Ethereum is a decentralized blockchain-based peer-to-peer crypto project that started its history in 2013. It is one of the oldest and most popular cryptos on the market. ETH has the second-largest market capitalization (approximately $220 billion), which makes it the most valuable among altcoins. It is also one of the most liquid assets, and you can easily swap ETH to BTS or any other coins.
How does Ethereum work and what should we expect from it in the following five years? Find out in the article.
Ethereum: A Brief Overview
In 2013, a Canadian programmer Vitalik Buterin was introduced to the concept of Bitcoin. He described the blockchain that BTC is based on as a perfect but limited invention. He decided to enlist support from other programmers and create a more advanced version of the blockchain with a native token ETH. Ethereum’s concept was described in the whitepaper in July 2013.
The current price is around $2,000 per coin, and the daily trading volume is near $20 billion. There are 120 million coins in circulation, and there is no upper limit for coin supply.
Ethereum is popular mainly due to its real-life utility, which lies within the features of the blockchain.
Technology Behind Ethereum
Ethereum’s blockchain is scalable, secure, programmable, and decentralized. It uses a Proof-of-Work consensus algorithm and supports the creation of smart contracts.
In a nutshell, smart contracts are computer programs. They can automatically perform actions that fulfill an agreement between two or more parties on the internet. It helps to reduce the need for intermediates between contractors, thus the transaction costs are lower.
So, smart contracts are inheritable for decentralized applications and decentralized finance projects (DeFi). Consequently, over 3 thousand DeFis are based on Ethereum’s blockchain as well as such tokens as Aave, Axie Infinity, Uniswap, and others. There is also a hard fork of Ethereum called Ethereum Classic. Although they sound the same, there are actually a lot of differences in ETH vs ETC. For example, it is staying put on PoW, while Ethereum is planning to move on to Proof-of-Stake (PoS) in 2022.
Ethereum’s creators announced the transition to ETH 2.0 in 2019 as the biggest upgrade in its history. Later, the start of the transition was moved to April-June of 2022. What exactly is going to change and how this will impact the investors of ETH:
- What is happening?
A switch from the existing PoW consensus mechanism to PoS. The transition aims to increase the speed, scalability, and efficiency of Ethereum’s network.
- Why ETH 2.0 is more secure?
The new version of the blockchain will require at least 163,384 validation nodes. Such a large number of nodes will make the network more decentralized and as a result more secure.
- How this will affect the scalability and transaction speed?
The Ethereum blockchain is capable to support only around 30 transactions per second. The implementation of chard chains in 2.0 will increase this number to 100,000 transactions per second.
Also, the transition to Ethereum 2.0 will lead to cheaper transactions and higher demand. Theoretically, it should increase the ETH price as well.
Will ETH Price Grow Any Time Soon?
Given the previous price history of Ethereum and news on the development of its network, the ETH price is forecasted to rise in the near future. Take a look at the five-year Ethereum price forecasts from reputable sources:
Even though the price predictions are extremely different, the profit for Ethereum’s investors looks prominent. According to the most pessimistic forecast by DigitalCoinPrice, if you invest in Ethereum in 2022, the five-year ROI will be around 100%.
Is Ethereum Worth Investing?
Ethereum remains one of the most popular cryptocurrencies among investors. The main reasons are reliability, good reputation in the market, multifunctional blockchain, and constant improvements.
Hence, there are no signs of Ethereum collapsing. On the contrary, both experts and AI-based forecasts predict a huge price increase during the following years.