Ethereum network backlog points to growing pains
Ether, the virtual currency based on the ethereum blockchain, might be getting too popular for its own good.
The cryptocurrency slumped Wednesday after congestion on its network slowed transactions, adding to concerns the novel combination of decentralized computing and cryptography hasn’t reached the level of maturity needed to go mainstream even as a growing cohort of investors clamor for access to the digital tokens.
It fell 9.5 percent to $328, according to prices compiled by Coindesk.com. Ether reached a record $402 earlier this month.
A series of initial coin offerings based on the ethereum network caused orders of ether to spike and triggered a bottleneck in the network, Alon Muroch, CEO of the cryptotrading platform CoinDash, said in an interview from Israel.
“A huge amount of people wanted to send money into the smart contract of the ICO at the same time and it’s taking longer to process all those transactions,” Muroch said in a telephone interview. “More and more people are using this new technology to the point that we’re stretching its limit.”
The mobile messaging platform Status, the distributed computing power network SONM and Gilgam, a platform for decentralized eSports tournament management, are some of the projects built on the ethereum network that were raising funds through digital-coin sales in the past week.
The backlog caused the cryptocurrency exchanges Bitfinex and ShapeShift to halt ethereum transactions, according to the platforms’ tweets.
Ethereum has soared from about $8 at the start of the year to the over $400 in large part thanks to a boom in ICOs based on the network, as it allows for more complex actions than the more widely known bitcoin. The gains have helped ethereum’s market capitalization balloon to about $31.3 billion, compared with bitcoin’s $44.7 billion, prompting speculation it could soon overtake bitcoin as the largest cryptocurrency.
Today’s network delays are evidence the sector will need to develop further to accept the volume and demand required to scale. Muroch said ethereum developers are on it.
“This isn’t a surprise for people involved and there’s a road map on how to bring it forward and keep growing,” he said.