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When Will Ethereum Finally Scale?

Even though Ethereum is the leading smart contract blockchain by a wide margin, it has a serious issue with transaction congestion. At peak times, it can cost upwards of $50 and take upwards of 30 minutes to do a simple token transaction. Fortunately, the technology for Ethereum to scale with security is nearly complete, and only adoption of these scaling solutions remains before Ethereum users will be able to experience low fees and fast transactions once again.

When Ethereum was released in 2015, it was the first blockchain of its kind, and thus did not have the foresight to know about the level of demand it would one day experience with hundreds of billions of dollars in value being transacted on the chain. As smart contracts became more popular and demand increased, it became clear that Ethereum in its current state would be unable to keep up with demand, and the fees for transactions skyrocketed.

As a result, other alternatives to Ethereum, such as Binance Smart Chain, Solana, and Avalanche were released. These projects chose to sacrifice slightly on decentralization in order to create faster blockchains with lower fees. The increased level of centralization means that these blockchains are more prone to censorship or issues with block creation. This has been seen with Solana multiple times during hours-long outages.

In order to stay decentralized while still providing minimal congestion, Ethereum has opted for two different types of scaling solutions: rollups and sharding. For the purpose of this article, we will focus on rollups, which are already available for use as opposed to sharding which will likely not be released until 2023.

Rollups are a type of scaling technology that posts transaction data to the main Ethereum blockchain, but moves the execution of these transactions off chain. The execution takes place on a separate blockchain, and then the data from multiple transactions are compressed together and posted as a single transaction on Ethereum, which is where the term “rollup” comes from. This compression is analogous to traditional ZIP files. By moving the execution off chain and compressing transactions, there is more room in Ethereum blocks for transactions, leading to cheaper and faster transactions. Additionally, using complex cryptography and verification, the transactions that take place on rollups are practically just as secure as those that take place on the main chain.