Why Ethereum is the top cryptocurrency investment of 2021
The second-most valuable cryptocurrency in the world is known as Ethereum and it certainly has a lot going for it. After all, it has helped investors make a bundle of money and has become a rather innovative utility coin. Those who decided to invest in Ethereum when it was launched six years ago have certainly managed to make massive profits, if they held onto their investment. In addition, it is also the first programmable money that stores instructions on the blockchain designed to self-execution upon fulfillment of certain conditions. These are known as smart contracts.
Cryptocurrencies like Bitcoin only enable people to send money to each other, but Ethereum takes things a step forward. However, the most important part are the innovations associated with Ethereum, especially in the world of decentralized finance, as most of the platforms that exist here are based on it. Why is it a worthy addition to your portfolios? Let’s find out:
Taking a step forward
Ethereum is poised to undergo a major transformation that will fix a massive challenge for other cryptocurrencies, such as bitcoin i.e. environmental sustainability. The Ethereum network is working on transitioning from a Proof-of-work (PoW) network to a Proof-of-stake (PoS). This means it will no longer require miners to use an increasing amount of computing power for solving algorithmic puzzles for validating transactions on the blockchain in order to create more coins. To put this into context, you should note that the energy consumed by the Bitcoin mining network is equal to that of 23 coal-fired power plants and this is increasing with each passing day.
Under the PoS system, transactions can be validated by anyone, depending on how much Ethereum they own, as 32 ETH is the minimum required, which is around $80,000. Validators will get a network fee, which is similar to interest and given in the form of tokens. This eco-friendly model can prove to be a bullish catalyst for this cryptocurrency.
Ethereum is currently being used by some of the world’s biggest and most prominent companies. A Dutch multinational bank by the name of ING Group that has assets worth $1.1 trillion is using Ethereum for settling payments, trading documents and bilateral lines of credit. Ubisoft Entertainment, the French video game giant, also uses Ethereum for in-game purchases. Likewise JPMorgan Chase & Co is looking into integrating the JPM coin, which is its own digital coin, with smart contracts through Ethereum.
Bringing on the next revolution
While most people may not see it outright, the fact is that programmable money, such as Ethereum has the potential of revolutionizing how people conduct financial transactions. Currently, smart contracts are only being used for the internal data of the blockchain, or the shared ledger that comprises of all the transactions occurring in the network. But, the introduction of oracle tokens, such as ChainLink, can turn out to be a great game-changer.
ChainLink empowers smart contracts to execute based on the link between computers and computer programs, or real-world API. This means that parties will no longer have to be restricted to the blockchain and they will be able to use pretty much anything, such as weather events, futures data, stock prices, economic indicators, breaking news, or video game achievements, as reference points for settling their Ethereum transactions.
The only issue with Ethereum is that the coin doesn’t have a supply ceiling. More than 116.9 million ETH coins are currently circulating in the market and they increase annually by 4%. Ethereum developers reduced this rate to 3% in August.
The revolutionary potential and widespread adoption of Ethereum can help its capital inflows be higher than its supply increase. In the last few days, the Ethereum price has also been climbing and further appreciation is expected, which would bring it close to the $5,000 threshold. This would undoubtedly be a major achievement for the cryptocurrency, which is expected to experience more growth in the future.