Is the timing of the departures a coincidence or a reflection of deeper problems?
ICON and TRON are abandoning the signature decentralized application platform for their own mainnets.
Though some ERC20 projects, such as ICON, plan for a departure to their own mainnets in their white papers, the timing of the emigration – when Ethereum’s market price has been relatively flat – could give the impression that there may be discontent brewing about the world’s second-largest cryptocurrency (by market capitalization).
ICON launched its mainnet in January, and will be exchanging its ERC20 tokens for native tokens at a rate of 1:1 from June 20 until September 25. The collected ERC20 tokens will then be burned.
The ICON trade is being facilitated by Binance, Upbit, and Bithumb – which are the only exchanges authorized to sell the new ICON token so far. Holders would be able to transfer back their ICX coins to their ICONex wallets as early as June 25.
TRON declared June 25 to be the project’s “Independence Day” and posited that its token burn “may set the record for the most amount of money destroyed in human history.” CEO Justin Sun said the burning marks a transition to a “free, autonomous, and self-governed decentralized internet.”
“To commemorate this exciting moment, TRON Foundation will conduct a burn of 1,000,000,000 TRX all at once, which is worth 50 million USD according to today’s market price,” the TRON Foundation wrote on its Medium page. “The amount of TRX at the beginning of mainnet launch will be reduced to 99,000,000,000TRX, and the remaining 33,251,807,524 TRX held by TRON foundation will stay locked until January 1th, 2020.”
TRON, which aims to be a direct competitor to its previous host, Ethereum, did not plan for a token swap or a mainnet in its original design. Sun decided that migration was necessary because Ethereum’s network performance was no longer addequate for TRON’s needs.
In announcing the mainnet launch on May 31, Sun wrote:
“Developing on Ethereum made the shortcomings of the platform very clear. Network issues have been a longstanding [sic], rendering Ethereum incapable of supporting the newest generation of dApps. Ethereum is unable to effectively resolve community governance issues, limited by an authoritarian system dominated by the foundation and developer team. Ethereum users cannot leverage their tokens to vote and have a voice within the community. Ethereum’s archaic gas burn mechanism and high gas fees pose a significant obstacle for dApp developers, leaving them out in the cold.”
To understand why these coins are now leaving, one must understand why they joined Ethereum in the first place. Ethereum, for lack of a better description, is a de facto coin incubator.
Ethereum offers a framework to support the Dapps of new crypto companies while they are being developed. The presence of Ethereum means that a startup does not need to set up a makeshift blockchain or coin while designing and building a mainnet.
It helps that the Ethereum community is robust. In the case of EOS, which migrated from Ethereum in early June, this allowed the company to raise several billion dollars without having a finished project or even its own native coin.
The problem lies in scalability. Currently, over 1,600 Dapps utilize the Ethereum ecosystem. The tokens associated with these projects must share Ethereum’s hard-coded block computational limit of about 15 transactions per second. For perspective, the VISA network – the standard by which blockchains are measured – can cover 24,000 transactions per second, according to its website.
A difficulty in scaling may be a driving factor behind the departures. As the various Dapps demand more of Ethereum’s capabilities, transaction times and fees will rise. One way forward, as highlighted by Ethereum founder Vitalik Buterin, would be to abandon the practice of having all nodes verify all transactions. “Sharding” would fragment the Ethereum blockchain into multiple pieces, each with its own state and transaction history.
However, with both consensus formation and Ethereum’s bearish market value being elephants in the room, it is yet to be seen if Ethereum can make staying with it more profitable than branching out.
Buterin himself understands the challenge. At the Deconomy conference in Seoul, South Korea, this April, he remarked on the state of his network:
“If you want to build a decentralized Uber and Lyft on top of an unscalable Ethereum, you are screwed. Full stop.”
Frederick Reese is a politics and cryptocurrency reporter based in New York. He is also a former teacher, an early adopter of bitcoin and Litecoin, and an enthusiast of all things geeky and nerdy.
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