Ethereum Foundation to Promote Scalability Fixes with Financial Incentives

Last updated: Mar 30, 2023
4 Min Read
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In a potential platform changing announcement, Ethereum foundation leader Vitalik Buterin released the details of a new subsidy program that is meant to help fund researchers and developers to produce innovative and effective solutions to the Ethereum scaling problem.

This program could lead to exciting new developments that could help defeat scaling problems before they become crippling issues.

The Ethereum Scaling Problem

Let’s take a moment to go over what scaling is, and what sort of challenge it presents to popular and active blockchain tech. Scaling refers to a blockchain’s ability to adapt to increasing demand for transactions and processing power.

Simply put, if you think of a blockchain as a highway, scaling refers to methods that would allow for more cars to pass through and have fewer traffic jams.

Bitcoin and Ethereum have both been suffering recently from problems related to traffic. Bitcoin has seen transaction fees and confirmation times get worse, and seemingly always reaching new all-time highs for fees or confirmation times.

While Ethereum has not faced quite as much of a burden as bitcoin, it’s growing popularity and the number of platforms that operate on top of it have a lead to issues. Instead of waiting for $50 fees to appear, the Ethereum foundation wants to have solutions in place before that would happen.

Ethereum Foundation Subsidy Program

As explained in the announcement by Buterin, the subsidy platform will give out amounts of funding between $50,000 and $1 million to qualified organizations that will engage in the research and development of scaling solutions. Those solutions include both blockchain sharding and layer two concepts.

While those amounts may seem large, Buterin noted that the goal of the subsidy program is not to dole out massive profits for participating organizations. But instead, to simply offset the costs they would incur by hiring top talent. A single engineer could cost as much as $100,000 per year, $1 million could be consumed by a team of 10 working for one year.

Buterin stated that the amount given out would depend on the number of factors. This includes the potential impact of the proposal, the size of the team, and the quality of the work. In order to qualify, interested parties need to apply first with the foundation and submit a proposal.

Who will benefit from the subsidies?

For the subsidies, they will mostly go to development teams that are already in the midst of creating said scaling solutions. One example of this could be the people behind Plasma, which is a project aimed at producing a Lightning Network like second layer solution for Ethereum.

Plasma is expected to launch alongside OmiseGo. The Raiden project is also listed as an example of layer 2 system that could benefit from this subsidy.

Other groups that are involved in or are going to enter the sharding space can also greatly benefit from this subsidy.

Impact on The near future

While it is unclear when the public at large will see the outcome of these research and development projects, it is clear that this sort of guiding hand could prove to be what allows Ethereum to overcome it’s scaling issues that have only just begun to appear this year.

Today, Ethereum transaction fees remain at around $0.20-$0.40 each, which is still considered to be relatively affordable when compared to bitcoin. However, when compared to other, lighter chains, these fees can seem high. For example, comparing to bitcoin cash, which has fees of about two or three cents, $0.40 can seem downright expensive.

If the research projects are successful, and they most likely will be, then the outcome of this research could also benefit other Blockchain perhaps including bitcoin.

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Editorial Team

The Coin Bureau Editorial Team are your dedicated guides through the dynamic world of cryptocurrency. With a passion for educating the masses on blockchain technology and a commitment to unbiased, shill-free content, we unravel the complexities of the industry through in-depth research. We aim to empower the crypto community with the knowledge needed to navigate the crypto landscape successfully and safely, equipping our community with the knowledge and understanding they need to navigate this new digital frontier. 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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