To gain widespread popularity, a cryptocurrency must possess several key qualities. It needs to be innovative, secure, decentralized, and easy and fast to use, but above all it must be able to grow and adapt to demand (scalability). Without these elements, it will be difficult for a cryptocurrency to achieve broad adoption.
Vitalik Buterin, the young founder of the Ethereum network, shared his perspective with The Star on the future of the crypto space and the Ethereum blockchain. In his view, the main attributes required for a cryptocurrency to support mass adoption are ease of use, privacy, security, and of course scalability.
What does scalability mean in the crypto industry?
The term scalability stems from the English word “scalability.” You may encounter other expressions such as scalability, capacity to scale, or scaling up. In this context, scalability refers to a blockchain’s ability to adapt and continue functioning effectively as its number of users increases.
As more users transact on a network or the transaction volume rises sharply, network performance can be affected. Scalability therefore describes how many transactions a blockchain can process over a given period of time.
Why are blockchains working to increase their scalability?
When a network cannot process all incoming transactions because volume has grown rapidly, the network becomes congested.
Transaction fees can rise quickly when demand outstrips capacity, and transactions can take much longer to be confirmed. Dissatisfied users may then shift to other blockchains.
Improving a blockchain’s scalability enables it to handle a higher number of transactions per second. The goal is to maximize user satisfaction so they have no reason to “look elsewhere.”
For cryptocurrencies to reach mass adoption, blockchains must implement technological improvements that primarily allow them to support larger transaction volumes.
The Ethereum blockchain is “almost full”
“Scalability is a major congestion problem [a significant bottleneck], because the Ethereum blockchain is almost full,” Vitalik Buterin explained during his interview.
“If you are a larger organization, the calculation is that if we work together, not only will it be even fuller, but we will be competing with everyone else for transaction space. It’s already expensive and it will be five times more expensive because of us. There is pressure that prevents people from joining us. But improving scalability can do a lot to alleviate this situation,” he added.
How can scalability be improved? According to Vitalik Buterin, the approach requires changing how computers are used to confirm transactions.
“The main problem with the current blockchain is the idea that every computer must verify every transaction. If we can move to networks where each computer verifies, on average, only a small portion of transactions, we can do better,” he said.
Scalability is not the only obstacle to mass adoption of cryptocurrencies. “Usability, account security, and privacy protection still present challenges,” Vitalik Buterin also noted.