Could Ethereum be your best investment in 2022?

Could Ethereum be your best investment in 2022?

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Jonathan
Jonathan

An editor at Coincrop


28 Feb 2022 | 10 min read
36,615 views

I

t’s can be easy to overlook Ethereum in your cryptocurrency investment strategy. It may not have the excitement and price swings of other blockchains but it remains the second largest cryptocurrency by market capitalisation.

In this guide:

Disclaimer: All of the information written on Coin Crop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

What is Ethereum?

Ethereum can be thought of as a distributed computer network onto which people can build applications. It has been described as “a blockchain with a built-in programming language” and the “most logical way to actually build a platform that can be used for many more kinds of applications.”

A simpler way to understand Ethereum is to compare it with Bitcoin. Whilst Bitcoin is the payment network used to transfer value between two parties, Ethereum can be thought of as the programmable infrastructure of the Internet.

The Ethereum network comprises “smart contracts” – these can be thought of as computer programs that include a set of instructions and run on the blockchain.  It is these contracts that enable decentralised applications (dApps). These applications have some similarities with the applications that run on Apple iOS or Google Android.

Ethereum has seen a surge in usage from the non-fungible tokens (NFTs) and decentralised finance.

The Ethereum project was founded in 2013. Ether is the native currency of Ethereum. The token symbol used for Ethereum is ETH.

Unlike a conventional blockchain system, Ethereum uses accounts and balances which we refer to as “state transition”. If we consider Bitcoin where the blockchain is a continuous growing list of records, Ethereum makes use of the current balances of all accounts and additional data owner by the state.

Unlike the current form of Bitcoin, Ethereum has a script language.

In Bitcoin, the rate at which new blocks are produced is around 10 minutes – this contrasts with Ethereum where new blocks are created every 10 to 20 seconds (depending on the difficulty of the transaction).

The differences with Bitcoin continue – in Bitcoin the maximum number of tokens is a fixed amount of 21 million. In Ethereum new 5 new Ether are generated approximately every 14 seconds with no upper limit. 

At the time of writing this, the Ethereum price is $ETH - $2,702.15. The asset has a market capitalisation of $326 billion and is the second largest cryptocurrency. The all time high for Ethereum was $4,812 on the 8th November 2021.

Who created Ethereum?

Although Vitalik Buterin is the “face of Ethereum”, there were actually 5 founders: Anthony Di Lorio, Vitalik Buterin, Mihai Alisie, Amir Chetrit, and Charles Hoskinson. Several of the aforementioned people were involved in the development of Bitcoin.

What is Ethereum 2?

Since 2021, there has been a significant demand for blockchain platforms and this will only increase further as enterprises begin to look towards adopting the technology.

Ethereum in its current form is sufficient to meet the needs of this future use cases – issues with scalability and usability are the stumbling blocks that could prevent Ethereum becoming a viable alternative to centralised systems. Network congestion and high transaction (gas) fees are repeatable seen as holding back growth.

Back in 2017, an experimental application known as Crypto Kitties was created on the Ethereum network. It allowed users to create and trade non-fungible tokens (NFTs). The massive increase in transactions on the network due to the increased traffic led to gas fees in excess of 6 figures. Also, in its present form, Ethereum was limited to 15-20 transactions per second (TPS).

Ethereum 2 has been designed to support 10,000 TPS. There have been suggestions that even this figure may be insufficient to meet future demand.

The Ethereum 2 upgrade phases

Upgrading of Ethereum has been split into 3 distinct phases:

    • Phase 0 – Ethereum 2 will be established on the Beacon chain – a new chain connected to the Ethereum 1 network. As it will run on the same ecosystem as Ethereum, data migration will not be an issue. By using the Beacon chain, it will make possible the migration from proof of work (PoW) consensus to proof of stake (PoS) consensus. On the 1st December 2021, the Beacon chain went live.

    • Phase 1 – “Sharding”.  This next phase will address the scalability issues through a process known as “Sharding”. Sharding is a technique familiar in the database world in which all blockchain databases are converted into partitions – each shard representing a fraction of the entire Ethereum database.

    • Phase 2 – Virtual machine configurations – In Ethereum 1, the Ethereum Virtual Machine (EVM) has the task of execution ERC-20 tokens, running smart contracts and deploying dApps etc. Phase 2 will bring about a web assembly code of Ethereum known as eWasm. This is an open-source standing instruction allowing the construction of fast applications on the web. It is secure, portable and fast.

Could Ethereum flip Bitcoin?

Experts have fiercely debated the possibility of Ethereum exceeding the market capitalisation of Bitcoin. Clearly Ethereum in its current form as a number of issues relating to slow transfers and high transaction fees. Assuming these issues can be resolved and the Ethereum 2 upgrades are successful, it is possible that adoption will outpace its speculation resulting in a shortage in supply and a peak in demand – the obvious price upside could be considerable.

Earn rewards by saving

It’s possible to earn rewards from lending your Ethereum to institutions:

OrganizationTermsRatingAPY Rate
OKExFixed (7 days)

61.0%

AAXFixed (360 days)

9.00%

NexoFlexible

8.00%

AAXFixed (180 days)

8.00%

HiFixed (365 days)

8.00%

HodlnautFlexible

7.46%

CoinLoanFlexible

7.20%

MyConstantFlexible

7.00%

The best staking rates

Ethereum can be staked for rewards. The following show the possible rates:

OrganizationTermsRatingAPY Rate
StakefishFixed (7 days)

10.5%

EverstakeFixed (7 days)

8.00%

StakedFlexible

6.80%

KrakenFixed (7 days)

5.50%

P2P ValidatorFlexible

5.00%

MyContainerFlexible

4.90%

GuardaFlexible

4.81%

Bitcoin SuisseFixed (730 days)

4.80%

Summary

If you’re still not convinced of the potential investment upside for Ethereum, consider the following: the all-time low price was on the 21st October 2015 at 42 cents. If you had invested $1,000 at that date, you would have become a millionaire when it reached $1,432 on the 13th January 2018.


Jonathan

Jonathan

An editor at Coincrop
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