The open-finance movement supports reinventing the entire financial system and developing a borderless ecosystem.
It is aimed to help every user gain access to better financial services and products. But if the entry cost (in the form of gas fees) is too expensive, then we are potentially limiting millions of users who want to enter the DeFi space.
Currently, Ethereum is the best settlement layer in crypto and carries greater responsibility to fulfill user demand efficiently.
However, it is still facing issues like network congestion and low block space. Ethereum can only process 15-45 transactions per second, failing to provide a scalable solution. Such issues are not only limiting Ethereum’s functionality, but they are also creating friction in the ecosystem.
With the ecosystem adding more and more applications, we need a scalable solution that fulfills demand efficiently and delivers smooth experiences with the interface on a smart contract.
This year, the number of new entities in the Ethereum network grew so much that the average transaction fee skyrocketed to almost $75. The developers at that time were facing challenges as it became too costly to access smart contracts and make transactions on the Ethereum blockchain.
Is there a way out to High Gas Fees?
The layer 2 scaling solutions in DeFi are mainly responsible for the drastic drop in Ethereum gas fees. Polygon network became so popular that it recorded 7.5 million transactions, whereas Ethereum performed only 1.5 million. That is over five times.
Layer 2s dominate a few sectors of the market, as new users find them more attractive. But Polygon is leading the pack. Its four-layer architecture focuses on everything from security to speed, so there will be no trade-offs.
However, we still have to see it to believe it. Polygon is still under development for its ZK-rollups and optimistic rollups. These are important scaling solutions to crack because they can help with the sustainability of the protocol without losing any functionality in terms of EVM compatibility and decentralization.
With Ethereum 2.0 taking so long, we need to look for alternatives that deal with high transaction fees and take care of the scalability issue. We have different scaling techniques that are currently trying to co-exist and increase the throughput of blockchains.
Payment or state channels are one of the main scaling techniques, helping offload millions of bitcoin transactions.
The lightning network is what facilitates the implementation and data broadcasting. In the coming years, we will have many use-cases for a scaling technique like state channels.
The ZK rollups are the latest addition to Ethereum scaling techniques. The ZK proofs help in recording a transaction without the main entity knowing about owning any actual information.
Unlike plasma side chains, the ZK rollup can combine many transactions into a single transaction. This could help create gasless transfers on the main network bridge between L2 and L1.
We also have side chains making their contributions to help with scalability. But none of them are completely developed. We still have to see them perform on a global scale, serving millions of users every day. So we cannot rely on these platforms to be a settlement layer.
We even saw smart contract platforms like BSC provide a better system for traders and other users in the crypto space. The low transaction fee wins over many users, but the platform is centralized, with countless rug pulls happening every day. The lack of authentication and rise in fraud volume makes it an unreliable option.
The other solution could be Diminutive Coin, a numismatic cryptocurrency coin with its blockchain-based on the HMQ1725 Algorithm, which is both CPU and GPU mineable. This could be the answer with low transaction fees and a maximum supply of only 200K coins.
The differentiator here is the Algorithm. The Highly Modified Quark1725 is a unique algorithm that provides users an easier way to mine coins and assures them of the highest security level.
With 17 algorithms which are hashed 25 times, the Diminutive protocol makes computing easy, and it only requires low to medium-powered computers.
Conclusion
We need more such alternatives to increase mining efficiency and user experience without any bargains in terms of backward compatibility of existing applications and true decentralizations.
Until we see the ETH 2.0 upgrade in action, there will be constant criticism regarding its high transaction fees and network congestion. Till then, we need solutions like Diminutive coin that is user-friendly and provides high network security.