Why Do People Prefer Other Blockchains Over Ethereum For Settlement? A Detailed Insight

People all around the world are in a rush to transit in the new era of Web 3.0 to experience the best internet accessibility. However, many DApp developers, enterprises, and opportunistic businesses have already been part of it to leverage its advantages as the era is backed by blockchains, dApps, smart contracts, and more innovations. 

Surprisingly, around 300 million blockchain users are there around the globe, which is less than 4% of the worldwide population. Ethereum is the pioneer among the top decentralized platforms that have eased business transactions with secured blockchain technology and loads of features.

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However, when it comes to settlement, people often overlook Ethereum and search for alternatives. What may be the possible reasons behind this? How are the rivals attracting people to adopt their platform for transactions and settlements?

Well! Be with us till the end of this article to unveil the hidden secrets with detailed insights. We will explore the expectations of businesses with settlements. We will also discuss the limitations of Ethereum based on factors like gas fees, ease of use, scalability, and much more.

What is Ethereum?

Ethereum is a blockchain protocol that was introduced recently in 2013 by Vitaly Dmitrievich Buterin, who is a co-founder. It is an open-source platform that allows developers to create decentralized applications such as DeFi with smart contract functionality. It also allows trading and exchanging NFTs (Non-fungible tokens) on the platform. Ethereum offers a robust platform to create innovative DApps, managing fast transactions with data anomalies.

With the highest number of blockchain users (160 million) in Asia, followed by European (38 million) and African (32 million) countries, Ethereum is the most popular decentralized blockchain platform. The revolution of Ethereum started from the execution layer, namely Eth1, and then turned to the consensus layer, namely Eth2. 

Later, in 2018, the protocol was further upgraded from PoS (Proof of Stake) to PoW (Proof of Work), known as The Merge or Ethereum 2.0. With this enhancement, Ethereum achieved success with a 99.95% energy reduction that contribute to a green environment and lower gas fees.

How does Ethereum Work?

Ethereum is a Layer 1 blockchain associated with Layer 2, Layer 3, and DA (Data Availability), along with several other components and mechanisms. Let’s quickly understand the role of the four layers associated with blockchain architecture and the Ethereum network.

• Layer 0 blockchain is the foundation that consists of hardware, software, network, internet connectivity, and other components to make a secured infrastructure to support the chains.
• Layer 1 blockchain is the core component built on Layer 0 that securely saves all the essential data, followed by node validations. It is also known as the implementation layer to make blockchains accessible.
• Layer 2 blockchain is built upon Layer 1 to speed up the transaction process by reducing the loads on the main nodes. It saves energy and time and reduces gas fees to provide faster TPS.
• Layer 3 blockchain is merged on top of Layer 2 to provide user convenience for easy blockchain accessibility and utilization in real life. Layer 3 makes it easy for developers to utilize decentralized finance (DeFi) platforms, create innovative dApps, perform easy transactions, and more. 

Solutions like Optimistic Rollups, ZKPs (Zero Knowledge Proofs), Plasma, Polkadot, Uniswap, OpenSea, and Lido altogether allow Ethereum to offer a strong and reliable ecosystem to users. It helps with secure, flexible, and efficient operations for dApp developers and businesses to begin the journey with Web 3.0.

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Remarkable Features of Ethereum

• It allows secured transactions through a smart contract to speed up the process.
• Offers EVM (Ethereum Virtual Machine) to create and deploy cutting-edge dApps.
• ERC (Ethereum Request for Comments) offers interoperability to stay consistent with your operations following standard structure.
• Upgraded with Layer 2 allows you to speed up transactions without compromising security.
• It allows you to trade unique digital assets like NFTs while maintaining ownership.
• It offers Ether peer-to-peer cryptocurrency to ease the transactions within the Ethereum network.
• It takes only 12-15 seconds to mine a block, which is speedy compared to the popular Bitcoin currency, which takes an average of 10 minutes.
• Managed by DOAs (Decentralized Autonomous Organizations) or a global network of nodes, Ethereum offers you trust and transparency with no data breaches.

Now, you must be wondering, as Ethereum is already offering remarkable and secure features, why is there a need to look for alternatives? Why are people shifting to other blockchain protocols? What does Ethereum lack in, forcing people to shift towards modern blockchain platforms?

Well! Don’t be overwhelmed; let us introduce you to the advantages and downsides of Ethereum. It will help you better understand the needs and demands of brainy developers and growing enterprises. You will also understand if the Ethereum community matches their expectations.

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Limitations and Challenges with Ethereum

Undoubtedly, Ethereum has been the early bird in blockchain technology and has made the stronghold to offer a robust solution to creative developers. It is speedily growing the user base while staying intact with security and decentralization to maintain anonymity. Being the first smart contract network and the world’s second-largest digital asset platform, followed by Bitcoin, it is the first choice of dApp developers to explore their imagination.

At present, Ethereum can manage an average of 27 TPS (Transaction Per Second), and The Merge is also at its beginning stage, which might take years to make it fully functional. Recently, in March 2024, Ethereum implemented EIP-4844 (Proto-DankSharding) to leverage the functionality of data availability at L2. It is used to manage off-chain transactions without sending frequent data sets to the base layer. It helped the Ethereum blockchain protocols with Blob carrying transactions and increased gas limits. This way, the gas fee can be reduced as it sends bundled data collectively back to the L1 instead of operating directly on-chain.

The effectiveness of EIP-4844 concludes its impact on consensus security, Ethereum usage, and roll-up transactions. Block delays, increased fork rates, and increased posting delays are a few consequences you can encounter with Ethereum networks, followed by EIP-4844 implementations. It significantly increased the risk of data security and anonymity to Ethereum with the vulnerability to the consensus layer.

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Consequences Of Ethereum Blockchain Settlements

• The Blob processing that handles a high amount of data in segments can increase the load on nodes connected in chains. 
• Larger Blobs can increase the data propagation times and further encourage attackers to misuse the network nodes. 
• Any interruptions in internet connectivity or downtime during Blob processing may keep the full transactions at risk or cause the loss of all data at once.
• The PoS consensus mechanism hugely relies on multiple confirmations before releasing a final block. The delay in this process may invite cybercriminals to amend or change the data value.
• There are always risks of Sybil and 51% attacks that can turn into incorrect data validation or monopoly in data control.
• As the consensus mechanism works with the community nodes, if any of them fail to respond promptly, it will lead to invalid transactions or risk to network data security.

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Why Are People Shifting To Other Blockchains For Settlements?

The prime reasons to transition to blockchain technology are to increase the transaction speed, save time, simplify managing huge amounts of data, and secure the identity and information to prevent vulnerability. If a decentralized platform offers data security and scalability in a place, it eases your shift towards a modern and efficient solution. Unfortunately, Ethereum is still at the beginning stage of providing scalability to businesses and decentralized app developers. Even though it has robust security, settlements take time as all of their roll-up transactions are finalized at mainnet in the form of CellData. It increases the waiting time for validation, results in increased gas fees, and is prone to data availability and security risks.

Consensus mechanisms, Rollups, and ZK rollups offer low transaction costs, integration compatibility, energy efficiency, and high-speed operations. Polygon PoS, Polygon zkEVM, Optimism, Arbitrum, zkSync, Aztec, and Hermez Network are a few popular alternatives that can ease your settlements in terms of programmable transactions, smart contracts, and consensus mechanisms.

Scalability can be significantly increased when you get high transaction speed without data breaches and concern for your important details. Thus, people dealing with large amounts of databases and huge numbers of transactions every day, as well as being focused on user experience, are shifting toward Ethereum rivals that are based on modern blockchain technology and backed with secured Layer 2 solutions. 

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