The other side of Ethereum: What criticisms does it often face?

This article was published on Reddit by author: Liberosist, translated by ETH Chinese Station.

The following lists some common criticisms of Ethereum, along with my personal views. These criticisms are filled with misunderstandings, FUD, and lies, and I hope this article encourages everyone to think critically and seek accurate information for themselves. If you have other questions, please leave a comment. I also welcome disagreements with my views, as I have expressed my opinions. Of course, if there are inaccuracies or oversights, I will also correct my views.

Special thanks to the friends from r/ethfinance for gathering questions.

Q: Ethereum cannot scale?

This is clearly a mistaken view, as multiple Rollups have already been launched, some of which have been running for a year! For example, Loopring, zkSync, DeversiFi, Hermez, Aztec, dYdX, and Immutable X, among others. Most of these projects can achieve thousands of TPS with extremely low Gas fees, and some can even subsidize (or reduce user experience Gas fees).

What is currently lacking is general-purpose programmable Rollups. Optimism has been active on the mainnet since January, but is currently limited to Synthetix. The next major project to be released on Optimism is Uniswap V3, which will open public smart contract deployment in July or later. By the way, Optimism has not communicated well this year, so criticism is warranted. Communication and public relations are always important, regardless of engineering projects.

But Optimism is just one of the solutions. Other solutions like zkSync 2.0, Arbitrum, and StarkNet will be launched this year, and competitors like OMGX and Cartesi will also join the fray. In fact, it now seems that Arbitrum will be deployed before Optimism. Not to mention sidechains or commitchains, such as Polygon, xDai, or other EVM chains like BSC or Avalanche. Ultimately, all of these will become part of the expanded Ethereum ecosystem.

At the same time, there is a factual basis for this viewpoint. I want to point out that Ethereum L1 Gas fees may remain high indefinitely due to the lack of currently non-existent technical support. Even for Rollups, Gas fees will not drop to extremely low levels before sharding is released, which will take years to achieve, and even if it can be achieved, it may not meet long-term demand. Additionally, there is still a very high demand for EVM block space.

Related article: Opinion: Rollups are 4th gen blockchains : CryptoCurrency (reddit.com)

Q: Will high Gas fees kill Ethereum?

This strange viewpoint has spread widely in the cryptocurrency circle, but it is completely unfounded. Does excessive demand for a product lead to its failure? Graphics card prices have skyrocketed, so will AMD and Nvidia soon be eliminated?

The answer is obviously no. The reality is, as mentioned earlier, the demand for EVM block space is very high, while Gas supply is limited. Currently, high Gas fees indicate a very high demand for Ethereum L1 block space, and people are willing to pay a high premium for it.

This is where the value of the Ethereum network and ETH lies. In two months, based on the EIP-1559 mechanism, every ETH stakeholder will be able to capture this value.

Over time, Gas supply will gradually increase, and Gas fees will decrease— from a realistic long-term perspective, block space supply will never meet the global demand for EVM block space. In the future, there will be Rollups, zkPorter/Validium hybrid solutions, sidechains/alternative chains, and centralized solutions. The entire Ethereum ecosystem will operate in synergy, making different trade-offs in decentralization and transaction costs.

Q: Ethereum is a centralized system, and all decisions are made by Vitalik?

Although Vitalik remains an important part of the Ethereum ecosystem, Ethereum's development has become sufficiently decentralized over time. What makes Ethereum unique is its use of multiple clients, working with researchers and developers to create understandable specifications. Then, multiple independently working client developers apply these specifications. This is different from all other blockchain projects, which are developed by a core team working on a single client. Of course, there are now supporters of a single client—concentrating all resources on one client can lead to higher quality than the other 4 or 5 independent clients, but developing multiple clients is clearly the most decentralized approach. For example, Ethereum currently uses four consensus layer clients, with one in development, and all these client developer teams are independent of the Ethereum Foundation, aside from receiving funding. For any consensus upgrade, these five development teams must reach consensus, and then over 135,000 validator nodes must also be updated. This is the opposite of a centralized network. Not to mention Ethereum's strong "Layer 0," which is the Ethereum community, where all developers and validator nodes participate. For example, EIP-1559 was largely driven by community will.

Q: Ethereum used a pre-mining mechanism, and Vitalik controls Ethereum? (from u/aaqy and u/ec265)

I am a fan of ICOs, although Ethereum did conduct an ICO. I also dislike selfish mining (ninja mining), like Bitcoin. We have seen some DeFi projects launch fairly, including airdrops to users, which is certainly the best way to distribute tokens.

However, it is important to understand the context of Ethereum's ICO at that time. In 2014, it was the fairest fundraising method. After Ethereum's genesis, the Ethereum Foundation held about 12 million ETH. However, over the years, many ETH have been distributed, many of which were used for fundraising, just like Ethereum's situation at that time. Currently, the Ethereum Foundation and early developers hold at most 2% of the supply. Vitalik owns 0.3% of the total ETH.

In contrast, founders of other projects often hold 20% or more of the tokens, such as publicly traded companies like Tesla or Amazon, and Satoshi holds 5% of the total BTC (which was over 50% in 2009 to 2010, but these bitcoins are considered lost, so there is no comparability). Therefore, I would say that 0.3% is not enough to adequately incentivize Vitalik to continue developing Ethereum!

Do I wish to see a fairer ETH token distribution? The answer is yes. But today, compared to all other projects, Ethereum's token distribution is the fairest.

Q: Mining is destroying the environment?

While different mining mechanisms do have subtle differences, this viewpoint is somewhat correct—proof-of-work mining mechanisms are very inefficient. In the coming months, Ethereum will transition to proof-of-stake, which will reduce Ethereum's energy consumption by over 99%.

This is not just an electricity issue; we know there is currently a severe global semiconductor shortage. Many of TSMC's limited wafer supplies are being used to manufacture mining cards, such as ASICs and GPUs, which could be reallocated to serve engineering, science, and other fields, and of course, to play games.

Q: Ethereum has rolled back before; will this happen again?

People like to use the DAO fork as an example to prove that Ethereum will roll back. But people also selectively ignore many details:

• First, the DAO fork was not a rollback. It was a special case where the attacker had to wait 28 days to withdraw, so the community executed a change to the smart contract.

• Developers, users, miners, and the community reached a strong consensus—so it is hard to say that the rollback was a centralized decision.

• Those who refused to roll back simply chose Ethereum Classic. This was a win-win for everyone.

• At that time, Ethereum was still a very, very new project. Do you know which project rolled back within two years of its inception? See: Value overflow incident - Bitcoin Wiki

• Against this assumption, the rejection of EIP-999 is the strongest counter-evidence. There was an opportunity to roll back 500,000 ETH for an entity managed by one of Ethereum's co-founders, but the community strongly opposed this decision. Ethereum will not roll back again.

Q: Does Ethereum rely on Infura?

While Infura is indeed a dominant service provider and the Ethereum ecosystem certainly needs diversification, this is clearly a mistaken view. In November 2020, Infura experienced a massive outage, but Ethereum continued to run smoothly. Of course, this incident disrupted some front ends, exchanges, and wallets, but the issue can be resolved by running your own node or using different service providers. Since this outage, many front ends and wallets have started running their own nodes and using alternatives like Alchemy. While there is still much work to be done in this area, it is a mistaken view to think that Ethereum relies on Infura.

Q: Is Ethereum's state growing too fast?

Compared to Bitcoin, this is certainly a correct viewpoint. If you want a blockchain to archive data and verify every transaction from the genesis block, then Bitcoin is indeed a better choice. So how valuable is that? If you want to use the Bitcoin network, then you have already trusted the miners. On Ethereum, you can run a full node (non-archive node) with a 1TB SSD on a Raspberry Pi 4 system, sending and verifying transactions. This is relatively easy hardware for most users and consumers to purchase. Some might say that even running an archive node can be easily achieved with clients like TurboGeth.

Similarly, compared to Binance Smart Chain, EOS, Solana, or other high TPS Layer 1 chains, Ethereum's state growth is closer to Bitcoin. For these chains, the concept of users verifying transactions does not even exist.

At the same time, it should be noted that Ethereum will make more trade-offs in this regard, gradually achieving weak subjectivity, statelessness, state expiration mechanisms, and other updates. Purists may find this unfair, but it will not have an impact, as considering other benefits, there will be a group of users willing to synchronize data from the genesis block.

Q: Is there no fixed upper limit on ETH supply?

This viewpoint is factual, but it considers security factors. I want to add that after EIP-1559 and the merge, the ETH supply is likely to reach around 120 million and then continue to deflate or stabilize thereafter.

Q: Is Ethereum's monetary policy unreliable?

This viewpoint is partially correct. While many exaggerate this point, Ethereum's block rewards have indeed undergone two reductions, and the reasons behind them are based on community consensus rather than code. EIP-1559 and the merge will fundamentally change Ethereum's monetary policy. But if these two do not bring further changes to Ethereum in the coming years, this criticism remains valid. In terms of predictability and reliability of token supply, Bitcoin remains the standard—though it will face security risks in the future.

Q: Does Ethereum 2.0 still need many years to be realized?

There are many misunderstandings about Ethereum 2.0, although largely, Ethereum's researchers and developers are responsible for the ambiguity in communication. First, we no longer refer to it as "Ethereum 2.0." In short, this refers to a series of upgrades. The beacon chain went live in December 2020, marking the first upgrade, and the relevant parties are actively pushing for the merge, planned for the end of 2021. Next, I want to talk about sharding. Another misunderstanding is that Gas fees will be lower after these upgrades—but this will never happen on Layer 1. The role of sharding is to accelerate Rollups. The combination of statelessness and state expiration will have a greater impact on Layer 1, and if necessary, sharding execution will be added (this is currently undecided).

Q: Ethereum has no intrinsic value; it is created out of nothing?

Ethereum is a globally decentralized SaaS platform that generates revenue through transaction fees. Currently, these transaction fees are quite substantial—over $1 billion per month. Compared to the largest companies in the world, Ethereum ranks second in revenue. I currently do not believe this is sustainable, but I mean it is possible and has some recognition for the future.

EIP-1559 will go live in July, and most transaction fees will be burned, directly creating value for ETH stakeholders. After the merge, aside from the staking rewards, the remaining undestroyed transaction fees (tips) will be distributed to stakers.

Ethereum is not only one of the most productive assets in the world but also has the most advanced value capture mechanism.

Q: Is ETH staking too difficult?

This viewpoint is very factual; 32 ETH is a significant amount of money. However, I believe there is a serious misunderstanding of what staking means. In many delegated blockchains, when you "stake," you are actually delegating someone else to validate. Newer consensus models like Algorand randomize this process, but you are still delegating to others rather than validating yourself. You can profit without doing anything.

In the Ethereum beacon chain, you become a validator by staking your ETH, earning staking rewards by providing services to the network.

For those who just want to stake without caring about the technical details, the beacon chain is just the base layer, on top of which various staking services have emerged, differing in their degree of decentralization. These services allow you to stake a small amount of ETH and receive rewards. Click here to view the list of staking services: Ethereum 2.0 Beacon Chain (Phase 0) Block Chain Explorer - Ethereum 2.0 Staking Services Overview - beaconcha.in - 2021

Q: Ethereum has never executed updates on time and often changes plans? (from u/Ihaven-treddit)

Does Ethereum constantly change plans? This is absolutely true, but it aligns well with actual needs. The cryptocurrency industry is rapidly innovating, and it makes no sense to stick to old technologies when you achieve breakthrough progress. Even if you haven't researched the industry for about a year, it still makes sense to abandon PoW/PoS hybrid consensus. Ethereum's adoption of a Rollup-centric roadmap is meaningful because it greatly enhances Ethereum's scalability, and its arrival is faster than we think. Various upgrades are indeed underway; the beacon chain went live in December 2020, EIP-1559 will be implemented within two months, and we are less than six months away from the merge.

Q: Will the proof-of-stake mechanism concentrate assets and lead to centralization? (from u/epic_trader and u/Mathje, u/sn00fy)

While this viewpoint seems reasonable at first glance, it also involves many nuances:

• The proof-of-work mechanism that has been running for over six years has brought many benefits to Ethereum, during which we have seen effective token distribution. Now, in terms of the degree of decentralization of token distribution, Ethereum is second only to Bitcoin.

• Validator nodes and (non-validator) stakers also have participation costs. While hardware costs have significantly decreased, there are tax issues and costs that will be redistributed.

• One of the biggest factors often overlooked is that under the proof-of-stake mechanism, the token issuance rate is very low. After the merge, the issuance rate will be around 0.5%. The community is proposing to set a cap on the number of validator nodes, after which the issuance rate will be limited to around 0.8%.

Q: If Ethereum is adopted by major companies, will they only run private chains? (from u/sn00fy)

Not just companies; private chains targeting consumers will also emerge in the future. Such situations have already appeared on Binance Smart Chain, but I believe that in the future, large companies such as governments, banks, and enterprises will run private chains.

Of course, enterprises will also adopt public chains that support B2B.

As mentioned at the beginning, in the long run, the gas consumed by Ethereum Layer 1 is very limited. But this is not important; Layer 1 space will remain 100% saturated, while other solutions built on Ethereum will increase its network effect and Lindy effect.

Q: Ethereum uses old technology, while newly born blockchains will adopt newer technologies? (from u/Mathje)

Despite the many misinformation in the crypto space that leads to panic, confusion, and uncertainty, this is the viewpoint that bothers me the most. Ethereum has always been at the forefront of innovation and will continue to be so. While there are indeed innovative projects in this field, no project attempts to solve the big problem: the blockchain trilemma. Suppose a situation arises where all other smart contract chains use some form of delegated consensus mechanism, many of which set a hard cap on the number of validator nodes. For example, Cosmos: 300 (currently reaching 150); Polkadot: 1000; Binance Smart Chain and EOS: 21. Ultimately, for blockchains, the more validator nodes there are, the worse the scalability.

The beacon chain uses revolutionary new technologies, such as weak subjectivity and signature aggregation, to support up to 1 million validator nodes, achieving large-scale decentralization. There are currently 135,000 validator nodes, with thousands more joining each week. Not to mention that beacon chain validator nodes do not need to be online 24/7 like other chains.

In the first scenario: in terms of ETH transfers, these Layer 1 chains can exceed Ethereum's throughput (around 55 TPS), and the overall throughput will also exceed Ethereum (around 20 TPS). But Ethereum is leveraging breakthrough new technologies, such as data availability sampling, to achieve over 100,000 TPS without compromising decentralization by empowering Rollup and data sharding technologies. Even if complete decentralization is abandoned, Layer 1 will not reach such high TPS. If hybrid solutions like zkPorter and Validium are added, Ethereum can achieve even higher TPS.

In the second scenario: the most innovative blockchains are actually Rollups. StarkNet has achieved significant accomplishments, and the reason Rollup solutions like StarkNet are based on Ethereum is that Ethereum has the best consensus mechanism in the industry.

In the third scenario: almost all innovative new smart contracts are launched on Ethereum and then copied to other chains.

In short, the Ethereum ecosystem has the most cutting-edge technology in the industry.

Q: Ethereum has no real use cases; it is just a gambler's game or a trading platform for some equally useless tokens? (from u/sn00fy)

Gamblers, like others, also pay transaction fees. Based on the characteristics of trusted neutrality and permissionlessness, Ethereum allows people to do anything through its platform.

That said, many activities on Ethereum seem speculative, which is indeed concerning. Of course, all early technologies are like this. We have also seen large companies genuinely adopt Ethereum, such as Visa, and the European Investment Bank issuing bonds on Ethereum. We still have a lot of work to do to expand these real use cases.

Q: Are Rollups centralized?

Indeed, some early Rollups have centralized sequencers. But this is not a security risk, as fraud proofs or validity proofs will provide the same security as the Ethereum mainnet. There are also risks of activity and censorship; centralized sequencers are certainly not a trustless system. Fortunately, most Rollups have plans to decentralize their sequencers in their roadmaps, so this will not be a long-term issue.

Q: Ethereum's roadmap is Rollup-centric; will it undermine its composability? (from epic_trader)

Yes and no. Everything is composable within a Rollup, but the composability between Layer 1 and Rollups, as well as between Rollups, is indeed compromised. Fortunately, many projects are working to solve this problem and achieve relatively smooth Layer 2 interoperability, but this work is still ongoing. For now, composability is more of an engineering problem than a theoretical barrier.

Q: Ethereum is like a monster with two heads, having two blockchains and two assets: ETH1 and ETH2?

This is a mistaken view; there is only one ETH token. Although there are currently two chains running in parallel, the beacon chain can be seen as an incentivized testnet to ensure that the new consensus mechanism runs smoothly. These two chains will merge into one Ethereum in the near future.

The original poster's responses to some comments:

I feel that half of the comments below ignore the blockchain trilemma. Aside from Ethereum, no project can solve this problem, nor has any attempted to do so. All projects other than Bitcoin and Ethereum have made varying degrees of compromises on decentralization and security, and most projects still cannot provide the scalability of Ethereum Rollups, which will achieve stronger scalability after sharding is implemented. If you apply a non-delegated consensus mechanism with 135,000 validator nodes (not to mention 1 million), while keeping the state manageable, allowing that blockchain to run on consumer-grade laptops or Raspberry Pi 4s, that is certainly dreaming. As mentioned earlier, most blockchains have at most a few hundred validator nodes, which accept delegation and engage in centralized staking. Someone mentioned Solana; according to the project's system requirements page (Validator Requirements | Solana Docs), running a Solana node requires spending $1,200 a month to rent a cloud instance, and the state size increases by several TB each month. This is simply a different type of product that cannot be compared to Ethereum. However, Solana's design approach is not wrong; as I mentioned above, solutions based on Ethereum or parallel to Ethereum will each have their pros and cons, making trade-offs between decentralization and transaction costs.

90% of the comments criticizing this article seem to relate to transaction fees. I want to reiterate that regarding the blockchain trilemma, the Ethereum ecosystem has a unique advantage in achieving high decentralization, security, and scalability through Rollups. Layer 1's Gas fees will remain high, which is an acceptable situation, as most people's transactions will go through Rollups, zkPorter/Validium hybrid solutions, or even centralized sidechains. I believe many people have a fixed mindset that equates Rollups with other Layer 1 solutions. On the contrary, Rollups are direct competitors to these solutions and have advantages in almost every aspect. It is crucial that many people seem to misunderstand that no single Layer 1 can provide the scalability demonstrated by the Ethereum ecosystem under multi-layer operations.