Ethereum — it’s the second-biggest cryptocurrency in the world, sitting right next to Bitcoin. And it’s probably going to fail. Here are five reasons why.
1. Network Congestion
The Ethereum network is incredibly congested at the moment, thanks to transactions from ICOs filling up the blockchain. ICOs have become the number one way to raise funding for blockchain projects — and Ethereum is the number one platform for hosting ICOs. Therefore, with all the blockchain traffic coming from ICOs, there isn’t much room for any other Ethereum transactions.
Because of this congestion, traders have had a hard time getting their transactions through — running into incredibly long confirmation times.
As a result, people have started losing confidence in Ethereum. In an opinion piece on CryptoCoinsNews, one writer raised the question: is it time to look for a new ICO platform? If developers can’t find a long-term solution to the transaction backlog, the author opined, an alternative will be necessary.
2. Ethereum Has No Real World Use Cases
Aside from ICO fundraising — the legitimacy and practicality of which remains questionable to many — Ethereum has no promising use cases.
Sure, enthusiasts have come up with all kinds of scenarios in which Ethereum could be used to replace or improve the current financial infrastructure. However, most of their theories seem like they would complicate things rather than simplify them.
For a technology to become mainstream, it has to make an aspect of life simpler, not unnecessarily complex.
And when those impractical ideas fail miserably, they become even less useful.
Take the DAO, for example. This 2016 project by Slock.it was a highly complex way of decentralized project funding. Many questioned whether it was necessary, and if it was better than ICOs or traditional VC funding rounds. Then the whole project exploded when a hacker exploited a security vulnerability in the DAO code, and tens of millions of dollars were lost in the fallout.
Eventually, Ethereum developers hard-forked the blockchain to reverse the theft, which literally split the cryptocurrency in two.
3. Community Politics
Last year’s DAO catastrophe revealed a huge flaw in the Ethereum ecosystem: its own community.
When Vitalik and the other fork-supporting developers hard forked the blockchain, there wasn’t a majority consensus. As a result, two versions of Ethereum emerged: Ethereum (erasing the DAO hack) and Ethereum “Classic,” which chose to keep the DAO hack on the blockchain.
For months, these two community factions stayed at each other’s throats, calling their own version of Ethereum the one true blockchain.
This episode caused many cryptocurrency enthusiasts to question the ability of the Ethereum community to make responsible decisions — concerns that still echo today.
This reason is closely related to ICOs. A widespread suspicion exists in the cryptocurrency community that many — if not most — ICOs are outright scams, with their organizers trying to get rich quick.
Since Ethereum is the main platform for ICOs, you could argue that the cryptocurrency platform enables scammers — who in turn are really one of the only reasons Ethereum is so popular right now.
Ether, the crypto-token powering the Ethereum network, has an extremely volatile market value. So volatile, in fact, that it is the focus of cryptocurrency speculators and daytraders across the globe, who trade the token as a way to make a fast profit.
The Ether price actually crashed on June 25 from US $300 to $260. This decline was caused by rumors that Ethereum creator Vitalik Buterin had died in a car crash.
Luckily for Ethereum, the news turned out to be a hoax — Buterin is alive and well.
Wait a Minute — Aren’t Those the Same Reasons Everyone Says Bitcoin Will Fail?
So there are the top five reasons why Ethereum will fail.
But, aren’t those the same five reasons that mainstream pundits previously used — and still use occasionally — to admonish Bitcoin and label it as a dead-end project? Yep.
It’s ironic, then, that many Bitcoiners have used these very reasons to put down Ethereum and its community. Scalability, lack of use cases, politics, volatility, scams — Bitcoin hasn’t even surpassed all of these hurdles yet. But its supporters still use them to trash Ethereum.
Is it jealousy of the hype surrounding the altcoin? Could it be fear that Ethereum will overtake Bitcoin? Or are those negative Bitcoiners really just blind to the fact that they’re using the same arguments that have been used against their own pet coin over and over?
Thus, putting things into perspective, maybe we should give the other serious altcoins a chance. Who knows, they might be the next Bitcoin if we can’t get our shit together come August.
Will Ethereum replace Bitcoin? Share your thoughts in the comments below.
Images via Motherboard, Ethereum