For most casual digital asset investors, the Ethereum 2.0 upgrade promises to be a game-changing event that will improve efficiency, reduce network costs, and propel the entire blockchain and crypto space. closer to a Web3 reality.
Ethereum is struggling with a lack of scalability and skyrocketing gas fees, and since it serves as the largest platform for developing smart contracts and DApps, the shift to a proof-of-stake blockchain ( more reliable and scalable PoS) will be a welcome reprieve.
Unbeknownst to most casual investors, however, Polkadot’s Substrate platform has made massive inroads in developing a parallel decentralized internet infrastructure that many believe will eventually eclipse that of Ethereum.
Related: The Polkadot Architecture and Introduction to the Substrate Framework
Since the publication of the Polkadot whitepaper, its value as a bridge between the Ethereum ecosystem and the many possibilities that make up a Web3 Internet experience has been at the forefront of Polkadot’s main selling points.
So how exactly does Polkadot compare to Ethereum? What is Ethereum’s current progress towards a decentralized internet, and have Polkadot’s parachains become a viable threat to the mainstream smart contract network? Here is a brief overview of the technical details that differentiate Polkadot’s ecosystem from the upcoming Ethereum update.
Two Paths to Decentralized Internet
To understand the value that Polkadot brings to the table, we must first compare Polkadot’s substrate and how it differs from what Ethereum currently offers.
There is no denying that at one time, Ethereum was considered a breakthrough technology and a sought-after platform for DApp development. Over the years, however, scalability has become Ethereum’s Achilles’ heel. With around 1 million transactions per day, the Ethereum blockchain is only capable of processing 15 transactions per second (TPS), which leads to volatile gas fees. Although this number is expected to increase with the upgrade to Ethereum 2.0, it will still be far from traditional centralized infrastructures such as Visa, which can theoretically process well over 1,700 TPS.
In addition to its slow and congested network, Ethereum’s outdated consensus algorithms consume up to 112.15 TWh per year, which is comparable to the electricity consumption of Portugal or the Netherlands. Simply put, Ethereum relies heavily on a proof-of-work (PoW) algorithm that requires computationally intensive mining to add new blocks to the chain and confirm transactions.
Related: Inside the Mind of the Blockchain Developer: Proof of Work Blockchain Consensus
Ethereum 2.0 plans to address these concerns by moving from a PoW algorithm to a more efficient PoS algorithm, which will eventually allow Ethereum to become carbon neutral and achieve more speed.
Ethereum 2.0 will also use sharding as a scalability solution which will see the network split into smaller pieces that can process transactions in parallel. In theory, this will allow Ethereum to process an infinite number of transactions per second, but in practice this will be limited by the number of shards created.
As of today, the move to Ethereum 2.0 is still ongoing, even though the testnet is live. Frustrated by the delays, developers of ambitious projects like Ethereum co-founder Gavin Wood left Ethereum to build the Web3 Foundation and Parity Technologies. Parity Technologies and the Web3 Foundation mainly focus on the development of three main technologies: Parity Ethereum (also known as Serenity), Parity Substrate and Polkadot.
Ultimately, the goal of these organizations and projects is to accelerate the Web3 vision.
Their victories and their defeats
As a central blockchain infrastructure company, Parity Technologies provides several tools and software that allow developers to launch their blockchains quickly and easily. The Parity Substrate is a toolkit for building custom blockchains from scratch, and it powers some of the world’s most popular blockchains, such as Polkadot, Kraken, and Chainlink.
Parity Ethereum, on the other hand, is the software that runs Ethereum 2.0 clients such as Geth and Prysm. Parity’s main contribution to Polkadot is the Substrate framework, which is used to create custom blockchains or parachains on top of the Polkadot relay chain.
Related: How Polkadot’s Parachain Auctions Make Decentralized Web3 Possible
Compared to Ethereum’s existing system as well as its future sharding framework, Substrate is very modular and allows for the creation of custom blockchains. Developers can choose the features they want for their parachains up to the degree of technical difficulty they can handle.
Here are some examples of how the functions of blockchains built with Substrate can differ:
- Zeitgeist has prediction markets (similar to sports betting or betting on the weather next week) and uses them for on-chain governance.
- KILT is a very complex system of decentralized identifiers (DID) with the aim of bringing an identity to Web3.
- Subsocial is composed of two communicating Substrate blockchains with social interactions integrated into the code (a palette for making posts, another palette for comments, another palette for reactions, etc.).
As a result, Substrate allows users to assemble a few palettes and launch their chains in less than an hour, which is much easier than starting from scratch. In the future, they might be far superior to Ethereum in performing specific tasks. Additionally, they can still communicate easily using XCMP, a cross-consensus message format developed for Polkadot that allows interaction between networks that share the same relay chain.
Substrate also provides developers with a library of modules that can be used to create compatibility between new blockchains and legacy chains such as Bitcoin and Ethereum. Moreover, you don’t even have to create blockchains that connect to Polkadot when using Substrate. Simply put, any developer can use Substrate to create forkless blockchains that can be upgraded without the need for hard forks and on any ecosystem outside of Polkadot or Ethereum.
In terms of validators, Polkadot uses a Nash equilibrium staking game that incentivizes validators to behave in a way that is best for the network as a whole. This is different from Ethereum’s current focus on rewarding miners for their efforts, which often leads to centralization and high barriers to entry.
The Polkadot relay chain is also designed to be much more scalable than Ethereum’s, with the ability to process around 1,000 transactions per second compared to Ethereum’s meager 15.
Perhaps the only flaw in Polkadot’s armor is the fact that Parity Technologies had a major security breach in its multi-signature wallet software in 2017, when over $30 million worth of ETH was stolen from several multi-signature wallets.
No confrontation, but complementarity
Ultimately, Polkadot is a complementary platform to Ethereum, as both blockchain ecosystems strive to achieve the same goal of providing a fully decentralized World Wide Web.
Although Polkadot has a ton of features and enhanced capacity, it’s still in its infancy, with only a handful of apps (Moonbeam and Moonriver) running on its network. At the same time, Ethereum continues to be a jack-of-all-trades, with hundreds of thousands of developers and projects giving it a significant edge in terms of adoption.
Polkadot and Ethereum serve different purposes and can co-exist and complement each other in a decentralized future.
A glimpse of the future
Polkadot and Ethereum have their own strengths and weaknesses. In the future, they might even coexist to provide a fully decentralized Web3. Developers can use Substrate to build decentralized social media platforms or video-sharing apps that integrate Ethereum’s ERC-20 token economy. With more developers arriving to help accelerate the shift to a Web3 internet, it’s unclear what the future holds for both Polkadot and Ethereum.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of TSWT.
Oleh Mell is the developer of Subsocial, a social networking platform designed to support the social networks of the future. These apps will feature built-in monetization methods and censorship resistance, where users will own their content and social graphics. Built with Substrate palettes, Subsocial is one of a kind in the Dotsama ecosystem and designed specifically for social interactions. These interactions don’t have to be social media specific, as Subsocial can support apps like YouTube, Shopify, or even Airbnb.