State of Today's Blockchains

The State of Today’s Blockchains

Without question, blockchains and distributed ledger technologies have changed the way millions live, and have reshaped the technological landscape. Just a few years ago, the notion that they were permanent mainstays in our daily lives could be challenged, but now, for better or for worse, they are here to stay.

The industry has spawned over 9,000 actively traded tokens and NFT projects, representing over $1 trillion in combined capital. With it, the chase to build and adapt better solutions for today's fast-growing technology marketplace has driven the development of faster, cheaper more reliable, and developer-friendly distributed ledgers. While a few have achieved some success in these metrics, no single solution exists to problem-solve all of them.

Ethereum – Slow and Costly

Ethereum has long been the most serious contender on the world stage of distributed ledgers. It currently boasts the largest adoption of any ledger with 242 million unique wallets as of August 2023. But Ethereum is a victim of its own success. At the start of 2017, the average base transaction fee was just USD 0.01, a far cry from the peak average of USD 52.53 achieved in November of 2021 and still substantially less than today’s average cost of USD 4.57 per transaction. When Ethereum launched in 2015, it could process three times more transactions per unit of time than the next biggest blockchain, Bitcoin. Still, even then it was slower than other UTxOs like Litecoin, and today in the competitive world of distributed ledger technologies, is considered one of the slowest contract-enabled blockchains in operation. During peak congestion times, the wait in the mempool can be several minutes, delaying block confirmation and transaction processing times, making the network prohibitively slow for many decentralised applications.

Historically it has been fairly reliable, but recent concerns spiked after a technical issue caused the network to stop finalising blocks on two separate occasions within a 24-hour period. The cause of the issue still remains unknown. Despite these setbacks, Ethereum remains the most widely used blockchain by creators and developers. Its extensive infrastructure, ease of use, vast developer support network, and high degree of familiarity allow it to be the number one development chain for the time being. Still, participants trade these benefits for an arguably inferior user experience, and, so far, the network's upgrades have only been incremental, with little to show in improving these user experiences.

Solana – Unreliable and Fate Uncertain

Then there's Solana, a blockchain that launched 5 years after Ethereum in March of 2020. It promised fast transaction times, low cost, high reliability, and ease of development – a seemingly unstoppable combination that if successfully deployed, would enable it to dethrone Ethereum for good. Out the gate, the on-paper specs were impressive. Solana was theoretically capable of processing 710,000 transactions per second (TPS), and reaching transaction finality in just 500ms – making not only blisteringly fast, but essentially the fastest account-based ledger launched. Processing transactions on Solana is also exceedingly inexpensive, costing about $0.000125 per transaction. But when it launched, its real-world performance substantially lagged behind its development specifications, garnering an average of 4,000 tps, and taking as long as 46 seconds to reach transaction finality. Still, of the most widely used blockchains, Solana was the fastest, and cheapest making it a contender in the competitive blockchain landscape. But Solana proved difficult to build on, utilising Rust as its core smart contract programming language, a less familiar and more challenging language typically used by professional developers. This affected its adoption, and even with the fuel of the bull market of 2021, there are ~400 projects built on the chain.

But, perhaps the largest issue that has plagued Solana is its apparent lack of reliability. The blockchain has counted over a dozen outages, with 11 “major” and 3 “minor” according to CryptoSlate in 2022 alone. In February of 2023, the network suffered an outage that lasted nearly 19 hours. The same article highlights "a massive design flaw" involving validator messages that stuff the network, representing some 95% of all transactions that "bogs down the system." Its association with Sam Bankman Fried hasn’t been ideal either.

Bitcoin – Strong Brand, Little Adoption

Bitcoin, arguably the most well-known blockchain is also the oldest, having launched nearly 15 years ago. Besides its brand recognition, it boasts several accolades including the largest market cap by a long shot, being more than double its nearest competitor, Ethereum. It’s also the most active blockchain by monthly active addresses, nearly tripling that of Ethereum while being less than one-quarter of the base transaction fee. Innovation continues to occur on the blockchain. At the beginning of 2023, Ordinals launched making it possible to label and “inscribe” satoshis, Bitcoin’s smallest unit of measurement, with metadata, essentially creating the first NFTs on the Bitcoin blockchain. Ordinals are unique in that they do not require the use of smart contract code, and do not require a new token or collection to be created.

From this, a new token standard called BRC-20 was created in March 2023 by an anonymous developer, leveraging the Ordinals infrastructure and combining it with a token standard that embeds JSON data into ordinal inscriptions. Like Ordinals, this new standard relies on existing satoshis, and does not require the minting of new tokens, and therefore does not rely on any smart contracts. As creative as these new projects are, they are merely ingenious workarounds to Bitcoin’s limited technical architecture. As they continue to leverage the network’s infrastructure, they run into the same scaling concerns that are inherent to Bitcoin, and may suffer from the effects of network congestion and high fees should they gain traction and popularity. Without any major technological breakthrough, Bitcoin risks being relegated to an investment currency. Bitcoin is sometimes called “blockchain 1.0” because it was the first to launch and like most first iterations, lacking in features. For example, Bitcoin's lack of any native smart contract capabilities results in a very limited world of decentralised and third-party applications running on its network. As such, few projects choose to innovate on the platform, negating the advantage of its long-standing recognition and low competition.