Startups See Service Outages Amid Ethereum Blockchain Backlog

The ethereum blockchain is beginning to show signs it's being impacted by a new influx of users.

Amid a surge in mainstream media interest, not to mention projects raising funds via initial coin offerings (ICOs), transaction backlogs were visible on the network. Data from ethereum information provider Etherscan shows that more than 300,000 transactions were broadcast on 20th June, the highest amount ever observed on the two-year-old blockchain.

The rise in activity has also pushed the size of ethereum's transaction blocks – which change dynamically – to new highs, while the amount of gas used to send transactions, a kind of charge for processing power, has climbed to new heights as well.

Combined, these changes appear to be impacting businesses.

The list of exchanges that have announced withdrawal pauses or service disruptions in the past day includes Bitfinex, BTC-e, CEX.io and ShapeShift, among others. Social media posts suggest that users are also seeing disruptions when using other exchanges, including Coinbase, BitBay and Poloniex.

Get in line

So far, however, this outsized demand has perhaps been most visible in impacting token sales.

An ICO hosted yesterday by the ethereum messenger app Status has been blamed by some for the inflow of transactions it attracted to the smart contract associated with the sale.

In a bid to avoid a similar situation, an ICO launched today by identity startup Civic has employed a queuing system. Earlier today, the line of potential purchasers saw interest from more than 15,000 participants. (At press time, the sale was still ongoing).

It's a situation that brings one of the central areas of blockchain development – scalability – into the fore. The issue is one that has faced the bitcoin community for some time, though developers, users and other stakeholders differ on the approach that should be taken to scale the network.

The market price of ether (the cryptocurrency of the ethereum network) has declined amid the congestion, falling more than 9% since the day's open.

At press time, the price of ether is roughly $323.

Dark market disruption

Exchanges aren't the only services that have been disrupted by the backlog.

Transaction delays also appear to have ensnared the dark market AlphaBay, which moved to integrate ether early last month. The market's operators first announced that they would let vendors accept the digital currency in March.

Posts on the AlphaBay and DarkNetMarkets reddits indicate that several users have experienced problems when trying to withdraw their funds.

Some of those issues seem to be connected to the exchange disruptions, according to one subreddit post.

Another possible factor: the use of a transaction tumbler by AlphaBay. One market vendor suggested that the need to cycle transactions – thereby creating a host of new ones while obfuscating their original source – had contributed to the delays.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in BitPay, Coinbase, Etherscan and ShapeShift.

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