How ETH Scales to a Million Transactions Per Second

by Feb 14, 2023Articles

Articles

At The Vanguard, we all have different views on the crypto boom is going to play out.

Tom Wake thinks that we have found a new engine for trust in society.

We no longer have to rely on a human to judge the validity of a payment, a contract or an art work…we can simply replace human intermediaries with code.

That includes lawyers, bankers and much else besides.

In fact, he goes further.

“We’re witnessing the birth of a new way of transacting information that’s faster, fairer and more secure,” says Tom.

I believe whole sectors within tech and finance could – and should – in the future be replaced with blockchain solutions.

It’s still early but once we reach tipping point people will migrate very quickly.”

Why now? He goes on to say:

“The 30 year old protocols the internet uses today are no longer fit for purpose. Hacks are commonplace, governments can control what we see and algorithms manipulate human behaviour.

It keeps privileging a creaking system where the owners of this infrastructure: Google, Facebook Amazon etc maintain almost total control. 

This technology changes all that.”

The Promise of Web3

In his view, banking and payments, social media, news, everything will soon move to a new and better internet: because this is a better system and people will recognise that.

The whole circus will move, en masse.

I take a slightly different view.

I’m not sure that all this economic activity will migrate to chains.

I think a great deal of financial, economic, social media and legal activity will not be displaced by blockchains.

In fact, we can only credibly say what activities will work on a case by case basis.

And we should be very open minded about the most popular use cases. We’ve talked about some of those use cases: data storage, identity, user payments and gaming.

But in trust, we don’t really know yet, because the system is still building.

In fact, there may not be just one platform that dominates what we recognise as “Web 3”.

There will be a whole archipelago of platforms: and I’m invested accordingly, with several infrastructure plays in my portfolio that I’m prepared to sit on for years to come.

How ETH scales to a million transactions per second

What Tom and I do agree on, is that these systems will scale quickly.

We’ve seen in the last year with the Merge.

Two things happened with the Merge…

Ethereum consumes 99.95% less energy: the equivalent of making a single cup of tea versus running a family household. And it will also cost 90% less to run.

The network will eventually be 500% more secure: the Ethereum blockchain was already like Fort Knox. Post merge, as Consenys put it, the “difficulty of attack increases fivefold overnight”.

This was a huge improvement in the network.

And what’s not appreciated is that there are huge upgrades to the network that are still in progress.

The next game changer developments on the Ethereum roadmap: namely  ‘optimistic rollups’ and ‘sharding’.

Each of these could scale the throughput on the network by 100x.

This is something that Michael at Crypto Traders’ Academy is going to be talking a lot about.

Michael has been doing that deep research for years. He left his work with one of the world’s largest wind farm companies to devote his time to crypto.

And he’s brought many of his friends, family and wider circle of traders along for the ride.

We’ve been investing alongside him for years, which has been a great story for all of us who have been involved.

Ethereum and other cryptocurrencies are scaling fast, and now is a good time to learn how to get involved and position yourself before crypto reaches mass adoption.

Key Takeaway

Ethereum currently handles around 10 TPS (transactions per second) so a 100,00x improvement is needed to achieve its scaling goals.

A network like Visa can handle around 65,000 TPS2.

How long will it take to catch up? At this pace, it might only be a matter of years.

Whether this platform will host finance, gaming, or creates a new industry, it is fit for purpose and evolving at an enormous pace.

And by owning Ethereum you gain exposure to all of it.

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