Vitalik Buterin, then a 19-year-old Canadian programmer, dreamed up the idea for Ethereum in 2013. Since then, it’s sailed on a stormy course fraught with spectacular highs and lows, with a close-to-death hacking incident in 2016. Even in the face of these obstacles, Ethereum experienced a historic technological leap forward in 2022 and remains a major work-in-progress full of innovation. Developers, including Danny Ryan and Vivek Raman, are optimizing its core network for speed, while an ecosystem of layer 2 (L2) chains expands its capabilities. This progression aims to enhance Ethereum’s position as a trusted technology layer. At the same time, its cryptocurrency, Ether, still trades well under its all-time high.
Optimizing Ethereum's Core Network
Ethereum’s main network, or layer 1, is constantly being optimized to process transactions more quickly and efficiently. Developers such as Danny Ryan and Vivek Raman are leading the charge in these collaborative endeavors. Their efforts to make transaction processing more efficient and speed up processing times are directly addressing concerns raised in the past regarding network congestion and high transaction fees.
Ethereum’s architecture accounts for layer 2 (L2) chains developed atop to it to further increase scalability. Things like L2s such as Arbitrum, Optimism, and Polygon increase transaction throughput. They accomplish this by aggregating user data and periodically posting it to Ethereum’s main chain. This method greatly alleviates the stress off of the main network, resulting in quicker and cheaper transactions for end-users.
Addressing Transaction Costs and Scalability
In the past, Ethereum users struggled with exorbitantly high transaction costs, especially when sending assets across the Ethereum network. Back in 2021, sending even small amounts of cryptocurrency often cost upwards of $10 – sometimes even over $100 – preventing many would-be users from trying it out. These excessive fees represented a major barrier to entry and made the network less user-friendly for small, everyday transactions.
Despite this, the cost of transactions has dramatically decreased with recent upgrades and the implementation of L2 solutions. According to Glassnode there’s been a “cumulative and dramatic drop” in transaction costs on Ethereum. Compared to the peak in mid-2020, these costs have now dropped by more than 99%. This cut increases Ethereum’s usability and affordability. It further expands the universe of applications, from decentralized finance (DeFi) to non-fungible tokens (NFTs).
The Future of Ethereum and Ether
Paul Brody, chairman of the Enterprise Ethereum Alliance, believes that Ethereum's upgrades, rather than explicit efforts to inflate Ether's price, should drive demand for the cryptocurrency. He argues that rather than getting lost in bandwidth debates, we should focus on utility and user adoption.
"If we do our job, and we become the first place for everybody to do business, then the asset price is just something that takes care of itself." - Paul Brody
Finally, Brody encourages the Ethereum project to return to its core value proposition as a business platform. He argues that it should give up its quest to compete as a deflationary cryptocurrency.
"I don't think it can or should try to be all things, all people, and, especially, I don't think Ethereum should also try to be the best, most deflationary cryptocurrency." - Paul Brody
So even as Ether finds its promising potential, the price has been hovering far below its previous all-time high. The cryptocurrency is now trading in the range of $2,500, about half its all-time high. This $900 swing in price is indicative of just how speculative and volatile the broader cryptocurrency market is. It further illustrates the still fiercely debated question of Ether’s value long-term.
