An Economic Analysis of Ethereum
I think the same analysis applies to Bitcoin in fact.<p>Funny that this upvoted article says much of what I said yesterday in a comment that was originally heavily downvoted, then went back:<p><i>The Ethereum solution to serve this demand, however, ironically has semi-centralized clusters. While it’s more decentralized than purely-centralized systems, it’s not really the level of decentralization that some were hoping for, and Buterin has admitted as such. These clusters of centralization serve as potential attack surfaces for governments to crack down on these methods of going around regulated and fully centralized and KYC-regulated firms.<p>One could almost say it’s a veneer of decentralization over a system that is actually quite centralized. There’s a step here towards decentralization, but it’s not actual decentralization in its current form.</i><p>I went further. Let me reproduce it here: No, blockchains are not the future, they are really the reason why one transaction can happen at a time in the whole world. Even Ethereum 2.0 will have shards which will do away with this anomaly. The only reason flash loans even work with no collateral is because you can be sure nothing else is running on the “world computer” while your transaction runs, so you can roll it back with no risk except gas fees.
Vitalik himself acknowledges this, the guy is quite honest and straightforward about its limitations:<p><i>Vitalik Buterin: Using Ethereum is expensive, and its blockchain is ‘almost full’ He also said blockchain&#x27;s &#x27;problem&#x27; is that every computer verifies every transaction</i><p>Actually blockchains are a first-generation technology that do global consensus for every block, which literally means all transactions in the world must go through one computer in the world (the miner) although it’s a different one each time. And the situation is actually worse, since you don’t know who would mine the next block in advance, every transaction must be sent to every potential miner! Imagine if BitTorrent had every computer store and seed every movie instead of using DHT.<p>The ability to send or loan arbitrarily large amounts for a fixed fee is a symptom of centralization. In a fully distributed network, transaction fees would have to be proportional to transaction size!<p>Almost every other protocol on the Internet does not have such bottlenecks in its design. No one asks how many emails or websites can be served per second. Blockchain is trying to secure every transaction using the entire network! That is why so much electricity is wasted just to do 7 transactions per second.
The next generation of crypto will actually be able to power payments using embarrasingly parallel architecture. Until then, we have blockchain.
Ethereum is nicknamed the “world computer” for a reason. Gas fees are super high for small transactions like paying for coffee or voting in a secure election. Just one app KryptoKitties can clog up the entire network.<p>As one example, we built Intercoin apps on top of Ethereum (<a href="https:&#x2F;&#x2F;intercoin.org&#x2F;applications" rel="nofollow">https:&#x2F;&#x2F;intercoin.org&#x2F;applications</a>) but we are not going to wait around for Ethereum 2.0 - which is blockchain also. Kik Messenger and others have long gotten off. Ripple, MaidSAFE and Solana use different technologies.