High gas fee, low scalability, and the compulsion to use Ether act as barriers for mass adoption
The number of active Ethereum addresses has grown aggressively in 2020 because of the Decentralized Finance (DeFi) boom. Active Ethereum addresses have doubled in size since 2019, leaving behind networks like Tron, Cardano, and EOS. However, as DeFi projects flock to Ethereum, experts warn that the Ethereum blockchain is not yet ready to handle the influx.
In an interview with CoinTelegraph, Martin Froehler, a former hedge fund manager, and founder of the Austrian crypto trading platform Morpher explained that though Ethereum is the best bet for DeFi, its current capabilities are not up to the mark.
“Ethereum can only handle about 15 transactions per second and has a block-time of 15 seconds, which is an eternity in finance,” he stated. Further, Ethereum requires everyone interacting to use Ether by design. This might act as a major barrier for mass adoption, he said.
Froehler stated that despite being the most decentralized smart contract platform, Ethereum still requires its developers to find solutions for the issues faced by the network.
“There is cryptographic proof for everything that happens on the sidechain on Ethereum. (…) People are able [to] trade without needing Ether. They don’t pay any fees, enjoy a settlement time of one second, and are completely independent of the many congestions on the Ethereum network,” he explained.
Froehler is not the only industry- expert who believes that Ethereum did not anticipate the DeFi hype. Sergej Kunz, CEO of decentralized exchange 1inch explained that Ethereum’s high gas prices may scare off new users. He further added that the Ethereum infrastructure lacks the capacity to host the DeFi environment.
“You can migrate smart contracts to the code but it’s not scalable. To be able to scale, you have to create standards and bring new protocols based on the new sharded architecture, such as NEAR which is similar to Ethereum 2.0,” he stated.
Mounir Benchemled, founder and CEO of middleware layer ParaSwap pointed out the complexity of how layer-2 works to end-users. He added that the risk of not being able to pay the funds immediately to these users can be a cause for concern.
Benchemled also explained that it is not practical for all DeFi projects to move to Ethereum 2.0.
“For it to work, all applications would need to move towards one single platform. Major projects might have a consensus. However, for other projects who have their own agendas, it might be hard. New bridges will be built to allow interoperability,” he explained.
Despite the challenges faced by Ethereum, experts have agreed that DeFi is here to stay.