Ethereum

Ethereum 2019: What’s the Current State of The Project?

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Ethereum is the second largest cryptocurrency project according to Coinmarketcap. This Ethereum project aims to be a distributed ledger or Blockchain network and is also a decentralized computing platform. Ethereum is the first cryptocurrency project that has also included smart contract as part of their Blockchain. Since its introduction in 2015, a lot of ongoing developments have been taken place on the platform. What’s the current state of Ethereum in 2019?

Ethereum & Smart contracts

First let’s start with its main feature which is smart contracts. With the introduction of smart contracts, the possible uses cases for applications on the Blockchain has increased drastically. Bitcoin, for example, only uses digital money as the primary use case. Ethereum wants to be the first platform in the world which offers online applications but in a decentralized manner. This goal comes with a lot of challenges and the first Dapp( decentralized application) on their platform ended in tears.

The DAO which was the first ICO on the Ethereum platform and raised more than 100 Million US dollar in May 2016. This was a huge amount because at that time the total market cap in the crypto market was at 8 Billion. In June 2017, the DAO project suffered from an attack that exploited a number of security vulnerabilities, whereby a hacker managed to get 50 million dollar worth of ETH.

Unfortunately, this was the end for the first Dapp on the Ethereum Blockchain. Out of this hack, a new Ethereum project called Ethereum Classic was founded which is a hard fork of the Ethereum Blockchain.

Ethereum current state of project

As of today, Ethereum has grown significantly in size as a Blockchain network and cryptocurrency project. Total market cap of the project is more than 17 billion US dollar and in 24 hours 5 billion US dollar is traded in ETH on a global scale. More impressive is the total Dapps that are residing on the Ethereum platform which is 2667 according to stateofthedapps.com.

Ethreum state and DAPPS
Stats for Dapps on Ethereum

Thus far, Ethereum has suffered a lot of protocol updates to improve its Blockchain network. Insiders call this version of the Blockchain network ETH 1.0, whereby there are plans to upgrade to ETH 2.0 probably in 2022. In short a summary of the protocol upgrades the network had during the last 4 years :

  • Olympic(2015)
  • Frontier(2015)
  • Homestead(2016)
  • Metropolis Part 1 : Byzantium(2017)
  • Metropolis Part 2 : Constantinople(2019)
  • Istanbul(2019 – 2020)

Constantinople upgrade

The latest upgrade of the Ethereum network took place in February this year and was implemented successfully, without any significant problems. This upgrade took almost 2 years and covered five very important subjects :

  • Lower gas fees for smart contracts
  • Improved scaling for off-chain transactions
  • Improved smart contract execution
  • ‘difficulty bomb’ delay for 12 months
  • Reduced mining fee rewards(from 3 ETH to 2 ETH per block now)

Proof of work

Like any other cryptocurrency project, Ethereum has miners or nodes which handles the transactions on their Blockchain network. Similar to the Bitcoin network all miners use a hashing algorithm which is called ‘Proof of work’. This algorithm uses a lot of electrical power to handle the newly created blocks on their Blockchain.

Ethereum state and state of proposal EIP-1057

To reduce the amount of electricity needed to mine a single block, the Ethereum community has designed a new proposal which is called Programmatic PoW (EIP-1057). ProgPoW is designed to reduce ASIC mining by making GPU and FPGA mining more efficient while decreasing the ASIC competitive advantages. Also this proposal is in favor of decentralization of mining when GPU mining can be done by anyone who has a desktop PC and GPU card. This proposal is considered ‘controversial’ by the community and will be implemented in the second implementation of Istanbul hard fork next year.

Nvidia AMD

What is the Istanbul hard fork of Ethereum?

The next Ethereum’s mainnet software update is called Istanbul hard fork and is planned to be initialized at block 9069000. Moreover, the exact date of this mined block will be 4 December 2019.

This Istanbul hard fork contains several major fixes and updates but has also a much bigger impact on the chain. One of the major fixes puts an end to redundant use of memory copying on the Ethereum Virtual Machine. Also, some minor bugs are solved containing the execution of transactions.

This hard fork is meant to upgrade the security of the chain, by identifying running software on other participating nodes. Furthermore, this Istanbul hard fork handles data storage on the chain together with the upgrading of mining algorithms. In general, the computation costs of transactions will be increased by this hard fork. Also, this upgrade will protect the system from potential denial-of-service(DoS) attacks.

Other Ethereum stats

One of the main differences of the Ethereum network compared to Bitcoin Blockchain is the inflationary property Ethereum Blockchain has. One could say that Ether or ETH, the coin which resides in the Ethereum network, is similar to fiat money which is also inflationary. In other words, instead of Bitcoin which has a limit on the coins in circulation capped at 21 million, Ethereum don’t has a capped supply of coins. This is a very important difference.

Blockchain transactions

Although both decentralized networks differ in philosophy they remain both cryptocurrency networks because of the facts that transactions are handled within blocks. Like I explained earlier, 2 Ether is created for miners by each block and the average block time is about 14 seconds. This rate of a newly mined block within 14 seconds is the highest rate ever experienced on the Ethereum network.

Ethereum state of the network

In total there are currently 105.655.348 ETH in circulation with an inflation rate of 4.74% annually. This inflation rate is quite low if you compare it to the inflation rate in the early days of the project. Despite record fast block times, pending transactions have hit new ATH with an average of 40K per minute.

Active nodes

The network currently has 8,420 active network nodes, 41% of which are located in the United States, second place goes to China with 14.9%. Due to the somewhat cumbersome hardware and time requirements of running a node, many of these nodes are run by Infura, or similar node servicers, who provide access to the network for developers.

Ethereum transactions

The number of on-chain transactions per day (line, chart below) recently increased to nearly 700,000, up from a yearly low of 430,000. Going forward, a significant uptick in transactions per day would paint a bullish picture and also likely suggest increased dapp activity.

Ethereum transactions
Ethereum transactions per day

The average transaction value per day is currently holding just below US$850, which is sharply down from a high of US$20,000 in June 2017. If dapp activity increases, average transaction values will likely continue to fall.

State of Ethereum wallets

Daily active addresses or Ethereum wallets have increased to over 234,000, which is up from a yearly low of 192,000, and marks a four month high. Overall, the amount of wallets remain well above levels seen throughout most of 2017. Unique ETH addresses continue to grow at a rapid rate, and are currently approaching 61 million (not shown). While addresses can never be deleted, this metric indicates a growing and sustained use of the ETH blockchain.

Other Ethereum stats

Furthermore, there are 321 ETH-related job postings in the U.S. on LinkedIn, down from over 1,000 postings in July 2018. There are almost 1.2 million members in 3,600 ETH groups on meetup.com and almost 435,000 subscribers on Reddit’s /r/Ethereum.

The top Ethereum based dapps over the past week, ranked by volume, continue to be led by gambling and exchange dapps. IDEX has had the highest number of transactions over the past week with more than 72,000. In the games category, MLB Champions, an NFT digital collectible dapp, has had the highest ETH volume over the past week while 0xUniverse, a space exploration game, has had the highest number of transactions.

Top Ethereum based Dapps
Top 7 Ethereum based Dapps

Github activity

In the past year, almost 1000 developers have been active in the development repo on Github. Github is an open-source development repository where any developer in the world can commit his code into. On this platform, developers can collaborate and make changes to the Ethereum codebase.

Ethereum Github repository

The ETH project on Github has about 200 different repos and a cumulative of 28000 commits have been done by developers to add to the codebase. When a developer wants to make a change to the codebase, he ‘commits’ his new changes to the codebase. After this commit has been made, the Github platform records what the changes are, which files are changed, by who, when it was done and what lines are added or updated.

The state of the Solidity repo, which is the main project of the Ethereum repository, has the highest recorded activity of changes made by developers. Solidity is the name of the programming language for creating new smart contracts on the Ethereum platform. Like I explained earlier, currently, the Ethereum platform runs on ETH 1.0. On Github also resides ETH 2.0 repo which has shown some activity recently with most commits coming from Vitalik Buterin and Danny Ryan.

State of Github commits Solidity
Github commits Solidity repository

Conclusion

Compared to 2018 the ICO inflows and outflows are heading downwards compared to the beginning of 2018 but are slightly increasing again. This selling pressure for the ICO holdings will continue until a new token offering will enter the market. ETH holdings in ICO have been declining, but decentralized finance ETH holdings have been on the rise again. Also, several Dapps on the Ethereum platform are increasing in popularity which brings growing transaction volumes.

Ethereum current state of project

On the Ethereum Blockchain the transactions are growing and also the number of addresses on the chain have been increasing. As a result of the latest hard fork, the inflation rate is on low levels again with lower block times. Currently, the PoW miners have a hard time to be profitable at these low price level of ETH.

At the end of the year, the new proposal called ProgPoW will be implemented which brings back the decentralization of miners. In my opinion, this Ethereum project is still in the works and getting ready for future developments. On a technical level the fundamentals are very good which will also result in a rising price for ETH.

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Jelmer Steenhuis
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Jelmer Steenhuis

Online entrepreneur at uDigitize
Crypto believer and 'Hodler' of Bitcoin since the early days. Spreading the word about this exciting new technology..
Jelmer Steenhuis
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