ETH 2.0 Won’t Fix Ethereum’s Scalability Problems, Analyst Argues

Key Takeaways

  • Unique addresses for DeFi are growing exponentially, crossing the 450,000 mark since the beginning of this year.
  • Ethereum needs to scale considerably to on-board the existing crypto user base of 50 million to DeFi platforms.
  • ETH 2.0 along with the layer-2 implementations might not be able to keep up with the growth in network usage from DeFi.

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The average transaction fee on Ethereum costs $7.5, three times that of Bitcoin. Setting up a wallet on MakerDAO costs over $40, while the fees to lend on Compound amount to $10. These ludicrous fees are not sustainable.

With new yield farming incentives on DeFi platforms being launched every other day, the space continues to expand despite alarming signals around network congestion and high fees. 

DeFi users are eagerly awaiting the eventual launch of ETH 2.0, which promises to scale the blockchain, but that too might not be enough to support the existing number of crypto users.

The Realistic Take on ETH 2.0

The number of unique DeFi addresses is rising quickly with the addition of 350,000 addresses since the beginning of the year . While DeFi platforms like Uniswap surpassed Coinbase in terms of trading volume, its user base is still tiny compared to Coinbase’s 32 million customers.

Assuming network gas fees have peaked, it is a good time to realistically assess how much of a difference Ethereum 2.0 will make on fees.

SIMETRI gains of 1031%

Ethereum 2.0 is initially set to begin with 64 shards, each shard could potentially operate as a separate chain with its own transaction history. Under such a scenario, the network would increase its transaction capacity by 64-fold.

Kruger’s estimate is based on the assumption that each DeFi user has four addresses. Following that logic, that…

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