end with these four, because there is still a long way to achieve the goal of simplifying the blockchain. However, Ethereum has gained the trust of various participants in the ecosystem since its initiation.