Welcome to the first recap of Korea Blockchain Week 2022, which happened on 8th-9th August.
One of the major talks was by Vitalik Buterin, the co-founder of Ethereum, who spoke about what would happen to Ethereum after The Merge.
Here are the key takeaways from this presentation:
#1 The focus after The Merge is scalability
One of the common misconceptions is that The Merge will help to reduce Ethereum’s high gas fees. However, this is not the case!
The high cost of transacting on Ethereum is due to the low throughput on the Ethereum network, where it can only process around 15 transactions per second (tps).
Due to this low number of transactions being processed, gas fees will be higher if there are a larger number of transactions that need to be processed compared to Ethereum’s processing capabilities.
As a result, one of Ethereum’s next steps is to become more scalable and handle more transactions.
Vitalik has been advocating a rollup-centric approach to increase Ethereum’s scalability, by using Layer 2 rollups.
A rollup-centric ethereum roadmap:https://t.co/11vxsD0XsJ
— vitalik.eth (@VitalikButerin) October 2, 2020
Layer 2s are networks that are built on top of a Layer 1, which in this case is Ethereum. Layer 2s can benefit from Ethereum’s security, and add scalability as well!
Some of the Layer 2s include Polygon and Arbitrum, which have been integrated on our desktop and mobile platforms. You can send, store and swap assets on these Layer 2s which have lower gas fees compared to Ethereum.
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After The Merge, this also allows Ethereum to utilise sharding, which could help compress the transaction data required to be posted onto the network.
6/ The surge 👀
The surge will introduce #sharding to Ethereum, making it much more scalable🚀 It will enable layer 2 solutions to reduce transaction fees while leveraging the security of Ethereum, boost TPS & reduce network congestion & could be completed by as early as 2023❗️ pic.twitter.com/FxqLdeRNLW
— Crypto India (@CryptooIndia) August 8, 2022
With fewer data required to be filled in a block on Ethereum, this means that more transactions can be included in a single block, resulting in higher throughput!
It is only after increasing scalability can we finally see a reduction in gas fees.
You can find out more about The Merge in our article here.
#2 Ethereum could be used for crypto payments again
With scalability comes lower transaction fees, and lower fees may bring rise to Ethereum being used for crypto payments.
Back in 2013, it could be argued that using crypto for payments is better as it was cheaper than Traditional Finance (TradFi), but this is no longer the case!
Vitalik mentioned that once a blockchain increases its user base, the fees will become expensive.
When he went to lower-income countries, he noticed that most of them were using Binance to transfer funds as these transfers were free and fast.
This showed him that users would use products with lower fees, even if it was more centralised.
Developing countries accounted for 15 of the top 20 economies when it comes to the share of the population that owns cryptocurrencies as per 2021 data.https://t.co/pWhLgYwlLq
— Mint (@livemint) August 11, 2022
As such, reducing the fees per transaction is now Ethereum’s main priority, as this can benefit lower-income countries in particular.
This is because remittance transfers usually have a lot of fees, so crypto payments will provide these users with a cheaper alternative!
#3 There are non-financial applications of crypto too
Apart from the financial benefits crypto can provide, there are quite a few non-financial applications of crypto as well.
- Soulbound tokens (AKA on-chain attestations)
- Account management
- Micro-scale DAOs
ENS has been one of the most popular non-financial applications of Ethereum, where it is sort of like your username in a decentralised world.
The Ethereum Name Service is proving the viability of a new paradigm of domain registrations.
As registrations approach two million, founder Nick Johnson reflects on its growth.
(Reporting via @gazza_jenks) https://t.co/XOF2W0kicE
— Cointelegraph (@Cointelegraph) August 8, 2022
Apart from that, there are other applications such as Proof of Humanity, Proof of Attendance Protocol (POAP), and soulbound tokens.
Proof of Attendance Protocol (POAP) refers to NFT-based digital badges that prove individuals attended certain events or experiences. https://t.co/ocCqwk4Me7
— CoinDesk (@CoinDesk) February 22, 2022
In fact, Vitalik was the first to come up with soulbound tokens, which are non-transferable NFTs that can act as Web3 credentials.
— vitalik.eth (@VitalikButerin) January 26, 2022
Are you excited about the future of Ethereum? The Merge seems to be paving the way for many more innovations to come, particularly non-financial ones!
Scalability seems to be the key to unlocking new use cases of cryptocurrencies, as some of these may be too complex and would not be currently possible given Ethereum’s limitations.
However, all of these could be realised in the future, once The Merge and scalability come out in full force!
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