ZoneBitcoin EditorialEthereum, the second largest blockchain in the world after Bitcoin, is a open-source platform which allows developers to create and deploy different types of protocols.
Launched in 2015 by Vitalik Buterin, Ethereum has rapidly gained popularity due to its advanced features and potential to transform different industries. Since then, Ethereum has become the 2nd largest cryptocurrency in terms of market capitalization and adoption. The capital committed to the protocols (T) built on Ethereum quickly reached heights, ushering in decentralized finance.
However, despite its relatively constant success, and in a bear market stretching, Ethereum faces several controversies and challenges that need to be examined more closely.
We will return to all the controversies that shook Ethereum and its founders, in order to better understand the issue of the current criticisms weighing on the second most important network in the cryptographic industry.
The pre-mined token controversy during the Ethereum ICO (Initial Coin Offering)
From its inception, Ethereum received criticism. Indeed, one of the most notable controversies dates back to its launch, during its initial ICO in 2014.
During the Ethereum ICO, ether (ETH) was issued and distributed to participants in exchange for their bitcoin contributions. Around 60 million ETH (Ethers) were pre-mined, which represented around 72% of Ethereum's total initial supply at the time. It is possible to know the details of pre-mined Ethereum tokens here.
Pre-mined ETFs were used to finance the development of Ethereum but for many people, this is already a sign of an unfair and undemocratic practice. If the reference is Bitcoin, it must be emphasized that no bitcoin was pre-mined and the first bitcoin emissions were distributed during the Genesis Block.
However, for many supporters, the Ethereum ICO was not considered problematic and it became a common practice during ICOs. The vast majority of projects that have used ICOs have pre-mined tokens which they distributed to founders and investors before the public launch of the project.
This fundraising method has paved the way for many fraudulent projects or to projects of little importance, as it was easy and accessible for the founders to receive funding.
Smart contract vulnerabilities and security concerns
The other criticism leveled at Ethereum is its vulnerability issues in terms of security. Vulnerabilities in programming smart contracts have led to several incidents of hacking and theft of funds.
Very quickly after the launch of Ethereum, the DAO (Decentralized Autonomous Organization) project was the victim of an attack which led to the theft of millions of dollars in Ether. It was a real tsunami in the cryptosphere and forever marked the history of Ethereum.
During its ICO in 2016, the DAO managed to raise millions of dollars in ETH, but some of the funds stored on the protocol were misappropriated. The hacker managed to transfer about a third of the DAO's funds, which opened a real crisis within the Ethereum community. The latter decided to conduct a "hard fork" of the blockchain, leading to the creation of a new version of the blockchain in order to cancel the fraudulent transaction.
However, this decision sparked a heated and divisive debate within the community, as some argued that it went against the principles of blockchain immutability. After a very long debate, the community voted by a majority (86%) for the hardfork. Since then, the first blockchain was named Ethereum Classic (ETC) and the one we know today is the one resulting from the hardfork.
Ultimately, this incident left its mark and showed the security problems that smart contracts raise and the need to put in place solid external audits. However, this did not subsequently prevent countless hacks on different protocols linked to Ethereum. We can regret that many crypto projects have regularly suffered hacker attacks of all kinds, revealing problems of security vulnerabilities on different levels.
The debate over Ethereum's governance model
The governance of Ethereum is yet another subject of controversy within the community. While some advocate a decentralized model without central authority, others argue that Ethereum's governance resembles that of a formal, structured startup.
Even though there are votes and polling systems, the participants are those who hold tokens. This is reminiscent of the functioning of boards of directors bringing together the shareholders of a company. If we take a comparison with Bitcoin, it is not necessary to own bitcoins to offer an update in the BIP (Bitcoin Improvement Proposal)), for example.
This controversy over Ethereum governance has direct implications for how updates and improvements to the platform are decided and implemented. Are they really the result of the decisions of Ethereum users or those of the founders?
To learn more about the creation of Ethereum from its foundations, we recommend the book “The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze » by journalist Laura Shin, available on Amazon (in English only).
Ethereum scalability challenges
Another major criticism that Ethereum faces very regularly is its ability to evolve (scalability) to meet the growing demand of users. This problem known as the "blockchain trilemma" is not unique to Ethereum and has been equally problematic for Bitcoin.
However, blockchains have attempted to solve this problem in several ways, including the creation of additional infrastructure. For example, the creation of layers 2 like Polygon on the Ethereum blockchain made it possible to facilitate exchanges and relieve congestion on the network.
Today, there are hundreds of protocols hosted on Ethereum and this complicates the network infrastructure and contributes to its weakening. Moreover, Vitalik Buterin himself warned against the development of too numerous and anarchic protocols on the network which could lead to making it more vulnerable to attacks. He calls for more minimalism… Read the CoinTelegraph article to learn more on the subject, here.
Similarly, before the update " The Merge", Ethereum used the consensus model called Proof of Work (PoW) and since then, it now uses the consensus model called Proof of Stake (PoS). However, this transition was not without controversy and still generates debates today within the Ethereum community. This involved many changes, involved variations within validators and in the functioning of staking….Finally, despite the change, users do not see any difference with gas costs which are still so high...
Competing blockchain platforms and their impact on Ethereum
In addition to internal challenges, Ethereum faces increasing competition from other blockchain platforms. Projects such as Algorand, Cardano, Cosmos or TRON offer similar functionality to Ethereum and seek to attract developers and users. Finally, some blockchains are qualitatively superior to Ethereum but the latter was the first and therefore has superiority in visibility which allows it to maintain its leading position. However, it is not impossible to think that other blockchains will supplant Ethereum over the years.
The fierce competition highlights the need for Ethereum to innovate and resolve its internal issues in order to remain competitive in the market.
Moreover, with the news MiCA regulations in Europe or, the SEC's decision to consider certain cryptocurrencies as securities, Ethereum faces regulatory challenges and legal implications in many countries.
Some governments have taken a restrictive approach towards cryptocurrencies and ICOs, leading to restrictions on the use and development of Ethereum. Compliance and regulatory issues are critical to the future of Ethereum and its widespread adoption.
The Future of Ethereum Facing Controversies and Challenges
Despite the controversies and challenges it faces, Ethereum remains a major blockchain platform with enormous potential.
Scalability, security, and governance issues are issues that affect all blockchains and can be addressed with continued updates and improvements. Additionally, Ethereum benefits from a community of passionate developers and users who work together to advance the technology. Ethereum has a veritable army of supporters (including many early holders of ETH tokens) who work to maintain and grow the network.
With the launch of Ethereum 2.0 and other upcoming innovations, Ethereum has the opportunity to overcome these challenges and continue to play an important role in the digital economy.
Final word: What are the prospects for Ethereum
To get a more complete picture of Ethereum controversies, it is important to consider the opinions and perspectives of experts. Some experts argue that Ethereum's problems are temporary and can be resolved through technical improvements, while others point to the deeper challenges Ethereum faces as an emerging technology.
Despite the controversies and challenges, Ethereum remains a blockchain platform that has made it possible to take a huge step forward in the development of blockchain and web3. Decentralized finance, the creation of tokens, NFTs, play to earn games are only one facet of what Ethereum has enabled to emerge. Even though there are clearly abuses and unimportant projects, the opportunity to create useful businesses is definitely there.
Current issues are opportunities for Ethereum to improve and become a more robust and reliable platform.
Should you still invest in ETH?
When it comes to investing in ETH, it is important for investors to understand the risks and uncertainties associated with Ethereum, as well as the need to diversify one's investments. Investors are those who believe that Ethereum will remain in the crypto landscape and that it will continue to increase in value.
Other people will invest in ETH so they can grow it on protocols. This will depend on each investor and the budget that each has. Ultimately, the decision to invest in Ethereum should be based on a solid assessment of the pros and cons, as well as an understanding of the external factors that may influence its future.
How to invest in ETH?
It is possible to invest in ETH in different ways and on multiple platforms. All the crypto trading platforms allow you to buy ETH easily, by bank card.
However, you should keep in mind that the best way to store your cryptocurrencies is to do so on a non-custodial wallet. You can first buy them on a centralized platform and then move them to a non-custodial wallet.
-> Binance is the leading crypto exchange platform in terms of volume. It is possible to buy ETH directly on the platform.
-> Youhodler is a platform that allows you to buy and generate ETH regularly in the form of yield.
There are other sites and other ways to buy ETH, make it bear fruit and store it and for this we invite you to read our beginner's guide to DeFi.
See more articles:
- Why Gas Fees Are Exploding on Ethereum?
- What does Ethereum's "The Merge" mean??
- The founder of Ethereum would like to accomplish great things in the crypto industry
- What are layers 2?
---
Disclaimer: The information on this site is provided for general information purposes and does not constitute investment advice. We encourage you to do your own research before investing.
