Covalent (CQT) provides the EVM L2 ecosystem with Covalent’s Unified API reducing the need for developers to navigate multiple providers, drastically scaling their effectiveness by addressing the challenges of fragmentation in multi-chain environments.
Supporting 225 blockchains and over 240 million wallets through its Unified API, Covalent stands out as the premier decentralized data network in the blockchain domain used in DeFi, AI and many data based applications. Actively indexing the entire historical state history for the Ethereum blockchain and 225 other chains, Covalent transforms this vast data into a standardized, interoperable format, consumable for developers through an enterprise-grade Unified API and a number of different formats.
Ethereum blockchain is the 2nd most valuable chain in the world and as it grows it faces challenges with scalability. It has tackled these issues head-on over the last few years with rollups and other L2s, but there remains new scalability issues.
As the Ethereum ecosystem expands, so does the demand for faster and cost-effective transactions. DeFi protocols and cross-chain bridges have gained immense popularity and placed a considerable strain on Ethereum’s base layer. Let’s dive into some of the key challenges:
Key Challenges in Ethereum’s Blockchain Scalability
- Fracturing of Liquidity: This results in challenges such as reduced efficiency, increased slippage, and limited depth in liquidity pools. Users looking to trade or transact may face obstacles when attempting to access sufficient liquidity for their transactions, especially if liquidity is dispersed across multiple platforms.
- UX Bottlenecks: This results from the necessary bridging protocols for Layer 2 adoption. These introduce added transaction steps, confirmation delays, and a learning curve for users, impacting the overall ease of use.
- Network Security and Decentralization: With increased demand and usage, there may be a tendency for centralization to occur, where a few large entities or nodes hold significant influence or control over the network. Often times, sequencers for rollups are centralized, impacting the decentralized nature that Ethereum aims to preserve.
- High Gas Fees: As more L2s emerge, an influx of data will be added to the Ethereum network. When the network gets congested, transaction fees—commonly known as “gas fees”—can see significant spikes. This heightened cost can impact users engaging with Ethereum-based applications, particularly during periods of high usage.
Covalent: A Decentralized Blockchain Database and API
In anticipation of the rising number of Layer 2 solutions, Covalent (CQT) takes a proactive measure in ensuring scalability in the EVM L2 ecosystem. The inception of the Covalent Unified API eliminates the need for developers to navigate multiple providers, effectively addressing the challenges of fragmentation among these chains. With the emergence of superchain structures formed by networks such as Optimism and Base, Covalent maintains a state of readiness for this evolutionary phase.
To address escalating gas fees amid Ethereum’s scaling, Ethereum is set to introduce Blob storage, which will reduce gas fees by posting L2 rollup data temporarily on the beacon chain. Covalent however is strategically positioned to index and permanently provide access to this critical data into perpetuity, via Covalent’s ‘Ethereum Way Back Machine’ contributing to a more sustainable and cost-effective ecosystem for Ethereum and Web3.
Designed to provide eventual self-serve enterprise options for indexing and access, Covalent’s scalability itself has boundless opportunity to expand supply and demand on the network. This unique approach maintains the paradigm of instant data access through querying the Unified Covalent API, underscoring Covalent’s commitment to creating a decentralized and accessible ecosystem and solving the scalability side of Ethereum’s and the wider ecosystem’s blockchain trilemma.
About Covalent
Covalent (CQT) powers the data layer in blockchain, enabling millions of users to build the new economy. It stands out for its deep commitment to democratizing blockchain data availability. Since its inception, Covalent has been helping developers, analysts, and enthusiasts with comprehensive, real-time data across over 225 blockchains. Learn how Covalent is building the Ethereum Wayback Machine.
For more information, check out Covalent’s: Official Website | Twitter | Discord | Telegram | Blog | API Guides
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