Why Ethereum Could Displace Bitcoin in 2022
At the end of 2021, a new cryptocurrency appeared that seemed straight out of a science fiction novel. Worldcoin offered free digital tokens to those who are ready to scan their eyeball. More than 100,000 people have signed up for it. Demand suggests that 2022 could be an even crazier year when alternative currencies challenge the supremacy of Bitcoin.
While Bitcoin remains the largest and most well-known cryptocurrency. According to Coinmarketrate.com, its market capitalization is $785 billion. This is twice as much as the second largest Ether. Amid the usual volatility, prices reached new highs in 2021, amid hopes for wider public acceptance. In April, the cryptocurrency exchange Coinbase came out as an exchange in the United States. In October, the first Bitcoin exchange-traded fund (ETF) was launched in the USA. In November, the price of Bitcoin jumped above $67,500, and this month it fell again to $40,000.
And so, let’s see what prerequisites Ethereum has, against the background of past and future events.
- Uneven price dynamics will continue. Business interest in alternative currencies is not yet permanent. Tesla has stated that the presence of Bitcoin as an alternative to cash demonstrates its liquidity. Then it sold part of her share, and decided that the VTS could no longer be used to buy her electric cars.
- The future of all digital tokens remains with regulators. The U.S. Securities and Exchange Commission (SEC) has allowed the Bitcoin ETF because it contains futures contracts traded on a regulated exchange, not the Bitcoins themselves.
- The world’s largest cryptocurrency exchange Binance remains unregulated, and is not listed as a licensed exchange. It has come into conflict with regulatory authorities in Singapore.
- In September, China announced that cryptocurrency transactions are illegal.
- SEC Director Gary Gensler warned that without increased oversight, investors could suffer.
As you can see, not a very good selection of events, but… This year the Ethereum network, which uses Ether, will be upgraded and is expected to become a Proof of Stake network.
But while the supervisory authorities are slow, institutions fearing that blockchain and cryptocurrencies may deprive them of expensive third-party services will continue to defend their rights to this sector. Governments will continue to promote their own digital currencies – CBDC managed by central banks.
Both of these factors should lead to increased interest in Bitcoin’s competitor, Ether. Ether is used to buy NFT (non-interchangeable tokens), a $15 billion market, and is the basis of DeFi, or decentralized finance. The latest technology does not rely on typical financial intermediaries such as banks.
This change requires much less energy than checking Proof of Work in Bitcoin.
It should appeal to environmentally conscious fans of cryptocurrencies and encourage them to switch. In a long-term game to win, fans of cryptocurrencies will give preference to the Ether, not the Cue Ball.
Moreover, within a decade, more than 50% of global financial transactions can be carried out using Ethereum.
Ethereum has every chance to become an integral part of the global financial market, says Joey Krug of Pantera Capital, one of the largest cryptocurrency hedge funds.
“If we fast forward 10-20 years, then a very noticeable percentage, maybe even more than 50 percent of global financial transactions, will somehow concern Ethereum,” he told Bloomberg.
Ethereum, the second most popular cryptocurrency after Bitcoin, has experienced a positive year, increasing by almost 400% and reaching a historic high in 2021.
At the same time, gas charges have also reached new highs. This, combined with insufficient speed to cope with the flow of activity due to the growth in the number of projects to create non-interchangeable tokens (NFT), and decentralized finance (DeFi), has led to a boom in new projects overlaying their technological solutions on top of the Ethereum blockchain, and the dominance of DeFi in the system from almost 100% in early 2021 to 70% today.
In this regard, Joey Krug doubts that these competitors will be able to win back the leadership of the platform, noting that there are too many compromises made by other blockchains, and Ethereum does nothing in the field of decentralization.”
“I do not know if they have the best opportunities to become the next global financial layer,” stressed the manager of the $5.8 billion fund.
As soon as Ethereum completes its plans to switch to Proof-of-Stake consensus, a method of confirming transactions that is considered more efficient and less energy-intensive than Proof-of-Work, competitors will not hesitate to develop their own projects based on Ethereum, Joey Krug believes, which will again increase the attractiveness of Ethereum in relation to its current competitors.
The Best Cryptocurrency to Buy
There are thousands of cryptocurrencies on the market today. You can choose metaverse coins, or you can choose stable cryptocurrencies that are linked to fiat currencies. There are well-established tokens with huge market capitals, as well as small tokens that supporters hope will make their way. But of all these cryptocurrencies, that’s why Ethereum may be the best cryptocurrency to buy right now.
- Positive dynamics since the creation
Ethereum was first launched in July 2015, and since then it has enjoyed undeniable popularity.
Over the past six and a half years, the price of the native Ethereum token, ETH, has soared by more than 121,000%. For example, an initial investment of $1,000 at that time would be worth more than $1.2 million today.
Thanks to such phenomenal growth, the market capitalization of Ethereum today is more than $ 362 billion. This makes it the second largest cryptocurrency in the world by market capitalization after the BTC.
But Ethereum offers much more possibilities than Bitcoin. Its blockchain is designed to support smart contracts. These contracts are automatically self-executing, and do not require personal interaction between the buyer and seller. They make it possible to use NFT and a wide range of decentralized applications (DApp).
By the end of 2021, the Ethereum ecosystem had almost 2,900 projects. This is about twice as much as the three leading cryptocurrencies, the so-called “Ethereum killers” – Solana, Cardano and Polkadot combined. More than 40 of the top 100 cryptocurrencies by market capitalization are built using the ERC-20 Ethereum compatibility standard.
- Ethereum 2.0 will Change Everything
Of course, Ethereum has its drawbacks. Its blockchain is slow and can only process 15 to 45 transactions per second. It also faced scalability issues. In addition, the fees for transactions in Ethereum are prohibitively high.
These shortcomings have forced some developers to turn to other blockchains. Solana, Cardano, Polkadot and Avalanche are just some of the cryptocurrencies that have stolen some of Ethereum’s success.
However, with the release of the new Ethereum 2.0 update, an improved version of Ethereum will solve many of the existing problems. For example, it should allow up to 100,000 transactions per second. The blockchain will be much more scalable. And transaction costs will be reduced.
The first stage of this modernization has already been completed. The second stage is planned for this year, and the final one for 2023. With the promise of a better, faster, and cheaper architecture, Ethereum is likely to further strengthen its position by the end of the decade.
- Ethereum is Less Risky than Most Other Cryptocurrencies
Due to its wide distribution and high functionality, Ethereum is less risky than most other cryptocurrencies. However, this does not mean that it does not involve certain risks.
One of these risks is that the planned Ethereum 2.0 upgrade may be delayed. The schedule of the final stage of modernization has already been postponed several times. It is also possible that the update will cause technical problems.
However, Ethereum appears to be the strongest cryptocurrency to buy and hold in the long run. Its current advantages, combined with constant improvements, can make it a formidable leader in the cryptocurrency space.