Just over a year ago now, it was looking possible and perhaps even likely that Ethereum would soon overtake Bitcoin for the largest market cap of any cryptocurrency. And why wouldn’t it? As a turing-complete blockchain, Ethereum has an entire order of magnitude more applications than Bitcoin, with vastly superior flexibility.
Fast forward to the present, however, and we are now further away from the flippening than any time since Bitcoin’s incredible bull run ended in December 2017.
While Ethereum’s strongest competitor as a platform cryptocurrency, EOS, has been flopping since its launch this summer, Ethereum’s own problems have also been brought into the spotlight during the past year as well.
The biggest problem for Ethereum is the same as it is for Bitcoin: scalability. It became impossible to ignore last December when CryptoKitties went viral and caused extreme congestion on the Ethereum blockchain. For a platform meant to support thousands of dapps, it didn’t bode well that just one viral dapp could nearly overwhelm the entire network. Ethereum’s transaction throughput capacity needs to increase significantly.
In the long-term, though, scalability isn’t a terribly concerning issue for Ethereum supporters. Solutions including Plasma and sharding are seen as just a matter of time. What many Ethereum supporters are less aware of, is that a scalability solution already exists and is production-ready.
It’s called Loom Network, and after reading this article, you’ll know exactly what it is, how it works, and how it could make a significant impact in helping Ethereum scale now and well into the future.
What is Loom Network?
Loom Network is a cryptocurrency project that has built (and is continuously improving) fundamental infrastructure to help Ethereum scale, immediately. Its primary product is a software development kit (SDK) that teaches and guides developers through the process of creating their own blockchains, without requiring any prerequisite knowledge of blockchain technology.
Ethereum lowers the barrier of entry for writing smart contracts and creating decentralized applications by providing a platform upon which to build them. Loom Network simply takes that one step further by actually showing developers how to do it from start to finish.
Now you might be wondering, how is a SDK a scalability solution? That’s where things get interesting. You see, Loom Network isn’t just teaching developers how to build dapps on Ethereum. They are teaching them how to build highly-scalable games and user-facing dapps that are still backed by the security of Ethereum.
To put it another way, if CryptoKitties had been built using the Loom SDK, Ethereum would have been just fine in handling its nearly 5,000 transactions per day as it was going viral last December. Instead of 20,000+ pending transactions in the memepool and insanely high transaction fees, everything would have continued as normal. How? I’ll explain…
How Loom Network Works
The critical concept to understand about the Loom SDK is that it generates something called DAppChains. What that means is that dapps can be built on layer-two blockchains that use Ethereum as a base layer, making them highly customizable and scalable.
As explained in the Loom Network comprehensive project guide, that gives dapps built with the Loom SDK several benefits, the two biggest of which are:
- DAppChains can use alternative consensus mechanisms to Proof-of-Work, such as the much more scalable Delegated Proof-of-Stake (DPoS) used by EOS.
- Unlike dapps built on EOS, DAppChains built with the Loom SDK can have the full security guarantees of Ethereum and its more decentralized Proof-of-Work (and eventually Proof-of-Stake) consensus protocol.
As a base-layer consensus mechanism, Delegated Proof-of-Stake makes some questionable tradeoffs to achieve its scalability. But as a second-layer solution, it allows dapps that might have large transaction volumes (i.e., online games, social apps, etc.) to scale to millions of users without causing major congestion on the Ethereum blockchain.
Ultimately, DAppChains make it easier to use Ethereum exactly as it was intended to be used: as a highly secure but basic base-layer platform that supports more complex and feature-rich applications on top of it.
Loom Network and Plasma
Not only is Loom Network helping Ethereum scale with DAppChains—the Loom team has also joined the ranks of Ethereum token teams to work on general Ethereum scaling projects. In this case, Loom Network is the first project to release an implementation of Plasma Cash, an idea first introduced by Vitalik Buterin at the Paris Ethereum Community Conference last March.
The main purpose of Plasma Cash is to reduce the transaction (Gas) fees that smart contracts and dapps have to pay to use the Ethereum blockchain. Before diving into how Loom Network plays into this, here is a basic summary of how Plasma Cash works.
A Quick Explanation of Plasma Cash
When somebody deposits tokens onto the blockchain, they are collectively assigned a single unique ID. At that point, the tokens can not be divided or merged with other tokens. This changes how the transaction history is stored, making the process of validating new transactions much faster by eliminating the need to review the entire chain. Plasma operators can now easily isolate the history of the relevant tokens with their unique ID, making the whole process more efficient.
Using Plasma Cash to Improve DAppChains
Loom Network utilizes Plasma Cash to improve the efficiency and security of their already highly-scalable sidechains. In fact, Plasma Cash can even enable zero-confirmation transactions.
The implementation of Plasma Cash can give DAppChain users complete confidence in knowing that they can reclaim their funds – or collectibles, in the case of ERC-721 tokens – on the Ethereum blockchain through Plasma exits in the event of a hack or fraud. (A Plasma exit works somewhat similarly to closing a payment channel in the Lightning Network.)
This added security is critical because of the tradeoffs made in using DPoS as the consensus mechanism for sidechains. As alluded to earlier, DPoS is not as decentralized as PoW, as it requires users to trust a select group of elected node operators rather than having all of the blockchain miners competing to propose valid blocks and earn the block rewards.
By providing users with a means of recourse should DPoS fail or in the unlikely event of a second-layer security breach, Plasma Cash greatly enhances Loom Network’s existing product.
Best of all, Loom Network already has a working implementation of Plasma Cash that enables the secure, trustless exchange of ERC-721 tokens on Loom sidechains. Meanwhile, the Loom team are working to add support for ERC-20 tokens and ETH itself, as well as to enable token splitting and merging so that they can expand the possible uses for Plasma Cash in the future.
Surprisingly few of the top cryptocurrencies currently have working products that are providing real utility to the cryptocurrency ecosystem. Loom Network is still a young project—having been founded in October 2017—but that hasn’t stopped the Loom team from making some great contributions towards helping Ethereum to scale.
Considering what has already been accomplished in such a short time, Loom Network appears to be one of the most promising Ethereum projects out there, and one that’s well worth watching in the months ahead.