Cryptocurrency Market Capitalizations
- Ethereum founder calls for the development of a decentralized exchange capable of coin swaps including Bitcoin to Ethereum
- Major development in Cardano network prove how development activity can relate to a projects overall health
- Cardano's now very capable blockchain trumps what traditional payment systems are capable of
Building the Gap Between Bitcoin and Ethereum
Vitalik Buterin tweeted on March 24th that the lack of coin to coin swaps in the industry, especially between Ethereum and Bitcoin, is embarrassing.
"We should put resources toward a proper (trustless, serverless, maximally Uniswap-like UX) ETH <-> BTC decentralized exchange. It's embarrassing that we still can't easily move between the two largest crypto ecosystems trustlessly."
His tweet called for resources to be given towards the creation of a decentralized exchange that would focus on the ability to trade one token into another rather than having to sell a token for fiat only to then buy another cryptocurrency.
He explains that this decentralized exchange (DEX) must be trustless, serverless, and have a user experience similar to Uniswap, a decentralized exchange where users can swap ERC-20 tokens (Cryptocurrencies created and issued on Ethereum’s blockchain) with Ether but have the added ability of cross-chain swaps like BTC → ETH as well.
While the idea behind a decentralized exchange follows the same ideology that cryptocurrency does, one of financial autonomy and not relying on a bank for financial products and security, they have struggled with liquidity. Part of the reason for this is that decentralized exchanges are not meant to be a money-making business. They are designed to run with no central authority. This gives little reason for people to invest in their production and makes the development of super intuitive user-experiences take far more time.
Centralized exchanges like Coinbase, Binance, and Gemini, receive tons of investment money that allow these companies to pay for more development and create easier on-ramps to their platforms. So far, decentralized exchanges have not yet built the same level of on-ramps and user-experiences.
Buterin went on to explain that this bridge does not necessarily need to happen with just Bitcoin and that a DEX bridge could also be made between a number of blockchain ecosystems.
The creation of decentralized exchanges would help to cut the cord from the traditional payment system and allow users to do all of their financial transactions in a decentralized nature with no middlemen.
Can a Crypto Be Built to Handle More Transactions Than Visa?
The altcoin “Cardano,” was launched in 2015 and has been under significant development ever since. Cardano is the first blockchain project to be built with a scientific philosophy put first, with layers and layers of peer-reviewed research from leading academics and engineers to help solve problems like scalability that plague cryptocurrencies.
The cryptocurrency was built by IOHK, the engineering company that uses a peer-reviewed research approach to building cryptocurrencies. One indicator of a cryptocurrency that has a bright future is the healthiness of its community. This can be seen by looking at how much development is committed to the project. Information on commits on Github can be a solid indicator of this. Santiment, a behavior analytics company that focuses on cryptocurrency, uses a number of metrics like Github commits to track a cryptocurrency project development activity.
While we can see on a chart that Cardano is obviously a busy project, it's hard to know what that really means. On the 25th, Cardano released its off-chain scalability protocol called “Ouroboros Hydra.” This new layer to Cardano has been in development for five years and has been through rigorous testing and research by Cardano’s team.
The solution claims to drastically increase the network's capacity and transactions per second, lower network latency, and allow nodes to use less storage. This layer also makes the network capable of applications like micropayments, voting, and insurance contracts, among other uses.
Ouroboros Hydra is the outcome of a European Union-funded collaborative research project. Theoretically, this could help to scale the cryptocurrency to a point that far exceeds the current global payment system. This is where you can see the commitment of this development activity come to fruition.
Hydra aims to scale the system up to potentially one million transactions per second. Visa, in comparison, handles on average 1,700 transactions-per-second. With Hydra, each user that joins the network will generate 10 “heads,” or throughput lanes for transactions and data. The University of Edinburgh created simulations to test the system and found that each Hydra head could handle up to 1,000 transactions-per-second.
IOHK’s blog announcement said: “We see that a single Hydra head achieves up to roughly 1,000 TPS (transactions-per-second), so by running 1,000 heads in parallel, we should achieve a million TPS. That’s impressive and puts us miles ahead of the competition, but why should we stop there? 2,000 heads will give us 2 million TPS – and if someone demands a billion TPS, then we can tell them to just run a million heads. Furthermore, various performance improvements in the implementation can improve the 1,000 TPS single head measurement and thus achieve even better performance.”
This is a monumental accomplishment for the world of cryptocurrency and blockchain. Currently, Bitcoin has a transactions-per-second capacity of just seven with Ethereum at 15.
If a cryptocurrency can achieve more transactions-per-second than Visa or Mastercard can, or even more than both combined, all while offering significantly faster transactions at near-zero cost, the traditional payment system may finally have a reason to fear cryptocurrencies.
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