While Bitcoin remains king in market dominance and popularity, the slightly lesser-known “altcoin” Ethereum has proven to be a force to reckon with. Ethereum has far broader applications than just a store of value and unit of exchange. It is considered a “world computer” on which several decentralized applications (DApps) can be built.
But as Ethereum gains in popularity, many of its shortcomings are rising to the surface. The most concerning of which is its scalability. Transaction fees — or “gas fees” as they’re called on the blockchain — are notoriously high during congested periods due to all of the DApps using up resources.
See the article Everything You Need To Know About Ethereum for more info.
Many alternatives to Ethereum have come into existence, attempting to provide solutions to Ethereum’s scalability problems. Some people like to call them “Ethereum killers,” although few developers agree with this term. Nonetheless, these alternatives to Ethereum offer compelling fundamentals that will be beneficial to the blockchain industry in general.
Alternatives to Ethereum
Below are brief summaries of blockchain projects similar in design and function as Ethereum.
Calling itself “the internet of blockchains,” Cosmos seeks to solve the scalability problem by creating many parallel blockchains that interact with each other. Founded in 2014, Cosmos was an idea grown out of a blockchain consensus model called Tendermint. Today, Tendermint is the core mechanism powering Cosmos.
The token for Cosmos interoperability is called the ATOM. It allows for the Cosmos mini-blockchains to communicate with each other. ATOM is also a staking token and enables token holders to earn interest and exercise voting rights while holding the coin.
Cosmos expects to provide high-throughput blockchain services for developers building on their blockchain with its interlinking blockchain ecosystem. It already has dozens of services using its blockchain, including wallets, enterprise companies, and stablecoins.
Founded by Gavin Woods — a co-founder of Ethereum — in 2016, Polkadot is another project utilizing the concept of multiple, integrated blockchains to improve scalability and interoperability. Polkadot calls their network of blockchains “parachains,” a shortening of “parallel blockchains.”
Parachains act as separate blockchains linked to the core Relay Chain. All parachains built on Polkadot will inherit the security characteristics of the Relay Chain. This alleviates much of the work developers would typically have to do if they’re building their own blockchain from scratch.
Developers build parachains using a Polkadot-provided platform called Substrate, a library of tools they’ll use to develop their own blockchains. DOT is the utility token that powers transactions over the Polkadot blockchain network.
In addition to parachains, Polkadot has introduced parathreads, which are similar, except that they are meant for less resource-intensive operations. The difference between parachains and parathreads can be thought of as differing subscription tiers for blockchain developers to use.
Alongside its network of parachains and parathreads, Polkadot is also focusing on bridging between unrelated blockchains. Using Polkadot, developers will have a library of tools to adapt their parachain to existing blockchains such as Ethereum or Bitcoin. Once external blockchains are bridged, communication between all bridged blockchains and parachains will be facilitated through the Relay Chain.
The Binance Smart Chain (BSC) is a byproduct of Binance — one of the world’s largest crypto exchanges. Founded by Changpeng “CZ” Zhao in 2017, Binance and its suite of products are very prominent in the crypto space.
Before BSC, Binance used a blockchain called the Binance Chain. BSC, released in April 2020, runs parallel to the regular Binance Chain and provides additional features. One such feature that BSC allows for is the use of smart contracts, which are the self-executing programs that Ethereum pioneered and widely uses. And while the two Binance blockchains run parallel to each other, they aren’t dependent on each other to continue operating.
Much like the Ethereum blockchain, BSC launched fully-equipped to host an array of DApps, including decentralized exchanges (DEXs). This is due to the BSC being built using the Ethereum Virtual Machine (EVM). Already, BSC has gained massive use, partly because of its extremely low transaction (gas) fees compared to Ethereum’s. And the DEX known as Pancake Swap has become one of the most popular, right next to Ethereum’s Uniswap.
Unlike Ethereum, however, BSC is more centralized given its consensus mechanism (Proof-of-Staked Authority), which is why the transaction fees are so cheap in the first place. Binance Coin (BNB) is the utility token powering BSC.
Cardano is another blockchain founded by an Ethereum co-founder. It was founded by Charles Hokinson, a mathematician and a blockchain advocate involved in funding blockchain research at various universities. He founded Cardano after leaving the Ethereum project in 2014.
What makes Cardano unique is that it is treated primarily as an open-source scientific project. All aspects of its development are peer-reviewed and drawn from academic research. The team is dedicated to keeping the project decentralized, transparent, and open-source.
Just like Ethereum and its competitors, Cardano aims to become a platform for DApps. Beyond that, Cardano is focused on becoming a world currency that completely disrupts the way societies operate. ADA is the name of the utility token and currency powering the Cardano blockchain.
Cardano’s roadmap of features is split into five eras. Byron is the name of the first era, which acted as the foundation of Cardano. At the beginning of 2021, the second era, named Shelley, was released, increasing the network’s decentralization. Smart contract functionality will be added in the Goguen era. Scaling and governance will be added in the Basho and Voltaire eras, respectively.
With all of these competitors quickly improving on the systems that Ethereum originally built, its developers are under increased pressure to roll out upgrades to the blockchain that will address some of its current pitfalls. For instance, Ethereum was initially built on a Proof-of-Work (PoW) consensus model, which has resulted in the inability to scale with network congestion, leading to enormous transaction fees. PoW consensus models are also notoriously energy-intensive.
Thankfully, developers are working hard on the Ethereum 2.0 upgrade, which will see it move to a Proof-of-Stake (PoS) consensus model. As seen above, all of the alternative blockchains to Ethereum have been using PoS models from the get-go. This is one of the best consensus methods for sustainability and scaling. It also allows token holders to earn rewards and participate in governance through staking.
ETH 2.0 will be released in phases, starting with Phase 0, which brings the Beacon Chain online, marking the PoS model’s beginning. Next will be Phase 1, which introduces sharding. Sharding is similar to Polkadot’s parachains mentioned above. Phase 2 is the final phase and will integrate the shards and mainnet blockchain into the Beacon Chain.
If all goes well, ETH 2.0 will be a much-needed upgrade that will benefit the entire cryptocurrency space and help Ethereum retain its dominance among other application platform blockchains. Regardless, it is a good idea to keep an eye on the Ethereum alternatives, as they will all play a crucial role in the growth of the blockchain industry in the future.