An Officer at Parity Communications and avid Ethereum user, Afri Schoedon, tweeted on 20 September 2018 that Ethereum is at capacity and requested that users stop creating new decentralized apps (Dapps). Vitalik Buterin, co-founder of Ethereum, disagreed and urged users not to follow that advice. A deep dive into Ethereum’s network metrics indicate that Ethereum is not at capacity and has plenty of room to grow.
Disagree. Most dapps have lots of room to gas-optimize, and even if *you* don't your dapp running raises gas fees and pressures *others* to gas-optimize. There's *plenty* of low-value spam on chain. And everyone should be looking into layer-2 solutions.
— vitalik.eth (@VitalikButerin) September 22, 2018
Transaction volume is one of easiest Ethereum network metrics to understand, evidence from which is contrary to the argument that Ethereum is at capacity. At peak in January 2018, Ethereum exceeded 1.25 million transactions per day. Since then Ethereum transaction volume has been on a long-term decline, and is now just below 500,000 transactions per day. Therefore, there was a time when the Ethereum network handled more than double the current transaction volume, and obviously, didn’t cease to work.
Further, Ethereum block sizes peaked at 34 KB in January 2018 and have consistently been below 30 KB since that time, so clearly there is more room for transactions in Ethereum blocks, which means transaction fees are relatively low and there is space in blocks for extra transaction volume if Dapp numbers or usage increases.
Another measure of Ethereum’s capacity is gas price, which is the fee for launching smart contracts, essential for Dapps to function. During the peak volume of transactions in January 2018, there was a clear crunch that caused gas prices to rise to as high as 96 Gwei, which was quite prohibitive for Dapps. There are other instances of gas price spikes in July 2018 and August 2018 to 86 Gwei and 57 Gwei respectively, and any spikes like this probably indicate Ethereum is at capacity or nearing it.
However, gas prices have been steady at 10-20 Gwei for most of the time since March 2018, including September 2018, and sometimes prices are lower. This indicates there is no persistent gas crunch, smart contracts can be deployed without being inhibited by fees and, therefore, Dapps can thrive.
Gas usage has not declined since January 2018 and is averaging more than 40 billion gas per day, indicating gas is being used in large amounts; usage has not had to decline to bring gas prices down. This means Dapps can use as much gas as they need without gas fees going up. This likely has something to do with gas optimization.
From a more subjective perspective, Dapp usage on Ethereum has been declining sharply in 2018. The number of Dapp users declined 56% from January 2018 to July 2018 according to a study by Diar, indicating there is plenty of room for current Dapps to grow and also plenty of room for the deployment of new ones.
During Buterin’s debate with Schoedon, he focused on how Ethereum gas usage can be optimized, and how layer 2 solutions like ZK-SNARKs or perhaps sharding could make Ethereum scalable. However, network metrics indicate that even without layer 2 solutions, Ethereum has plenty of capacity for new Dapps to launch and existing ones to grow, and perhaps gas optimization is enough for the foreseeable future.
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