For most casual digital asset investors, the Ethereum 2.0 upgrade promises to be a groundbreaking event that will improve efficiency, lower network costs, and bring the entire blockchain and crypto space closer to a Web3 reality.
Ethereum struggles with a lack of scalability and skyrocketing gas costs, and as it serves as the largest smart contract and DApp development platform, the move to a more reliable and scalable proof-of-stake (PoS) blockchain will be a welcome reprieve.
Unbeknownst to most casual investors, however, Polkadot’s Substrate platform has made huge strides in developing a parallel decentralized internet infrastructure that many believe will eventually overshadow Ethereum’s.
Related: The Polkadot Architecture and Introduction to the Substrate Infrastructure
Since the publication of the Polkadot white paper, its value as a bridge between the Ethereum ecosystem and the many possibilities that come with a Web3 internet experience has been at the forefront of Polkadot’s key selling points.
So, how exactly does Polkadot compare to Ethereum? What is Ethereum’s current progress towards a decentralized internet, and have Polkadot’s parachains become a viable threat to the dominant smart contract network? Here’s a quick look at the technicalities that set Polkadot’s ecosystem apart from Ethereum’s upcoming upgrade.
Two routes to the decentralized internet
To understand the value Polkadot is putting on the table, let’s first compare Polkadot’s Substrate and how it differs from what Ethereum is currently offering.
There is no denying that at one point Ethereum was considered a revolutionary technology and a sought-after platform for DApp development. Over the years, however, scalability has become Ethereum’s Achilles heel. With an estimated 1 million transactions per day, the Ethereum blockchain can only process 15 transactions per second (TPS), leading to volatile gas charges. While this number will increase with the upgrade to Ethereum 2.0, it will still lag far behind traditional centralized infrastructures such as Visa, which can theoretically handle well over 1,700 TPS.
In addition to the slow and congested network, Ethereum’s outdated consensus algorithms consume up to 112.15 TWh per year, which is comparable to the power consumption of Portugal or the Netherlands. Simply put, Ethereum relies heavily on a proof-of-work (PoW) algorithm that requires computationally intensive mining to add new blocks to the chain and confirm transactions.
Related: In the Mind of the Blockchain Developer: Proof-of-Work Blockchain Consensus
Ethereum 2.0 plans to address these concerns by moving from a PoW algorithm to a more efficient PoS algorithm, ultimately allowing Ethereum to become carbon neutral and achieve greater speed.
Ethereum 2.0 will also use sharding as a scalability solution, dividing the network into smaller chunks that can process transactions in parallel. In theory, this will allow Ethereum to process an infinite number of transactions per second, but in practice this will be limited by the number of shards created.
To date, the shift to Ethereum 2.0 is still a work in progress, even though the testnet is live. Frustrated by the delays, ambitious project developers like Ethereum co-founder Gavin Wood left Ethereum to build the Web3 Foundation and Parity Technologies. Parity Technologies and the Web3 Foundation primarily focus on the development of three main technologies: Parity Ethereum (also known as Serenity), Parity Substrate and Polkadot.
Ultimately, the goal of these organizations and projects is to accelerate the Web3 vision.
Their victories and defeats
As a core blockchain infrastructure company, Parity Technologies provides various tools and software that help developers launch their blockchains quickly and easily. The Parity Substrate is a toolkit for building custom blockchains from the ground up, powering some of the most popular blockchains in the world such as Polkadot, Kraken, and Chainlink.
Parity Ethereum, on the other hand, is the software that runs Ethereum 2.0 clients like Geth and Prysm. Parity’s main contribution to Polkadot is the Substrate framework, which is used to build custom blockchains or parachains on top of the Polkadot Relay Chain.
Related: How Polkadot’s Parachain Auctions Enable a Decentralized Web3
Compared to Ethereum’s existing system and upcoming sharding framework, Substrate is very modular and can build custom blockchains. Developers can choose the features they want for their parachains up to the technical difficulty they can handle.
Here are some examples of how the functions of blockchains built with Substrate may differ:
Zeitgeist has prediction markets (similar to sports betting or betting on what the weather will be like next week) and uses them for on-chain governance. KILT is a very complex system for decentralized identifiers (DIDs) with the aim of bringing identity to Web3. Subsocial consists of two communicating Substrate blockchains with social interactions built into the code (one palette for creating posts, another palette for comments , another comment palette, etc.).
As a result, Substrate allows users to put together a few palettes and launch their chains in less than an hour, which is much easier than starting from scratch. In the future, they could be much better than Ethereum at completing specific tasks. In addition, they can still communicate easily using XCMP, a mutual consensus message format developed for Polkadot that allows interaction between networks that share the same relay chain.
Substrate also provides developers with a library of modules that can be used to create compatibility between new blockchains and legacy chains such as Bitcoin and Ethereum. Plus, while using Substrate, you don’t even need to create blockchains that connect to Polkadot. Simply put, any developer can use Substrate to create forkless blockchains that can be upgraded without the need for hard forks and on any ecosystem outside of Polkadot or Ethereum.
In terms of validators, Polkadot uses a Nash balancing act that encourages validators to behave in a way that is best for the network as a whole. This is different from Ethereum’s current emphasis on rewarding miners for their efforts, which often leads to centralization and high barriers to entry.
The Polkadot Relay Chain is also designed to be much more scalable than Ethereum’s, with the ability to process around 1,000 transactions per second compared to Ethereum’s meager 15.
Perhaps the only gap in Polkadot’s armor is the fact that Parity Technologies had a major security breach in its multi-sig wallet software in 2017, when more than $30 million worth of ETH was stolen from several multi-sig wallets.
No confrontation, but complementarity
When it’s all said and done, Polkadot is a complementary platform to Ethereum as both blockchain ecosystems pursue the same goal: to deliver a fully decentralized World Wide Web.
While Polkadot has a ton of features and enhanced capabilities, it’s still in its infancy, with only a handful of applications (Moonbeam and Moonriver) running on its network. At the same time, Ethereum remains a jack of all trades, with hundreds of thousands of developers and projects, giving it a significant advantage in terms of adoption.
Both Polkadot and Ethereum have different goals and can coexist and complement each other in the decentralized future.
A look into the future
Polkadot and Ethereum have their own strengths and weaknesses. In the future, they may even co-exist to deliver a fully decentralized Web3. Developers can use Substrate to create decentralized social media platforms or video sharing apps that integrate Ethereum’s ERC-20 token economy. With more developers on board to accelerate the move to a Web3 internet, there’s no telling what the future holds for both Polkadot and Ethereum.
This article does not contain investment advice or recommendations. Every investment and trading move carries risks, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Oleh Mell is the developer of Subsocial, a social networking platform built to power the social networks of the future. These apps will include built-in monetization methods and resistance to censorship, with users taking ownership of their content and social charts. Built with substrate pallets, Subsocial is unique in the Dotsama ecosystem and designed specifically for social interactions. These interactions don’t have to be social networking specific as Subsocial can support apps like YouTube, Shopify or even Airbnb.