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Ethereum Co-founder Announces Subsidy for Solutions to the Scalability Issue

Originally published on: BTCMANAGER
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January 05, 2018

Vitalik Buterin, the co-founder of Ethereum, announced on January 2, 2018, that the Ethereum Foundation would be offering two subsidy initiatives that will compensate those willing to dedicate their time and resources to come up with solutions to the ongoing scalability issue that is currently negatively affecting the cryptocurrency ecosystem as a whole.

In the blog post, Buterin states that the foundation is welcoming any development team, regardless of whether they are affiliated to a company or not, to apply for subsidy amounts ranging between $50,000 and $1 million as long as their research and work contributes to the improvement of blockchain technology as a whole.

The Ethereum co-founder agrees that, as of right now, the problem of scalability is an important technical challenge for blockchain applications which needs to be overcome as soon as possible. In the post, he describes two methods that can be used to develop a solution, sharding and second layer protocols, and states that since they can be used in conjunction with each other, the foundation is willing to support both approaches to the problem to support the explosive user demand for the cryptocurrency.

The first approach, dubbed “sharding,” involves breaking the throughput of the blockchain across multiple “shards,” thus reducing the burden and work expected from nodes. The Ethereum foundation hopes to subsidize and support multiple community-based independent groups that have the skill-set required to work on the development of a prototype and then subsequently participate in testing of the Ethereum sharding testnet and mainnet.

Speaking about second layer systems, Buterin reiterated that the foundation would offer the subsidy even if the applicant’s project has an independent business model and otherwise divergent from the Ethereum community as long as the requirement of open source is met. Layer-2 scalability solutions such as Plasma and the Raiden Network already exist and are being worked upon. The funds are being offered to those working on implementations involving those existing strategies as well as to anyone researching and developing new ones.

While the blockchain technology based Ethereum supports close to a million transactions per day, it is not alone in doing so. Bitcoin is currently the world’s largest cryptocurrency, and while its speed is nowhere as close to most other competing digital currencies, that fact is only true because of its overwhelming popularity.

Bitcoin found itself amidst a scaling debate throughout 2017 with a small segment of its users calling for bigger transaction blocks. Ultimately, a fork of bitcoin, named Bitcoin Cash, was created with 8MB blocks instead. Today, bitcoin is looking to implement second layer solutions, including the long-awaited Lightning Network.

Buterin clarified in his blog post that the subsidy has not been designed to be “sources of substantial profit to recipient organizations,” but is instead “intended to cover some of the costs involved.” He further stated that those working on sharding and second layer solutions would be able to participate in the development of Ethereum 2.0 in collaboration with core Ethereum researchers and participate in testing one of the first mainnet clients.

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