Vitalik Buterin promises Ethereum rollups will speed up congested network
More than just a stopgap solution to Ethereum’s congestion problem, rollups are expected to enable huge throughput increases.
In an interview on The Tim Ferriss Show podcast, Vitalik Buterin described an L2 solution that could increase Ethereum’s processing capacity by 100 times. Called Rollups, the solution creates sidechains for processing and storage, then Crypto Genius returns the results to the Ethereum mainnet. Developed by a company called Optimism, the solution should leave beta testing in a month, Vitalik said.
Vitalik also claimed that by the time the network needs more capacity than the rollup solution can provide, Ethereum 2’s sharding mechanism will be in place.
Ethereum is getting an upgrade, called Berlin, scheduled for April 14, at block 12244000, and rollups will not be included there. The London upgrade will follow in the summer of 2021, but Vitalik did not indicate whether the solution will take hold at that time.
Urgent need for Ethereum
Ethereum clearly needs to get a handle on its network congestion problem. The crypto world was stunned when the network was clogged during the „Crypto Kitties“ NFT craze in 2017. The event was seen as a shot across the bow – but the ultimate solution, Ethereum 2, saw subsequent delays in development and launch.
The situation came to a head with the rise of Decentralised Finance (DeFi). DeFi came of age in 2020, and as decentralised credit and other financial instruments became more popular, the cost of transactions and processing time on the network increased accordingly.
Impact on the Ethereum price
The price of ETH on the market is directly linked to the cost of transactions on the network. In early March 2021, gas prices crashed by almost 70%, and when they did, the market price of Ethereum (to buy Ethereum guide) increased by 11.5% in one day.
Competitors
Competition on platforms serving the DeFi industry, and in any area where smart contracts are useful, is fierce. Ethereum’s competitors always win when the network is congested.
Some alternatives, such as Ripple, Cardano and Ripple’s XRP, have been around for a long time. Migration to these networks is happening.
However, Ripple has its own problems in the legal arena. The Securities and Exchange Commission in the United States is currently suing Ripple and two of its CEOs for selling unregistered securities.
Binance Smart Chain (BSC) is a newer competitor that could benefit from the situation. Binance CEO CZ tweeted in January that DEXs on BSC would be 49x cheaper than Ethereum in 2020.